Its impossible to ignore the influence of policy on the success, or otherwise, of renewable energy in specific markets.
Take one obvious example: Ive had some lovely summer holidays in Germany in the past, but I didn't go there under the illusion that it is the sunniest place on earth yet it is home to an installed PV capacity almost twice that of its nearest rival.
But I always think its worth stepping back to consider some of the energy fundamentals that could, and should, drive the penetration of renewable energy into energy markets. In a future world of no, or reduced, policy support, these are obviously crucial. Even in todays policy-distorted markets, they should provide guidance to the sustainability of, and motivations or justifications for, such supports.
By way of example, Ill briefly relate each to one specific market where renewables surely have an important long-term role to play: Chile.
1. Good renewable energy resources
We dont throw lumps of solar or wind energy onto tankers and sell them overseas, which means the economics of renewable energy sources like these are very much localised
We trade fossil commodities such that they are available to competing countries on an equal basis, in terms of preparedness to pay the market price. Oil and coal are both cheap to transport and so equilibrate at essentially global prices we know this because we are used to the fact that, every now and then when some crisis is occurring, "the oil price" gets a mention on the news.
Natural gas is currently hard (i.e. expensive) to trade globally, so we end up with regional prices with the US currently enjoying cheap gas prices compared to Japan saddled with costs up to four times as much.
Even if technology costs start to commoditize, PV module costs for example, then clearly the more solar energy you have landing on, and being converted by, each module, the better the economics of solar power will be.
These local variations are not something that will change or be equalised by the onward march of globalized trade.
It obviously makes sense that, in the long-term, a fundamental driver of comparative advantage in embracing renewable energy exists in those countries for which nature has provided the best resources.
Chile, in the Atacama Desert, boasts the highest solar irradiance levels anywhere in the world. It is a country of volcanoes, where the Curacautin geothermal plant under development can claim to have drilled the largest capacity individual geothermal well anywhere in South America.
It has excellent wind resources, theoretically up to 40GW according to the Global Wind Energy Council. It has one of the longest coastlines of any country, along which the Ocean Energy Council has suggested may exist the largest wave power potential anywhere in the world. It already has hydro power, and the resources to build much more.
In short, Chile is a country that nature has blessed with abundant and varied renewable energy supply.
2. Poor access to conventional energy supplies
For small countries in particular, how comfortable are you in bidding against energy behemoths like China or the US?
In the absence of fossil fuels, renewable energy would be all we could turn to.
We've already mentioned above that these fossil fuels can be moved about though, so lack of domestic supply doesn't mean sitting in a cave rubbing sticks together to keep warm and wondering what this "TV" thing, that foreigners mention, is all about.
However there is a good reason why being a "non-producing" country will certainly become an increasingly insecure position to find oneself in.
In a world of increasing population and increasing energy demand, on the one hand, and decreasing or harder to extract and hence more expensive fossil fuel resources on the other, you'll find yourself in a bidding war for these resources.
So you have no individual control over the future of these prices and limited ability to predict them. Prices can be highly volatile, moving the wrong way just when it is most inconvenient or economically damaging. Even if you can pay the price, as you bring energy supplies into the country, so your hard-earned wealth disappears the other way.
Chile imports about 95% of its oil, 97% of its coal and 69% of its natural gas.
In the worst case, future geopolitical events thousands of kilometres away and unrelated to your own country could even cut off supply completely.
In a market with limited or no access to domestic conventional fuels, the exploitation of renewable energy resources is an obvious and increasingly useful component of an energy security strategy, as well as an important hedge against future price risks.
If these renewable resources are as abundant as fossil fuels are scarce, then so much the better!
In the case of natural gas, Chile has seen previous pipeline supply from Argentina decline hugely and has become dependent on more expensive LNG imports from further afield.
While there is, as yet untapped and hence uncertain, potential for shale gas in Chile, it is a country that combines excellent renewable energy resource with a highly exposed position in terms of conventional energy supply.
3. A favorable and stable business environment
Developing renewable energy costs money. It almost certainly costs more than can be found down the back of the government sofa.
That means building the new infrastructure to create a more secure and predictable energy market and, ultimately, not exporting money in order to import energy means persuading private investors that they want to bring their money to you rather than send it somewhere else.
Investors are practical and pragmatic people: they are likely to be more interested in making money than in the fact that in doing so they are securing your country's future
You can have the best renewable energy resources in the world and the most severe problems of energy security and conventional fuel supply, but it means nothing if you are seen as a risky or difficult market in which to do business.
Investors are practical and pragmatic people: they are likely to be more interested in making money than in the fact that in doing so they are securing your country's future.
They may be prepared to take risks, but if they do, they'll expect better returns to compensate where risks are higher. So, if the latter describes your country, it'll cost you more to achieve an energy transition.
Investors can value the stability and reliability of a policy environment over and above apparently generous subsidies and incentives in an environment where they believe the goalposts might suddenly move.
Chile is considered one of South America's most stable and prosperous countries, with one of the highest regional rankings in competitiveness, globalization, and economic freedom indexes.
In Ernst & Young's most recent Renewable Energy "Country Attractiveness" Ranking, Chile ranks 13th overall, above markets like Denmark, Mexico and South Africa, to name but three examples. Only Brazil at 10th ranks higher overall in Latin America, and Chile beats Brazil for rankings in CSP: 2nd in the world after only the US; PV, geothermal and marine energy.
The perfect troika?
Of course there are no guarantees within the market complexities and multi-faceted economic variables that contribute to an industry's success.
But I have little doubt that coincidence of the three factors outlined above abundant renewable resources, poor domestic fossil fuel resources and a favorable and stable business environment will prove to be a major determinant of those markets which ultimately deliver strong growth in renewable energy.
In that context, the long-term future of renewable energy in Chile should be viewed very favorably indeed.
Don't miss the 2014 Chilean International Renewable Energy Congress.
There's no doubt about it. In this competitive marketplace, companies need to be building relationships and taking a collaborative approach to new projects with partners. And what better place than in Santiago at the 2014 Chilean International Renewable Energy Congress?
This unmissable event takes place on September 8-10, bringing together industry leaders to network, share insight and do business. Find out more and book your place here.
