The Valley of Death for New Energy Technologies

It is often claimed that a difficulty of raising investment funds prevents promising new energy technologies from attaining commercial viability. We examine this issue using a dynamic intertemporal model of the displacement of fossil fuel energy technologies by non-fossil alternatives. Our model hig...

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Bibliographic Details
Published in:The Energy journal (Cambridge, Mass.) Mass.), 2017-05, Vol.38 (3), p.33-61
Main Authors: Hartley, Peter R., Medlock, Kenneth B.
Format: Article
Language:English
Subjects:
Alternative energy sources
Alternative fuels
Energy
Energy costs
Energy industry
Energy minerals
Energy technology
Environmental aspects
Forecasts and trends
Fossil fuels
Fuels
Operating costs
Renewable energy
Renewable resources
Surveys
Technology application
Viability
Water-power
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Summary:It is often claimed that a difficulty of raising investment funds prevents promising new energy technologies from attaining commercial viability. We examine this issue using a dynamic intertemporal model of the displacement of fossil fuel energy technologies by non-fossil alternatives. Our model highlights the fact that since capital used to produce energy services from fossil fuels is a sunk cost, it will continue to be used so long as the price of energy covers merely short-run operating costs. Until fossil fuels are abandoned, the price of energy is insufficient to cover even the operating costs of renewable energy production, let alone provide a competitive return on the capital employed. The full long-run costs of renewable energy production are not covered until some time after fossil fuels are abandoned.
ISSN:0195-6574
1944-9089
DOI:10.5547/01956574.38.3.phar