Alternative Energy Sources - Essay Example

Download file to see previous pages Additionally, consumption of oil as a source of energy is non-renewable, and results in environmental pollution. As such, leading economies in the world have been seeking to adopt alternative sources of energy and measures to conserve energy, though with minimal success (World Bank, 2010:190). This paper discusses three key barriers that impede the adoption of alternative energy sources and energy conservation. Three key barriers deter the adoption of alternative or renewable sources of energy: cost and pricing, market performance, and legal and regulatory (Martinot and Beck, 2004:13). Majority of these barriers are a form of market distortion that work to discriminate against alternative energy sources, while others result to high costs of developing and adopting alternative sources of energy. These barriers are situation-specific in any country or region. The first and most significant barrier category is pricing and cost. Alternative and renewable sources of energy cost more than the traditional oil, leading to policies and decisions that avoid alternative energy sources based on cost. The price comparison depends on an array of factors. For instance, there may be public subsidies that lower the costs of competing sources of energy. ...
Therefore, the difference in subsidy provision may result to competitive disadvantage of an alternative energy source. Despite the fact that renewable energy sources may have significant cost-competitive advantages on the life-cycle basis, the high initial costs often mean that they provide lower installed capacity per initial dollar investment than conventional sources of energy. Thus, capital markets may require lending rates premium in order to provide finances for these alternative energy sources. Moreover, the alternative energy source faces high import duties and taxes. Consequently, this may result to high first-costs compared to other sources (Dell and Rand, 2004:240). Another significant factor is transaction costs. Alternative energy source projects are relatively smaller than those of conventional sources are, primarily because of their unfamiliarity or uncertainty in performance. Consequently, transaction costs for alternative energy sources, including assessment, permitting, power-purchase contract negotiations, and financing packages assembly, result to enormous per-kilowatt capacity basis than conventional energy sources. Higher transactional costs are not an economic distortion barrier, but rather another way of making alternative energy sources extremely expensive. The last notable sub-category is environmental externalities. The conventional energy sources have real costs on the society, including infrastructure decay, human health and, probably, climate change costs (Edenhofer, Madruga, ans Sokona, 2011:884). However, environmental externalities dollar costs are hard to evaluate, thus, subject to discretion and interpretation. Though economic comparisons ...Download file to see next pagesRead More