Will the falling oil price undermine green energy?

Will the falling oil price undermine green energy

Common sense would surely tell you that if you slash the cost of one source of energy, then alternatives look less appealing.

You might think, therefore, that the crash in the price of oil must be dealing a potentially fatal blow to renewable power.

An illustration from recent history seems to back that up.

When the oil price spiked in the 1970s, the then US president Jimmy Carter had solar panels fixed to the White House roof, only to see his successor Ronald Reagan rip them off when the oil price tumbled.

Fast forward to the past few months and at first sight a similar effect appears to be happening as the share prices of many renewable energy companies take a hit.

Different markets

However, things are not so straightforward. The world of energy has changed.

For a start, oil does not compete with wind or solar power. They perform different roles – oil is still dominant in transport while renewables generate electricity.

Since the 1970s, the use of oil at power stations has dwindled. It was replaced by gas, which was seen as a cleaner and more secure option with supplies less vulnerable to international crises.

So the oil price does not directly affect the market that renewables are operating in.

Then there are the wind turbines and solar panels themselves. As technologies develop and become mass-produced, costs usually fall and that is what has happened in the last 10-15 years.

Better manufacturing techniques, soaring demand, intense competition – all have driven down prices for turbines and panels and further encouraged their spread.

And government policies to support renewables with subsidies – to help young green industries find their feet – show no sign of changing in the near future.

Source: http://www.bbc.com/news/science-environment-31057078



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