The rise of renewable energy is a hot-button issue, and, as is all too often the case, the headlines can outrun the facts. There is a natural tendency to see change as a threat. Instead, we encourage companies to view these emerging technologies and demand categories as an opportunity.
First, it is important to understand the context. The existing renewable energy sector may not be exactly what you think it is. When discussing renewable energy sources, most Americans envision fields of solar panels and wind turbines. Yet as of 2020, only 11% of US renewable energy consumption came from solar sources, while wind accounted for 26%. The largest source of renewable energy is biomass, which includes wood and biofuels and accounted for 39% of the total. Hydroelectric power, another well-established energy source, contributed another 22%.
Renewable energy sources account for only 12% of US primary energy consumption, which means that solar power accounts for just over 1%, and wind makes up roughly another 3%. This share of the total is only slightly higher than that of coal (10%) or nuclear power (9%) and remains significantly behind the largest two sources: petroleum (35%) and natural gas (34%).
Renewable energy sources are growing at a faster pace than legacy sources; the US Solar Energy Consumption 12/12 was at 20.6% in February, and the US Wind Energy Consumption 12/12 was at 9.7%. Both energy categories have expanded in the past 20 years with improving technology and increasing demand. However, also note that high growth rates are mathematically easier to achieve when starting at a lower base, and solar and wind power combined accounted for less than 1% of total energy consumption in 2000.
While solar and wind energy are sure to continue to gain in the coming years, they will not completely replace traditional energy sources anytime soon. Until energy storage concerns are addressed, many states and localities have limited the share of energy generation that can come from these sources, for fear of blackouts during calm or cloudy spells. Finally, even new energy technologies rely on legacy transmission and peripheral equipment, for which demand will not evaporate.
Instead of viewing the shift to sustainable energy as a threat to existing business, now is the time to adapt and evolve. Seek out the opportunities, but don’t lose sight of what hasn’t changed – our economy will demand an increasing amount of energy to power it, and there is money to be made.
Lauren Saidel-Baker
Economist
