Renewable energy wonâ€™t die from cheap oil. With oil prices hitting six-year lows, you would think cleantechâ€™s momentum would stop. After all, history has not been kind to renewables when oil prices have fallen.
However, Bloomberg Business paints a different picture.
In his analysis, author Tom Randall cites 7Â key reasons why, this time, cleantech is here to stay.
1. â€œThe Sun doesnâ€™t compete with oil.â€
Randall argues rather obviously that solar does not complete with oil, as itâ€™s used more for transportation. Solar power is used for electricity. This is something everyone should know, but it seems few do. As solar prices continue falling (see hereÂ & see #3 on this list), by 2050, itâ€™s expected as the largest global power source, based on International Energy Agency predictions. (Currently, solar makes up only 1% of the worldâ€™s energy.) With solar cars and even planes always lurking around, perhaps oil will have to compete with solar-powered electric vehicles in future transportation, but weâ€™re not there yet.
Bloombergâ€™s solar analyst, Jenny Chase, suggested no one can kill solar energyâ€™s current momentum.
2. â€œElectricity Prices are Still Going Up.â€
Increased demand for electricity is putting pressure on our grid, according to Randall. In 2010, grid investments were $27 billion, four times 1980 cost levels. This is making people looking at solar as an alternative source for a homeâ€™s electrical needs as prices increase. Itâ€™s also creating a paradigm shift in how we get our energy, as many utilities scramble to harness its power within the grid. Itâ€™s a similar to comparison to cell phones within the 1990s and 2000s â€” as cellular phones became more affordable to middle to low-income people, they quickly overtookÂ to standard landline telephones.
As electricity prices increase, and solar prices fall, new left-right political alliances are emerging. Many libertarians embrace solar energyÂ as part of promoting free market choice. Environmentalists have teamed up with Tea Party members in some states, including Georgia, Florida, and Arizona to fight regressive solar laws.
Green Tea Coalition leader Debbie Dooley toldÂ The Energy Gang podcast recently thatÂ she sees Tea Party members and environmentalists working together on theÂ common goal in promoting solar. She also said more educated conservatives on solarâ€™s potential as a free market choice would help diminishÂ negative perceptions within right-wing circles.
Expect even more unique political alliances between liberal and conservative groups advocating solar as electricity prices continue rising.
3. Â â€œSolar Prices are Still Going Down.â€
We here at CleanTechnica, have provided wall-to-wall coverage of solar energyâ€™s sharp price decline. Improved technology and economies of scale haveÂ driven its cost downÂ dramatically. Oil meccas, including the UAEÂ and Saudi Arabia are starting to go bigÂ on solar, as low oil prices hit them in the pocketbook. Even more impressive, solar isÂ now price competitive with fossil fuels in many parts of the US.
As Randall notes, â€œIn the few places oil and solar compete directly, oil doesnâ€™t stand a chance.â€
4. â€œSales of Plug-ins Are Doing Just Fine Actually.â€
History has shown when oil is cheap, it leads to declines in electric vehicles sales. However, times are changing. Bloomberg New Energy Finance (BNEF) noted globalÂ EV sales increased by one-third in 2014.
Randall points to three reasonsÂ why cheap crude wonâ€™t smother EVsâ€™ future:
- There has been no link between electric vehicles sales and gas prices since 2010
- High European gas taxes negate any gains seen in following prices
- Healthy investments from Chinaâ€™s government in EVs thanks to pollution and climate change concerns
Factor in Teslaâ€™s ambitiousÂ Gigafactory in Nevada to mass produce EVs, and Chevy bringing an affordable all-electric car with a range of at least 200 miles, and you can see there is plenty of life in EVs.
5. Â â€œPump Prices Havenâ€™t Dropped as Much as Oil Prices.â€
Customers in some countries are not reaping the benefits of lower oil prices at the gas station. Southeastern Asian countries are using falling declining crude prices to chop fossil fuel subsidies, which were eating away at national revenues, including India and Indonesia.
Meanwhile, other nations are using this opportunity to boost gas taxes and government surpluses, namely China.
Many within environmental economic circles have encouraged governments, with gas prices this low, to have discussions about governmentsÂ implementing carbon pricing schemes and reduce fossil fuel subsidies. Even a prominent UAE executive and minister has said we should do so. This is a good idea overall as a way to move away from coal oil and gas and towards clean energy. Consider:
Fossil-fuel subsidies outpace renewable-energy subsidies by a factor of 6 to 1. Reducing the subsidy gap is one ofÂ the cheapest ways to increase fuel efficiency and speed up the switch to cleaner energy. Expect similar moves as the rising toll of climate change pushes governments to take action.
And if this would occur, imagine how much more global investment would occur in clean energy, which is already happening (see #6).
6. â€œOil Prices Wonâ€™t Stay this Low Forever.â€
While lower gas prices have brought a new love affair for gas guzzling vehicles, donâ€™t expect this to last an eternity. Randall suggests falling prices is leaving US oil rigs quiet at its fastest rate in 24 years. This means everything must go up again, as supply diminishes.
Debate is raging on now if lower gas prices are good for the environment. New Scientistâ€™s Fred Pearce recently discussed two sides of this debate. On one side, declining oil costs would leave investments less attractive, keeping oil in under the ground. On the other side, increasing oil costs would cut demand, increasing more interest in alternative energy.
This is why volatility in oil prices gives renewables other advantages â€” thanks to declining costs and predictability, Randall suggests. Which leads us toâ€¦..
7. â€œGlobal Investment In Clean Energy Keeps Flowing.â€
Last year saw renewable energy hit its highest global investments since 2011,Â with $310 billion invested in the sector. The US continues to invest heavily in solar. China has invested lots of money in solar, wind, and electric vehicles. And plenty of other countries are behind these giants.
While itâ€™s early days yet in this new era of oil prices and renewable energy stocks have taken a thumping, itâ€™s still not detoured sentiment. From Pope Francis and his activist involvement on climate changeÂ to the US and Chinaâ€™s historic deal late in 2014Â and this yearâ€™s Paris conference, these areÂ key factors in play towards moving global clean energy investment forward.
Even one Canadian stock market analyst said solar stocks will hit an age of solid long-term growth, identical to the Information Technology boom period.
Some will debate over the months to come how big a bite low oil prices will continue to take out of cleantech.
However, a shift in the global energy landscape is occurring towards cleaner power, Similar to the Internet transforming other industries 10â€“15 years ago. Â This time cheap oil will not kill off renewables as in previous times.