Saturday, January 3, 2009

6 Factors Shaping the Renewable Energy Industry in 2008


Many industries experienced turbulence this year and renewable energy was no exception. 2008 was really a mixed bag for the industry, with lots of good and bad news.

1. High Energy Prices
Natural gas and oil reached record highs in July, 2008. This impacts the price of energy overall and make renewable energy more favorable. The return on investment for a solar power plant for example is shorter when considering the cost of the electricity generated from natural gas.

2. Toppling Energy Prices
After peaking in July, the price of oil and natural gas have since plummeted. This has made it harder to finance renewable energy projects.

3. The Credit Crunch
It is not just hard to secure a mortgage. Homeowners wishing to pay for a solar system using a home equity loan may have been denied. Even billionaire, T. Boone Pickens hasn't been able to finance his enormous wind farm in Texas.

4. Extension of the Federal Tax Credit
After numerous near misses, the investment tax credit that encourages residential and commercial renewable energy projects passed. It removed the $2000 cap on the tax credit for residential systems and extends the incentive to utilities. This 30% tax credit was originally created in 2005 and has now been extended through 2016.

Although this incentive doesn't have a direct impact on renewable energy in 2008 because the law take effect in 2009, the indirect impact cannot be over emphasized. The existence of an 8 year incentives give stability to an industry that has seen many undulations.

5. Election of Obama
By 2025, Obama would like 25% of U.S. electricity to be generated from clean, renewable sources including wind, solar and geothermal. He calls for $150 billion to be invested over 10 years in clean energy and infrastructure to support it.

6. Fluctuating Commodity Prices
Renewable energy systems rely on raw materials, such as silicon, copper, and steel. Many of these materials have spiked in price in recent years, but some prices have started declining. The silicon shortage caused by a spike in solar panel production may be ending and the cost of copper has started falling.

Original here

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