Final answer:
The economic model for energy generation is expected to shift towards long-term contracts as renewable energy sources require a higher upfront investment with zero fuel cost. These long-term contracts provide financial stability for producers and energy assurance for consumers in the context of transitioning away from fossil fuels and embracing technologies like hydroelectricity and solar power.
Step-by-step explanation:
The statement suggests that as the world transitions to renewable energy sources, the economic model for energy generation technologies will likely shift towards long-term contracts. This is due to the need for upfront investment in renewable technologies, which tends to be higher because the fuel cost (e.g., sunlight, wind) is zero. Therefore, it is expected that to recover the initial costs and ensure financial viability, energy providers will need to secure long-term contracts.
Renewables, like hydroelectricity and solar power, exhibit economies of scale, meaning the average cost of production decreases as the scale of production increases. This aspect makes renewable energy competitive over time but requires careful planning and investment, which is where long-term contracts come into play. Such contracts provide certainty for both producers, who need to secure a return on their significant upfront investments, and consumers, who require a stable energy supply.
In considering future energy scenarios, there is a focus on the fact that fossil fuels, while having powered past growth, are finite and contribute to climate change. Thus, investing in renewables sooner rather than later is a strategic move, even if the infrastructure arrives before it is critically needed. Energy technologies like hydroelectricity and wind turbines are seen as part of a future mixed energy portfolio, which must also include demand reduction to be sustainable.