With Oil So Cheap, What’s Happening With Renewable Energy?

It’s been quite a while since oil has been this cheap. It isn’t having the dramatic effect people have expected–people are still drilling, in some places gas at the pump is still pretty high, people haven’t doubled their driving.

And people are still investing in renewable energy. This is actually important, as for those of us who hope that renewables can help lower emissions, there is a perennial worry that short term events can slow down innovation. Fossil fuels have a lot of history behind them and a lot of very real advantages to overcome.

If we want renewables to comprise about 30% of electricity generation worldwide, which is a sane total to shoot for (especially if we can get another 30% from nuclear power and maybe 9% from hydroelectricity) then what we need to see is steady investment in plant, installation and research.

We seem to be getting it now.

Chris Mooney, a writer I don’t have much time for, looked at Bloomberg’s New Energy Finance’s report on investment and found that “2015 was a record year for global investment in the clean energy space, with $ 329 billion invested in wind, solar panels, biomass plants and more around the world. (The number does not include investments in large hydroelectric facilities).”

About half came from China and the U.S. “Fully one-third of the 2015 clean energy investment occurred in China — a punchline we’ve come to expect by now. That country saw investments of $ 110.5 billion last year. The United States was second with $ 56 billion.”

Perhaps most importantly, “Measured in terms of electricity generating capacity, the world saw an additional 64 gigawatts of wind capacity added and 57 gigawatts of solar capacity, BNEF estimates. The most striking figure here is that while 2015 only saw about 4 percent more clean energy investment than 2014 (when $ 316 billion was invested), the growth in renewable energy generating capacity was much higher at 30 percent. This, again, signals declining cost.”

Are subsidies still important to renewable energy? Yes. Is renewable energy still more expensive than fossil fuels? In most places, yes. Is renewable energy still growing rapidly from a small base? Yes.

And to emphasize, should developing countries like India continue to use cheap coal to lift their populations out of poverty? Yes, yes and again yes.

But we will switch our emphasis to renewables over the course of this century regarding the optimum fuel portfolio and this shows that investors are for once thinking more long term than usual.

Investment is freer from the politics of subsidy, the fiddling with capacity vs. generation games, the fantasy of Levelized Cost Of Energy. It reflects where people with money think that money can get a return.

Hooray.

Hooray-logo

4 responses to “With Oil So Cheap, What’s Happening With Renewable Energy?

  1. Lets give you a hand with some of the incoming data:

    This is a link to the worldwide drilling rig count from Baker Hughes:

    http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NjA2Mzk3fENoaWxkSUQ9MzE4NzEwfFR5cGU9MQ==&t=1

    It shows a steep decline in the number of rigs drilling wells around the world.

    As it turns out, there’s a correlation to the number of rigs we use and oil production. Simply put, oil production tends to decline as the reservoir is depleted. The decline rate depends on many factors, but depletion is inexorable and unstoppable.

    To offset the decline we add new wells, which can tap virgin reservoirs, inject fluids, accelerate production, or look for new oil fields. Thus the total decline from today’s crude oil and condensate rate (we produce roughly 80 million BOPD) can be variable, and a lot of it depends on the amount of wells we drill.

    So as of right now, in early 2015, oil production capacity is declining rather fast, simply because the number of rigs has dropped, and will likely drop for a while. I suspect the price is simply too low for any country to sustain production, therefore by 2017 we should see much higher prices. The big question is whether the industry will have the funds or the desire to risk drilling so much, given Saudi Arabia’s very radical regime and its evident aim to roil the markets and create instability.

    The big problem may end up being economic crises and wars as the oil market begins a series of swings which precede peak oil. After that, if some sort of energy source doesn’t show up, we are scrood.

  2. “If we want renewables to comprise about 30% of electricity generation worldwide, which is a sane total to shoot for (especially if we can get another 30% from nuclear power and maybe 9% from hydroelectricity) then what we need to see is steady investment in plant, installation and research.”

    That is unrealistic unless you plan on making extensive use of curtailment (shutting down wind turbines and solar panels because there is nowhere to send the power). Curtailment sends the cost of renewables soaring.

    Nuclear is baseload power. Hydro (other than pumped storage) is largely baseload power. Renewables, when available, displace baseload power. Baseload is 60-70% of average production. So with 30% nuclear, there is room for maybe 10-15% renewables before you start to need extensive curtailment. With no nuclear, maybe you can accommodate 25% renewables.

    But with no renewables, we could get 60-70% of power from nuclear. Adding a modest amount of storage (much less than needed for renewables) could push that to perhaps 95%. If you really think that we are facing a crisis, from either too much CO2 or too little fossil fuel, nuclear is the only way to go.

    A smaller point: 9% from hydro? Really? I just don’t see that, unless you are including pumped storage as “production”.

  3. “Investment is freer from the politics of subsidy”

    Really? Freer than what?

    “It reflects where people with money think that money can get a return.”

    Yes it does. And people can get a return from renewables soley because of subsidies and other government enforced rents.

  4. Why would a low oil price impact renewables?
    Tell us if hybrids or electric car sales are increasing.

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