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Renewables: The economics of energy

Jan 20, 2025 05:04 PM IST

This article is authored by Arif Aga, director, SgurrEnergy.

The climate crisis is a matter of global concern and rapidly growing energy demand placed this world in a Catch-22 situation because of resource depletion. In this juncture, the idea of renewable energy has replaced idealistic dream with economic pressures. A greener option for fossil fuels is served by green or clean power sources. Solar, wind, and other clean energy sources reduce environmental damage and create massive economic benefits. The climate crisis--a global crisis calls for innovative and new solutions. There is a need to bridge the gap between cost-effectiveness and environmental stewardship to enable governments and corporations to transition toward sustainable energy practices, lowering the financial and environmental costs of pollution.

An aerial view of the world’s largest renewable energy plant, the 30 GW Khavda Renewable Energy Park, in Kutch.(ANI) PREMIUM
An aerial view of the world’s largest renewable energy plant, the 30 GW Khavda Renewable Energy Park, in Kutch.(ANI)

From these, the economic rationale about renewable energy starts with ascertaining the costs of fossil fuel dependence. Through polluting air, water, and soil, coal, oil, and natural gas damage the quality of the ambient resources, thereby affecting public health. According to the Unicef, air pollution accounted for 8.1 million deaths globally in 2021, becoming the second leading risk factor for death, including for children under five years. In the current scenario both environmental damage and productivity loss due to various illnesses of industrial workers are enormous.

The climate crisis and pollution have significant economic consequences for agriculture, fisheries, and biodiversity. A report from the International Monetary Fund estimated in 2022 that pollution-related damages total over $5 trillion worldwide annually--a stark reminder of the urgent need for cleaner energy systems.

Moving the world to renewable energy seems a perfect solution that has proven to spur economic growth. Clean energy jobs, boosting local economies and lessening reliance on turbulent fossil fuel markets, serve as some of the incentives for renewable energy. Notably, the International Renewable Energy Agency (IRENA) states that in 2022, the clean energy sector employed 13.7 million people in the world, with continuous growth projected as more nations commit to ambitious clean energy policies.

Long-term energy costs are also diminished because of renewables. Fossil fuels, by contrast, involve continuous extraction, transport, and refining, whereas renewable energy systems use freely accessible natural resources. The long-term savings on renewable infrastructure, such as wind turbines or solar panels, would be enormous, since costs to operate are minimal. This would lead to business and household lower energy expenses, thereby improving disposable income and economic resilience.

It is well-known that transitioning to renewable energy involves transforming the potential of clean energy into practical, cost-effective solutions. This requires a strategic approach that spans technical, economic, and regulatory considerations. A critical first step is conducting an extensive cost-benefit analysis—assessing installation costs, projecting savings, calculating returns on investment, and leveraging government incentives like tax credits to ensure financial feasibility. Tailoring energy solutions to specific needs and budgets is equally essential, whether through hybrid systems or dedicated solar installations, ensuring maximum efficiency without unnecessary costs.

Energy efficiency is the cornerstone of success. Improving the efficiency plays a crucial role. Upgrading insulation, retrofitting lighting systems, and optimising HVAC setups can significantly reduce energy consumption and operating costs. Balancing economic priorities with environmental goals is key to making sustainable energy practices both viable and impactful.

The challenges are many and addressing common challenges such as high upfront costs, intermittent energy supply, and resistance to change also requires innovative solutions. These include exploring creative financing mechanisms like green bonds and integrating energy storage technologies to enhance reliability. By embracing these strategies, stakeholders can overcome obstacles and unlock the economic and ecological benefits of renewable energy, paving the way for a sustainable future.

In nutshell, there is an urgent need to open the doors to a greener and prosperous future. Hence, governments, businesses, and individuals must recognise that the transition to renewable energy is not just an environmental necessity—it’s an economic opportunity. It is time to go all out for a sustainable energy future that balances profitability with planetary health.

This article is authored by Arif Aga, director, SgurrEnergy.

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