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), 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) 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.

Thus, small-scale solar is called a "freeloader" and consumers are dissuaded from making their own power.

But there's a more important point driving some of renewable energy coverage that isn't always seen by investors: competition.

A vicious price war among Chinese polysilicon panel makers such as Yingli Green ( YGE) forced dozens of them out of business during 2011-2012, but the survivors have gotten costs below the cost of grid energy in many places across the U.S. It's this price war that has commentators at CNBC calling renewable energy "down."

But this has created the first energy price war in decades. Natural gas is displacing coal, while solar and wind are taking increased loads. This isn't just happening in the U.S. -- coal is steadily losing its export markets as well. Half the planned coal export terminals in the U.S. Northwest, including one from gas pipeline giant Kinder Morgan ( KMP) are being cancelled, Ecowatch reports, , because there just isn't enough demand.

For the first time this century, we're getting economic growth around the world without rising energy prices. This is a tipping point, a thumb on the scale, and while fracking can be credited with America's growing energy independence, in the developing world it's renewable technology that's supplying the increased demand.

Where do we go from here? The Chinese solar players aren't going away. Technology isn't going to stand still. Efficiency isn't going to stop being a priority. High-cost fossil energy suppliers are starting to face the same questions client-server computing suppliers are facing.

At the time of publication, the author was long KMP.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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