Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
This Is Your Last Chance to Dump Netflix Stock - 19th July 19
Gold and US Stock Mid Term Election and Decade Cycles - 19th July 19
Precious Metals Big Picture, as Silver Gets on its Horse - 19th July 19
This Technology Everyone Laughed Off Is Quietly Changing the World - 19th July 19
Green Tech Stocks To Watch - 19th July 19
Double Top In Transportation and Metals Breakout Are Key Stock Market Topping Signals - 18th July 19
AI Machine Learning PC Custom Build Specs for £2,500 - Scan Computers 3SX - 18th July 19
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19
UK House Building and Population Growth Analysis - 17th July 19
Financial Crisis Stocks Bear Market Is Scary Close - 17th July 19
Want to See What's Next for the US Economy? Try This. - 17th July 19
What to do if You Blow the Trading Account - 17th July 19
Bitcoin Is Far Too Risky for Most Investors - 17th July 19
Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? - 17th July 19
Boost your Trading Results - FREE eBook - 17th July 19
This Needs To Happen Before Silver Really Takes Off - 17th July 19
NASDAQ Should Reach 8031 Before Topping - 17th July 19
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19
Stocks Market Investors Worried About the Fed? Don't Be -- Here's Why - 13th July 19
Could Gold Launch Into A Parabolic Upside Rally? - 13th July 19
Stock Market SPX and Dow in BREAKOUT but this is the worrying part - 13th July 19
Key Stage 2 SATS Tests Results Grades and Scores GDS, EXS, WTS Explained - 13th July 19
INTEL Stock Investing in Qubits and AI Neural Network Processors - Video - 12th July 19
Gold Price Selloff Risk High - 12th July 19
State of the US Economy as Laffer Gets Laughable - 12th July 19
Dow Stock Market Trend Forecast Current State - 12th July 19
Stock Market Major Index Top In 3 to 5 Weeks? - 11th July 19
Platinum Price vs Gold Price - 11th July 19
What This Centi-Billionaire Fashion Magnate Can Teach You About Investing - 11th July 19
Stock Market Fundamentals are Weakening: 3000 on SPX Means Nothing - 11th July 19
This Tobacco Stock Is a Big Winner from E-Cigarette Bans - 11th July 19
Investing in Life Extending Pharma Stocks - 11th July 19
How to Pay for It All: An Option the Presidential Candidates Missed - 11th July 19
Mining Stocks Flash Powerful Signal for Gold and Silver Markets - 11th July 19
5 Surefire Ways to Get More Viewers for Your Video Series - 11th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Why Lower Crude Oil Prices Won’t Kill the Renewable Energy Boom

Commodities / Renewable Energy Nov 14, 2014 - 02:05 PM GMT

By: Money_Morning

Commodities

Kent Moors writes: Whenever oil prices drop, everyone always wonders how it will affect wind and solar power.

It follows from the traditional assumption that renewables like these are only competitive when oil and natural gas prices are high.

After all, the early stages of wind and solar power came with a hefty front-loaded price tag, requiring massive government subsidies to both producers and end users to get off the ground.


Some states even introduced legal measures that required that utilities buy a certain percentage of their energy needs only from renewables.

All of this only added to the wider perception that renewables couldn’t truly contend, especially if oil and natural gas prices fell.

But those days are now rapidly coming to an end…

The Key to All the Controversy is Grid Parity

The larger truth is that the wind and solar landscape has changed significantly. Most of the subsidies have been phased out, and mandatory renewable energy purchases are now facing significant political opposition.

As utilities have argued for years, both the subsidies and the obligated energy buys have translated into higher costs to the consumer.

There is also the common problem built into renewable electricity production: Since the power cannot be stored, it’s not always available when needed.

After all, the sun doesn’t always shine and the wind can suddenly go calm. That has required energy producers to duplicate sourcing in a legal no man’s land, adding to the effective expense.

Of course, environmentalists have long maintained that even some additional cost is worth the major advantage gained on the pollution side. Needless to say, solar and wind remain far less damaging to the environment, even though wind towers create dangerous impediments for birds, especially migrating fowl.

Yet it is ultimately price that will put an end to all of these controversies.

And in this case there’s always one overriding consideration, often looked upon as the Holy Grail for renewables.

It’s something called grid parity

Grid parity refers to different sources of energy being able to deliver electricity at the same cost. Subsidies aside, everything from the family budget to broader economic recoveries hinges on the reliability and expense of electricity.

What’s new and not that well-known is that solar power has reached grid parity in several regions of the West and Southwest, while wind is reaching that point in Texas – where more power is generated from wind than anywhere else in the country.

A Place Where Ebola and Insurgents Aren’t the Only Problem

So if grid parity is practically here, how is the situation different now that oil prices are lower?

Well, that depends on where you are in the world.

Oil products are no longer the main source of electricity in North America or Western Europe. In these areas, the primary battleground for market position will be with natural gas.

Yet, in other parts of the world, the use of oil to generate power is significant. These also happen to be areas where the demand for power is growing at the highest rate. West Africa in general – and Nigeria in particular – is a prime example. The combination of Ebola and radical insurgency may be capturing the headlines there these days, but the electricity situation in this area is a major story as well.

Now that may seem odd on the face of it. Nigeria is a major producer of light sweet crude, the most desirable of oils. However, its refinery sector is in shambles, which means most of the crude is shipped out of the country as raw material.

That’s critical, since they can only generate only about 25% of the electricity needed on a daily basis. The gap is filled with diesel and other oil products, making oil the primary energy source.

Because the diesel cannot be produced locally in sufficient volume, it must be imported. So the following irony ensues: one of the world’s leading oil producers has to import oil products to provide three-fourths of its daily power requirements.

So in places like these the price of oil does indeed make a fundamental difference in the availability of electricity. And while there are moves to introduce renewables in these areas, there’s neither the political will nor sufficient working capital to accomplish it. A vicious cycle has taken root.
It’s All About the Price

Meanwhile, the low cost of both coal and oil has virtually scuttled a national campaign for renewable energy in Australia. This was also accompanied by some very poor national planning and equally faulty economic assumptions at the outset.

In the U.K., the battle is over onshore wind power. Offshore power is already part of the grid. However, the industry is now looking suspiciously at the Conservative Party agenda should they retain 10 Downing Street (independently or in coalition) after the next Parliamentary election.

In fact, The RenewableUK 2014 conference began yesterday in Manchester and the kickoff speech by the trade body’s chairman, Julian Brown, left little doubt where the industry thinks the lines are being drawn.

Brown addressed the price issue first, emphasizing that wind power (generated mainly offshore in the North Sea at this point) is approaching grid parity. It is still subsidized, and that has been an increasing political issue. The current Conservative leadership is pushing for new nuclear plants (owned by foreigners, no less) and an expansion of fracking to exploit available shale gas.

Aside from providing a general barometer for energy prices, the decline in oil is less a major threat to wind power in the U.K. than the availability of alternative substitutes for both oil and coal. Wind has the strong support of environmental groups, but they hardly sway either side of the aisle in the House of Commons.

The simple fact of the matter is this: Wind power will not achieve parity there unless it can be expanded onshore. That is where the next political fight is looming. It has already become a partisan issue and is likely to divide the country. Despite opting not to become independent, Scotland is already ground zero in this developing donnybrook.

In the U.S., the rise of shale and tight oil as a major energy ingredient doesn’t directly translate into a threat for renewables, since there is so little electricity generation coming from oil now or in the future. Once again, this becomes a pricing issue, with oil serving as a surrogate standard.

Achieving grid parity is more a perceptual matter than anything else, and (rightly or wrongly) consumers view this rather straightforwardly as what translates into their monthly bill.

It’s not surprising, therefore, that a renewable offensive has already begun. The American Wind Energy Association has just come out with an analysis concluding that wind power in Texas adds at least $3.3 billion annually to the state economy, with $1.2 billion in savings yearly to consumers.

As in the U.K., the push is coming from an industry lobbying group with an obvious vested interest in the outcome.

Nonetheless, the arguments in defense of renewables are moving into the category that used to be the primary argument used against them by their opponents.

Price.

This is going to get really interesting.

Source : http://oilandenergyinvestor.com/2014/11/lower-oil-prices-wont-kill-renewable-energy-boom/

Money Morning/The Money Map Report

©2014 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules