Renewable energy is crossing the divide towards a competitive role in energy markets. But there is still more terrain to cover among the different renewable energy sources in terms of economics, technology and scale, says Daniel Yergin, chairman of Cambridge Energy Research Associates (CERA) and executive vice president of IHS Inc.

Renewables are already a significant business in terms of tens of billions of dollars in investment per year. But the scale of the existing energy business is enormous, and we’ll only start to see the real impact in terms of market share in the next five to 10 years. High energy prices, climate change and energy security are converging as the new engine driving the development of clean energy. They are being bolstered by public policy and a major shift in public opinion. All of this is supported by the growing conviction that new carbon policies will reshape the competitive landscape of the global energy business.

Governments around the world-prompted by dual concerns about energy security and climate change-will also play a significant role. As governments move forward to further encourage renewables development, they do need to pay attention to key considerations-about costs, scale, reliability, timing and unintended consequences. Another key issue is the additional investment needed to support and tie renewables into existing energy systems. A major reason for the recent leap to $100 a barrel is the economy-but now a weak U.S. economy and the credit crunch, rather than the strong global economy that has been so important the last few years. A slowing U.S. economy, rate cuts by the Federal Reserve and expectations of more, and a weak U.S. dollar-along with the reappearance of inflation around the world-are driving investors into oil and other commodities. Instead of the traditional ‘flight to the dollar’ during times of uncertainty, we are seeing a ‘flight to oil.’ At the same time, rising costs in the oil field have put a higher floor under oil prices.

We are going through a period of what I call the 'great bubbling,' a high degree of innovation all across the energy spectrum. This is boosting the competitiveness of renewables and efficiency, and is also evident in terms of conventional energy. There is a broad range of opportunities and benefits, as well as risks and pitfalls, as the modern energy industry increasingly moves to adopt clean technologies that will be part of the alternative, low-carbon pathway to the energy future. This changing energy future will be shaped both by traditional technology and engineering firms, electric power companies, and oil and gas companies and by such new entrants such as innovators, entrepreneurs, venture capital firms and high tech companies.

Source:CERA