How Will Reform Affect Market Prospects for Renewables?
Commercialization should help renewables in distributed markets. Utilities required to recover the cost of serving isolated rural areas will often find small renewable energy systems cheaper than grid extension — even apart from the environmental advantages. Distributed renewables reduce demand for grid electricity, so that utilities can channel power to cities, where clustered customers use more electricity per unit of capital outlay. Commercialization alone will have little effect on bulk power markets for renewables, although it may improve utilities’ ability to adopt new technologies. The effects of privatization on penetration of renewables are mixed. Privatization can promote renewables by introducing new capital. However, higher discount rates and short time horizons may favor non-renewables. Private energy suppliers face higher interest rates than government entities, and will prefer conventional energy options with lower capital costs. Private electricity companies may also c
