It's the latest fashion in the energy business...renewable or "Green" energy.  While the idea has been around for over 40 years, it would seem that its time has finally come.  As more states enact laws requiring the integration of renewable energy into the taxpayers utility bills, the promise of low-cost, fossil-fuel free energy is turning into reality.  However, before you jump on the bandwagon there are a few economic details that you may be interested in learning.

In all of the news stories, legislative bills, and laws that I have read pertaining to this topic, I have yet to read one that explains the reality of renewable energy prices.  Probably because it is obvious...no fuel costs, therefore lower cost of energy...right?  Not quite.  Energy, whether fueled by natural resources or fossil fuels is not valued or priced on a cost-of-production basis as many renewable proponents would lead you to believe.  Rather energy is a commodity, and accordingly is valued by a market clearing price that does not discriminate the energy source.  Simply stated, energy produced by no-cost [renewable] or low-cost [nuclear] fuel sells or "clears" at a wholesale unit price equivalent to the most expensive energy unit [e.g. oil or natural gas] required to meet the market demand for any given month, day or hour.  In addition, the market clearing price of energy is traded forward on a speculative basis [i.e. futures]...allowing the unit price to increase without limitation other than the limits of fear and greed.  Hence, the wind and sun are free, but renewable energy will continue to reflect the present and future cost of more expensive and volatile fossil fuels until they are completely removed from the marketplace.  Given the limited availability of renewable generation in many parts of the world [i.e. cloud cover, insufficient wind, limited transmission distance], the complete abolition of fossil fuels is an unlikely scenario.  Accordingly, the assumption that renewable energy will be anything more than a supplemental energy source to mitigate future fossil-fueled generation is foolish...as well as the concept of it being low cost.

If the market clearing process were not inequitable enough for the consumer, energy powered by renewable sources such as wind, water, solar, etc. is not considered "renewable" or "green" unless it is purchased with accompanying Renewable Energy Certificates [RECs].  REC's are basically the equivalent to having papers for your dog in order to claim its breed, they certify the renewable attribute of the kW that you have purchased.  REC's also provide a separate and secondary paper market that offers renewable generators additional subsidies beyond the value of the energy itself.  REC's can be, and frequently are traded separate of the energy from which they originated and are subject to the same speculative trading behavior of energy futures.  Given the relative scarcity of actual green energy, most consumers [including state laws] participate in the renewable markets via secondarily and residually-traded REC's...not actual investment in the energy.  In the meantime, renewable energy generators collect margins well in excess of their operational costs, pocket additional revenue from the sale of paper RECs, energy marketers/brokers add on their piece and consumers are forced to pay state-mandated subsidies to renewable generators that are already more profitable than their fossil-fueled counterparts. 

At the end of the day, the objective of introducing renewable energy into the market is to mitigate the growing demand for fossil-fueled power plants and their adverse impact on the environment.  Nobody I know would argue the value and importance of this objective.  However, how and where the tax payer's money is best spent by the state government to achieve this end should be questioned when the same dollar can reach the same objective more economically through proven energy reduction measures such as high-efficiency lighting, refrigeration, heating and cooling.  Renewable generators already have a zero-cost fuel source, yet they require additional subsidies to turn a profit?  There is a reason for this, it's called inefficiency.  Subsidizing inefficient business processes is called regulation and there was a very good reason why the energy markets were deregulated...the government did not know best!