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Renewable Energy: Let's All Fail Like This

NEW YORK ( TheStreet) -- Did you know that cloud computing is a failure because no one is making money at it?

Seriously, the vicious price war led by Amazon.com (AMZN - Get Report), in which customers keep getting a better bargain while providers are hammered by nonexistent margins, means the technology is a complete failure.

It must be true. How else can you explain headlines like the one on CNBC claiming renewable energy is "down but not out."

I'd like to be down like renewable energy is, just as I'd like to be down like cloud computing is down. The International Energy Agency reported last week that renewable energy is on track to pass natural gas as an energy source by 2016.

It's something I sometimes forget, living in the U.S. We're not the whole world. When I see estimates for "grid parity," the price at which solar energy becomes cheaper than alternatives, I often forget that these are U.S. estimates. The U.S. has a very extensive electrical grid, meaning energy here can get to market fairly cheaply. Most of the world does not.

As a result, grid parity has already been passed in countries such as India and Brazil that don't have extensive electric grids. The infrastructure needed for an electric grid, like that of wired Internet service, is too big an investment for most developing countries. Thus their Internets are wireless and mobile, and their electrical systems are increasingly based on solar and wind.

This difference has a real impact on the take-up rate of renewable energy.

When you install a solar panel on an American roof, you connect that panel to the electric grid, partly so that roof owner can sell power to the utility, but partly so they can buy power when the panel isn't working.

As Jason Hibbets of Red Hat (RHT - Get Report) explained to me recently in a blog post, there's a huge profit margin here for the utility. They buy power at their base rate, then resell it to consumers at a premium "peak" rate.

But many utilities now want more, calling solar panel owners "freeloaders" on the infrastructure. This is nonsense, but the fact is the U.S. electrical system is geared toward massive, out-of-town inputs serving massive demand that peaks in the late afternoon, when air conditioners go on. So while utility-scaled solar can be plugged-into this system, with some additional storage, small-scale solar creates uncertainties in balancing supply and demand.

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