Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
The Copper/Gold Ratio Would Change the Macro - 21st Oct 20
Are We Entering Stagflation That Will Boost Gold Price - 21st Oct 20
Crude Oil Price Stalls In Resistance Zone - 21st Oct 20
High-Profile Billionaire Gives Urgent Message to Stock Investors - 21st Oct 20
What's it Like to be a Budgie - Unique in a Cage 4K VR 360 - 21st Oct 20
Auto Trading: A Beginner Guide to Automation in Forex - 21st Oct 20
Gold Price Trend Forecast into 2021, Is Intel Dying?, Can Trump Win 2020? - 20th Oct 20
Gold Asks Where Is The Inflation - 20th Oct 20
Last Chance for this FREE Online Trading Course Worth $129 value - 20th Oct 20
More Short-term Stock Market Weakness Ahead - 20th Oct 20
Dell S3220DGF 32 Inch Curved Gaming Monitor Unboxing and Stand Assembly and Range of Movement - 20th Oct 20
Best Retail POS Software In Australia - 20th Oct 20
From Recession to an Ever-Deeper One - 19th Oct 20
Wales Closes Border With England, Stranded Motorists on Severn Bridge? Covid-19 Police Road Blocks - 19th Oct 20
Commodity Bull Market Cycle Starts with Euro and Dollar Trend Changes - 19th Oct 20
Stock Market Melt-Up Triggered a Short Squeeze In The NASDAQ and a Utilities Breakout - 19th Oct 20
Silver is Like Gold on Steroids - 19th Oct 20
Countdown to Election Mediocrity: Why Gold and Silver Can Protect Your Wealth - 19th Oct 20
“Hypergrowth” Is Spilling Into the Stock Market Like Never Before - 19th Oct 20
Is Oculus Quest 2 Good Upgrade for Samsung Gear VR Users? - 19th Oct 20
Low US Dollar Risky for Gold - 17th Oct 20
US 2020 Election: Are American's ready for Trump 2nd Term Twilight Zone Presidency? - 17th Oct 20
Custom Ryzen 5950x, 5900x, 5800x , RTX 3080, 3070 64gb DDR4 Gaming PC System Build Specs - 17th Oct 20
Gold Jumps above $1,900 Again - 16th Oct 20
US Economic Recovery Is in Need of Some Rescue - 16th Oct 20
Why You Should Focus on Growth Stocks Today - 16th Oct 20
Why Now is BEST Time to Upgrade Your PC System for Years - Ryzen 5000 CPUs, Nvidia RTX 3000 GPU's - 16th Oct 20
Beware of Trump’s October (November?) Election Surprise - 15th Oct 20
Stock Market SPY Retesting Critical Resistance From Fibonacci Price Amplitude Arc - 15th Oct 20
Fed Chairman Begs Congress to Stimulate Beleaguered US Economy - 15th Oct 20
Is Gold Market Going Back Into the 1970s? - 15th Oct 20
Things you Should know before Trade Cryptos - 15th Oct 20
Gold and Silver Price Ready For Another Rally Attempt - 14th Oct 20
Do Low Interest Rates Mean Higher Stocks? Not so Fast… - 14th Oct 20
US Debt Is Going Up but Leaving GDP Behind - 14th Oct 20
Dell S3220DGF 31.5 Inch VA Gaming Monitor Amazon Prime Day Bargain Price! But WIll it Get Delivered? - 14th Oct 20
Karcher K7 Pressure Washer Amazon Prime Day Bargain 51% Discount! - 14th Oct 20
Top Strategies Day Traders Adopt - 14th Oct 20
AMD is KILLING Intel as Ryzen Zen 3 Takes Gaming Crown, AMD Set to Achieve CPU Market Dominance - 13th Oct 20
Amazon Prime Day Real or Fake Sales to Get Rid of Dead Stock? - 13th Oct 20
Stock Market Short-term Top Expected - 13th Oct 20
Fun Stuff to Do with a Budgie or Parakeet, a Child's Best Pet Bird Friend - 13th Oct 20
Who Will Win the Race to Open a Casino in Japan? - 13th Oct 20
Fear Grips Stock Market Short-Sellers -- What to Make of It - 12th Oct 20
For Some Remote Workers, It Pays to Stay Home… If Home Stays Local - 12th Oct 20
A Big Move In Silver: Watch The Currency Markets - 12th Oct 20
Precious Metals and Commodities Comprehensive - 11th Oct 20
The Election Does Not Matter, Stick With Stock Winners Like Clean Energy - 11th Oct 20
Gold Stocks Are Cheap, But Not for Long - 11th Oct 20
Gold Miners Ready to Fall Further - 10th Oct 29
What Happens When the Stumble-Through Economy Stalls - 10th Oct 29
This Is What The Stock Market Is Saying About Trump’s Re-Election - 10th Oct 29
Here Is Everything You Must Know About Insolvency - 10th Oct 29
Sheffield Coronavirus Warning - UK Heading for Higher Covid-19 Infections than April Peak! - 10th Oct 29
Q2 Was Disastrous. But What’s Next for the US Economy – and Gold? - 9th Oct 20
Q4 Market Forecast: How to Invest in a World Awash in Debt - 9th Oct 20
A complete paradigm shift will make gold the generational trade - 9th Oct 20
Why You Should Look for Stocks Climbing Out of a “Big Base” - 9th Oct 20
UK Coronavirus Pandemic Wave 2 - Daily Covid-19 Positive Test Cases Forecast - 9th Oct 20
Ryzen ZEN 3: The Final Nail in Intel's Coffin! Cinebench Scores 5300x, 5600x, 5800x, 5900x 5950x - 9th Oct 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

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