Oil Prices: Is it a slippery slope for Renewable Energy?
20 January 2015 by Marketing Team
As motorists continue to rejoice in being able to get more fuel for their buck, we look at whether the plummeting oil prices could have a devastating effect on the renewable energy industry.
The price of Brent crude oil has now slipped below $54 per barrel in New York and London markets; the lowest price since May 2009. This has caused panic across the markets with the threat that the prices will continue to fall and who knows when they will stop.
Analysts’ opinions on the impact of the oil prices on the renewable energy industry has been somewhat divided to say the least. Some analysts argue the maturity of renewable energy has substantially developed from the days of the 1980’s which saw solar, wind and geothermal markets crippled by the cheap oil and gas in North America; Renewable energies are now established technologies that will be able to withstand the volatility of oil prices.
Today we use oil and renewables in completely separate realms, although the transport sector may sink millions of barrels of oil a year, this does not compare to the production of electricity. For instance, the renewable energy generates nearly a fifth of the UK’s electricity compared to only approximately 0.06% which comes from oil, and similarly in the US oil generates only 1% of electricity from oil. This doesn’t say that other countries will not suffer; many countries still rely heavily on oil particularly in the Middle East where 29% of electricity comes from oil, but it does suggest that the price of one may not have such a great impact on the price of the other.
On the other side of the spectrum, the long standing argument from the government is that it is better to invest public money in renewable energy than fossil fuels. Their argument that the latter will get more expensive, whereas renewable energy subsidies will continue to decrease, seems to fail if oil prices continue to drop.
According to energy analysts, the fall in oil prices could result in even more subsidies being required to fill the gap between the price of fossil fuels and renewable energy. Despite this we cannot be sure that the fossil fuel industry will go unharmed, as it is likely that the fossil fuel industry will also be affected as many may decide that exploitation projects are no longer worth the cost and risk.
Nevertheless the renewable energy industry, in particularly solar, remains positive and bright about the future. The billions of pounds of investment over the years that has been poured into renewable technology (and let’s not forget the government’s legal obligations to the climate change) will hopefully ensure the survival of renewable energy……. at least for the time being!