From commodity to product?
Updated: Mar 15
Commodities are subject to the economic rule of “Supply and Demand”.
Something that has been accepted as a fact for ages and with that, the fluctuating prices in trading and shipping of these commodities.
Does this also apply to Renewable Energy? It could very well be different. Let’s look at it this way:
Coal, oil and gas are valuable commodities because they are used to create “Energy” and thus that energy becomes a commodity.
As long as energy is needed and used at a location far away from the refinery or powerplant it stays a commodity
The same goes for Energy created by means of solar panels and wind turbines.
But when produced right on top of where it is needed it becomes a product.
A refrigerator is a very useful product that conserves our food stock. And it needs the commodity of electric energy. Connected to a PV panel on your roof it becomes part of your refrigerator.
A PV installation on top of the roof is part of the house and by that, part of its value. A solar panel has a life time of 20 to 25 years. A tank of petrol lasts a week.
That house is still a good asset, tradable but on a much less volatile market and on the local estate market. Thus, less market disruption and less prone to speculation.
Maybe a roof is not big enough to cater for all the energy needed, but a communal cooperative can build a big enough system and produce sufficient for all members. Such systems are more and more deployed in rural areas. Also in urban settings these can become real game changers. The more energy becomes a product rather than a commodity, the least volatile energy prices are.
Sun and wind will never be a commodity, but the energy produced by large windfarms, solar farms and hydro plants, must still be distributed and the trading makes it a commodity again. Energy traders will protect their interests and make use of the trading schemes as we now have for fossil and green energy.
But the market factors will be different. And when storage facilities improve, volatility is further reduced. Trading in energy will be merely a regional matter. Self-supporting communities and regions will be less effected by global disruptions. A more resilient economy based on full or partial self-sufficient production will result in a more equal society.
Commodities will still be needed for the production of goods and materials, but building a circular economy will dampen the negative impacts of our present linear economy.
If there is one thing the Covid pandemic has revealed, it is the vulnerability of the global economy.
The full long-term impact might be bigger than we foresee now. Much bigger.