the economic side of the renewable energy 


i couldnt write today because i was busy writing my English report i though why not sharing it with you (please no comments it is just for the course) 

The economic side of the renewable energy


For a lot of decades people were keep saying that investment in renewable energy is waste of money. The research and development in this field leads to a lot of technological advancement that solved a lot of problems regarding the intermittency and the storing. The intermittency and storing problem are critical issues that should be solved in order to rely on renewable energy. They argue that even if the functionality of the renewables worked out the economic side will not. In order to commercialize the renewable energy and replace the fossil fuels with the renewable energy it must be economically profitable. Since Adam smith said “every individual perusing his or her own interest” no one will abundance the traditional energy source unless the alternative will be cheaper. This report is going to discuss the economic side of the renewable energy. Things like the cost of installation, government and corporate investments on renewables and the affect of renewables on the employment.

The first promising thing about renewable energy is the cost of installation. Since 2010 the cost of installing a solar panel have been cut more than 70 per cent and it is continuing to reduce. Even the wind power cost of installation has been reduced.


2.1 definition of renewable energy

Renewable energy is a source of energy that never ends because it naturally recharge itself again, and it has no or little impact on the environment.

2.2 Types of renewable energy

There is a lot of types of renewable energy but the most important are solar, wind, biomass, hydrogen and geothermal energy. Solar and wind is most spread types around the globe. Solar is generated from the sun light using solar panel. Wind is generated using wind turbine.

2.3 The affect of renewable energy on the climate change

Climate change is a major concern, renewable energy plays vital role in reducing the climate change. Switching to the renewable energy instead of the fossil fuels will reduce the amount of carbon dioxide Emissions in the atmosphere.

2.4 problems stand against renewable energy

the renewable energy field is a new field so like any other field there is problems to overcome. The main problems are storing and the intermittency. The research and development centres around the world worked hard to solve these problems and every day there are some technological advancement although some solutions have not tried yet.

3. The employment in the sector

One of the most important factors that the economist or the policy maker should consider when making new decision or establishing new policy is the employment. Cause It affect the people directly unlike the other factors. The renewable energy industry contributes to the jobs market. According to annual review published from IRENA (2018) over 10.3 million people employed by the renewable energy sector. See figure 3.1.

Figure 3.1 (IRENA,2018)

The jobs varies from researchers to engineers and workers for development, installation and maintenance. The major employer is china with almost 40 per cent of the global jobs are based in china since it is the leader in the industry and over 60 per cent of the jobs are in asia. However, the rest of the ten million is spread over the 6 continents. The growth of the jobs creation in the renewable energy industry is the highest comparing to the other energy sources and it will continue to grow as the market grow. The renewable energy is classified as a labour-intensive market so there are more jobs opportunities to come in the future higher than what the fossil fuels will offer. The solar pv is the largest renewable energy employer with over 3.4 million employees. The number of job opportunities will still prosper with the innovation and technology and it its estimated to create additional 200,000 jobs in the next five years.

4.cost of installation

The first lesson in microeconomics is that everyone is pursuing his or her own interest and no one will use renewable energy unless it is cheaper than the traditional fossil fuel source. Due to the research and development and technological advancements, the cost of the installation is plunging down. According to IRENA (2018) cost of installation of a solar panel reduce 80% from 2009. Not only the solar even the wind energy, the cost of install a wind turbine has fallen 40% form the last decade.

According to Amin (2015) “The cost of generating power from RW has reach to a level equal or below than from fossil fuels so the price will be reduced”. Obviously as the cost fall the prices will also falls and that will lead to more demand for renewable energy.

5. The unprivileged area

The development of renewable energy will help the humanity not only regarding to the climate change and the other environmental reasons but because it will provide the electricity supply for those who live in areas that have no electricity. Whether you are in the big Sahara in Algeria or in forest in Africa you will still have a solution for the electricity. By providing electricity to those areas the economy will thrive. There will be opportunity to build manufactures or performing a service after the sunset and this will reflect on the national output (GDP) of the economy. There will be opportunity for the farmers to install wind or solar panel in their farms and sell the excess energy which gives them more income in addition to the reduction of the cost of operation since the electricity bills will be eliminated.

6. Investments in the renewable energy

6.1 corporates that adopt the technology

The initial investments are the major concern for both corporates and individuals about adopting renewable energy solution. However, the investment in the long run seems reasonable because it will generate energy with no extra charge forever. Now it becomes a trend in the private sector to have environmental goals for example Facebook have goals to run 100 per cent on renewable energy sources.

6.2 Corporate investments in the renewable energy

Corporates are now aware of the potential that the renewable energy have, so they have started investing in the sector. They are even invests in the long-run rather than the short-run. Investments in the renewable energy are expected to grow. Due to the reduction in the cost of installation of renewable energy a lot of corporates hedge funds are switching to renewables since it became more profitable. According to Cunningham (2018) Investments in the last year 2018 have reached over 333.5 billion dollars and it will continue to grow. This means that unless there is high potential in investing in renewable energy fund managers will not take those investments. the investments are spread out around the globe and at Saudi Arabia the public initial investment (PIF) announce that there will be a mega project in the empty quarter deserts for solar panel. The project that funded 45 billion dollar by PIF and Softbank will generates 200 Gigawatts of solar power in Saudi Arabia’s desert.

6.3 oil and gas companies’ investments

The investments of the oil and gas companies in the renewable energy industry is the biggest prof that the future is for the renewable energy and those companies in order to survive in the long term they have to put step further in the renewable energy. The biggest player in the oil and gas market Aramco, which is the company that operate in the kingdom of Saudi Arabia, rebrand it is name and make it related to the energy in general and have investments in the renewable energy.

7. The governments’ role

The governments have a significant role in the energy ecosystem especially the renewable energy since it is in early stages. Although that renewable energy costs had fallen, and it can compete against the traditional fossil fuels in the free market, it needs policies to support it is adaption. The policy makers should support the case and sign agreements likes Paris agreement. Agreements that try to stop the climate change by adopting other energy alternatives. The government revenues will increase since there are new tax applied on the renewable energy. The governments should support the renewable energy by establishing new policies that contribute positively in the sector cause this sector will employee a desent portion of the labour force and will boost the economy.


To summarize, the renewable energy is the solution for the climate change and environmental issues. In addition, it has bright economic future and that is the most important thing. The renewable energy will contribute to the employment rate, help unprivileged areas, gives higher return on investments due to the reduction of costs of installation and boost the economy. The research and development will keep trying to reduce the costs even more and solve some of the problems.

All in all, the renewable energy is economically feasible and it will help the future generation to live more easy and clean lives.