The year is coming to a close, it has been an eventful one. The average annual temperature for the year was the highest and the global crude oil prices have hit a low for the decade. Climate scientists who have just concluded the Lima climate conference( Was Lima conference, a success? Read here) are worried that the falling oil prices could impact the renewable energy development.
The financial indications
Tesla motors reported a fall in sales of 11% in the last quarter. Does a drop in electric car sales indicate gasoline power cars are most desired? Can’t say. In the same period the Chinese solar panel manufacturer Yingli solar’s shares fell. More recently the OPEC cartel decided not to cut production meant the oil prices would fall further owing the supply demand equation (Why are oil prices falling? Read here). Immediately the share prices of the world’s largest wind turbine manufacturer Vestas fell and they continue to be at a low level.
So is cheap oil burning renewable energy? What are the experts saying?
At the moment it is very preliminary to correlate the dropping oil prices and renewable energy development. Few believe the impact could be serious. The example cited is the high oil prices in 1970s made the world turn towards renewable energy but a drop a decade later saw dwindling interests in renewable energy. Will that repeat?
Maria van der Hoeven, executive director of the International Energy Agency says “Back then the prospect of climate change barely registered as a policy concern, Today we know otherwise,” adding that governments should take advantage of the latest oil price slump to encourage more low-carbon investment, by eliminating fossil fuel subsidies and putting a meaningful price on carbon.
Bloomberg research group believes that countries today don’t look at these short term variations and they are framing long term policy objectives. They believe at worst the current trend could only delay the current projects but they cannot derail the progress of renewable energy. Global wind energy council declared “We don’t compete with oil”. The situation is much better for wind power developers, even at 50$ a barrel the current wind power could compete with them.
Another group Bernstein Research says, “Inevitably, there will be some impact because we think the high oil price is a key driver [for] renewable energy,”. Noting in countries like India and other island nations “Solar is still cheaper than [fossil-fuel derived electricity]. It’s just now that the difference is smaller,”. Theirs recent report noted “Renewable energy is a technology. In the technology sector, costs always go down. Fossil fuels are extracted. In extractive industries, costs (almost) always go up,” it said. “Renewable and fossil fuel cost per unit of energy are now roughly comparable in many places… but heading in opposite directions,” the report said. “New, superior technologies don’t split markets with old, inferior technologies.”
And Sir Richard Branson says….
Richard Branson is a firm believer in renewable energy being the answer to the future, he has pledged to turn the Caribbean green. This past year his private island, Necker saw a solar power plant being installed. This is what he had to say at a recent event
“They have done it before and it hurt. They don’t just want to damage the US fracking industry, but also the clean energy business. The collapse of oil prices is going to make it much more difficult for clean energy,” on Saudi Arabia’s role in the current oil price fall.
“Before the oil price collapsed, solar was actually cheaper [than oil]. If oil goes down to $30-$40 a barrel, then it will make it much harder for clean energy. Governments are going to have to think hard how to adapt to low oil prices,”
On the Paris conference in 2015 and why Carbon tax should be a reality
“If governments want a carbon tax [at the climate summit ] in Paris next year, then it would be the best time. What the clean energy business needs is a gap between it and coal and oil.”
The current scenario is just making the Paris conference in 2015 a big occasion for all countries to act and close out on a deal.