Answer to 9/2's Question of the Day

Asked Yesterday:
Can we as a population, using elementary-school economic principles, imagine a scenario in the future where renewable energy sources may be more cost effective than fossil fuel?

We should absolutely be able to fathom that for a number of good reasons, all of which revolve around the law of supply and demand.

For those of us who don't know, the law of supply and demand states that for every product there is an equilibrium price that balances supply and demand, and this equilibrium is found at the intersection of the demand curve and the supply curve.

As supply increases, the price equilibrium will decrease. As supple decreases, the price will increase. The follow illustration shows this effect:


The current argument for fossil fuels is based on supply. There is currently a plentiful (though limited) supply of fossil fuels, especially in the United States. There isn't a compelling reason to abandon them unless we imagine our supply of fossil fuels dwindling. There is also a limited supply in renewable energy right now, driving up the costs. Simply stated, it is easy to see how in the near future the cost of the decreasing supply of using fossil fuels could exceed the cost of an increasing supply of efficient renewable energy resources.

The supply of resources like coal and oil could dry up because we run out of them. We also m,ay face a peak oil or coal situation, our ability to extract and refine non-renewable resources may no longer be able to keep pace with demand. Both would increase the cost of using fossil fuels.

As time goes on human beings will discover more efficient methods of harvesting the energy potential of the sun, the wind and other forces. This will drive down the cost of using renewable energy, increasing demand for it over fossil fuels.

Taking this into consideration, even without the efforts of environmental activists, the days of the coal and oil companies are already numbered.

It is also important that we not forget the other costs of using coal and oil combustion to fuel our vehicles and our power plants. Coal and oil are very labor intensive - renewable resources are not. Fossil fuels come with major infrastructural, environmental and health liabilities that solar, wind and hydroelectric electricity generation do not share.