Solaqua's Energy Future Project :: Context of the Project

Project Proposal

Section 1.1 Impending Energy Challenges

Section 1.2 The Rising Cost of Energy

Section 1.2.1 Energy Composition

 

 

1.2 The Rising Cost of Energy

 

     On January 8 th 2006 Consolidated Edison Company of New York, the major electricity provider for New York City announced a 36% hike in electricity costs to its customers. The company cited the volatility of natural gas prices due to recent natural disasters as the major driver for increased prices (Montefinise 2006). This tremendous price increase represents an important message to consumers from energy providers that the price of energy is not something to be taken for granted, and the price of energy is not likely coming down.

     Energy is a commodity, thus it is subject to the exact same economic laws, such as supply and demand, that govern commodities. As our current major sources of energy are non-renewable, and thus depletable, it is logical to assume that as more energy supply sources are tapped and consumed, the overall nonrenewable energy resources will decrease. This would lead to an inevitable and undeniable reduction in supply, which, by classical economic theory, will result in an increase in costs. Furthermore, the economic implication of current global trends of increased energy consumption, resulting in an increase on the demand for the finite resources, translates to an additional driver for increased energy costs.

     Energy markets are not nearly as cut and dry as the above synopsis suggests. Market forces are the basic means by which energy costs are determined, but policy plays a substantial role, as will be discussed below. The price of energy and its future price depend upon the composition of the energy sources. The following section will discuss how the US energy market is composed, and how prices of those components are expected to change in the coming decades. It is useful, if not necessary, to understand where we are coming from to responsibly and effectively plan where we are going.

 

Go to Section 1.2.1