NewEnergyNews: ORIGINAL REPORTING: How wind & solar could benefit from low oil prices

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Gleanings from the web and the world, condensed for convenience, illustrated for enlightenment, arranged for impact...

The challenge now: To make every day Earth Day.

YESTERDAY

THINGS-TO-THINK-ABOUT THURSDAY, September 29:

  • TTTA Thursday-Mars Sees Threat To Chocolate In Climate Change
  • TTTA Thursday-Wearable New Energy
  • TTTA Thursday-Picture Proof That U.S. Offshore Wind Lives
  • TTTA Thursday-BMW’s Used Battery Power Plant
  • THE DAY BEFORE

  • ORIGINAL REPORTING: Taming the Wild West: The CA ISO’s Bid For A Regional Electricity Market
  • ORIGINAL REPORTING: A Closer Look At The Plunging Cost Of Battery Energy Storage
  • ORIGINAL REPORTING: New arrival Spruce ups game for 'trusted energy advisor' role
  • THE DAY BEFORE THE DAY BEFORE

  • TODAY’S STUDY: What Utilities Are Planning For Solar
  • QUICK NEWS, September 27: Facts Check Trump – Fed Investments In Solar A Huge Success; Top Midwest Utility In $2 Billion Wind Buy; Solar Cost Increasingly Beating The Market
  • THE DAY BEFORE THAT

  • TODAY’S STUDY: The Future Of Offshore Wind Foreseen
  • QUICK NEWS, September 26: The Sonification Of Climate Change; Wind Is Red, White, And Green; The New Hybrid Solar-Storage Concept Module
  • AND THE DAY BEFORE THAT

  • Weekend Video: Good News On Climate – The Public Is Starting To Get It
  • Weekend Video: The Libertarian Failure On Climate Change
  • Weekend Video: New Energy Is Doable – And Is Being Done
  • THE LAST DAY UP HERE

  • FRIDAY WORLD HEADLINE-World Gets A Step Closer To Enforceable Climate Laws
  • FRIDAY WORLD HEADLINE-New Energy Ready To Power The World Future
  • FRIDAY WORLD HEADLINE-Sahara Sun Could Power The World
  • FRIDAY WORLD HEADLINE-World’s Biggest Offshore Wind Turbines Building Off UK Coast
  • --------------------------

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    Anne B. Butterfield of Daily Camera and Huffington Post, f is an occasional contributor to NewEnergyNews

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    Some of Anne's contributions:

  • Another Tipping Point: US Coal Supply Decline So Real Even West Virginia Concurs (REPORT), November 26, 2013
  • SOLAR FOR ME BUT NOT FOR THEE ~ Xcel's Push to Undermine Rooftop Solar, September 20, 2013
  • NEW BILLS AND NEW BIRDS in Colorado's recent session, May 20, 2013
  • Lies, damned lies and politicians (October 8, 2012)
  • Colorado's Elegant Solution to Fracking (April 23, 2012)
  • Shale Gas: From Geologic Bubble to Economic Bubble (March 15, 2012)
  • Taken for granted no more (February 5, 2012)
  • The Republican clown car circus (January 6, 2012)
  • Twenty-Somethings of Colorado With Skin in the Game (November 22, 2011)
  • Occupy, Xcel, and the Mother of All Cliffs (October 31, 2011)
  • Boulder Can Own Its Power With Distributed Generation (June 7, 2011)
  • The Plunging Cost of Renewables and Boulder's Energy Future (April 19, 2011)
  • Paddling Down the River Denial (January 12, 2011)
  • The Fox (News) That Jumped the Shark (December 16, 2010)
  • Click here for an archive of Butterfield columns

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    Some details about NewEnergyNews and the man behind the curtain: Herman K. Trabish, Agua Dulce, CA., Doctor with my hands, Writer with my head, Student of New Energy and Human Experience with my heart

    email: herman@NewEnergyNews.net

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      A tip of the NewEnergyNews cap to Phillip Garcia for crucial assistance in the design implementation of this site. Thanks, Phillip.

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    Pay a visit to the HARRY BOYKOFF page at Basketball Reference, sponsored by NewEnergyNews and Oil In Their Blood.

  • ---------------
  • FRIDAY WORLD, September 30:

  • Does The Oil And Gas Industry Finally See Climate Change?
  • Roadmap To The World New Energy Future Updated
  • Where In The World Better Solar Is Being Made
  • Windmaker Designing Wind Storage System

    Wednesday, March 16, 2016

    ORIGINAL REPORTING: How wind & solar could benefit from low oil prices

    How wind & solar could benefit from low oil prices; Oil is for transportation and renewables are for generation, but there is a connection

    Herman K. Trabish, June 22, 2015 (Utility Dive)

    To those in the energy industry, it seems to be stating the obvious to observe that the price of oil has little to do with the renewables market, but global corporate consultant Nexant sees a connection.

    Oil is essentially a transportation fuel and only provides about 4% of global electricity generation, while wind and solar primarily compete for market share in electricity markets. But the money that finances energy projects has no problem jumping that market divide, and therein lies the reason that low oil prices could help boost the growth of renewables.

    “The observed historic correlation between crude oil and renewables primarily results from the secondary influence of market perception,” Nexant’s recent white paper, "Crude Oil’s Impact on Renewable Energy" reports.

    It is important to note, according Nexant Consultant and white paper author Bonaire Le, that “crude oil is subject to a lot more market volatility than renewable energy," and that volatility could influence what energy investors do.

    The 2014 drop in Brent Crude and WTI oil prices from above $110 per barrel to below $50 per barrel highlights the unpredictability in crude oil's price, Le said. Though there is presently “a slight uptick” in prices, indications from reliable market-watchers like the Bank of England and the International Monetary Fund see the price settling at some point “around $70 per barrel to $80 per barrel,” although they stress that prices could still fluctuate.

    Those price estimates, and their uncertainty, have had investors focused on the oil and gas sector worried for months. At the same time, steady gains in market share for wind and solar generation highlighted how isolated they are from fuel price fluctuations, and Le said that big investors are taking notice.

    “When we are working with banks and law firms who are the funding bodies to energy or chemical projects,” he said, “they want to understand – if there is an issue with crude oil, what else is there to finance?”

    Investors are the connection

    The 2014 drop in the price of crude oil was a straightforward supply-demand issue mixed with geopolitics, Le said. Energy efficiencies and sluggish global economy compromised demand. Burgeoning volumes of U.S. crude over-supplied a market that eventually became over-saturated when the Organization of Petroleum Exporting Countries (OPEC), determined not to lose market share, refused to cut output.

    Solar and wind provide some insulation from such fluctuations in fuel prices. While they require high upfront capital investment based, they have “an input cost of ‘zero’” because their fuels are essentially free, the white paper explains. The history of oil price volatility “has demonstrated that investing in crude oil is an increasingly risky strategy," it continues, while renewables could offer a safer, more appealing option.

    Banks and other investors “are comfortable with looking at crude oil price scenarios and forecasts and how that impacts their potential return on investment,” Le explained. But with the 2014 oil price crash, they realized new investments in unconventional, hard-to-reach resources would not be as likely to pay off.

    At the same time, advances in technology and market forces were driving the price of wind and solar projects down and the projects were providing reliable, if more modest, returns.

    Renewables are technology dependent “and at this stage of the experience curve costs will continue to go down with the refinement and improvement of manufacturing methods, installation techniques, and development of know-how,” the paper explains.

    Fossil fuels, on the other hand, are “extraction-dependent” and “costs increase as resources become harder to find.”

    Distinguishing between “technology-based” and “extraction-based” industries is a crucial point to get across to potential investors, the paper stresses. As investors become more comfortable with the new set of risks and returns associated with renewables ownership, it predicts, “they will be increasingly willing to underwrite debt positions where the cost of capital is lower than experienced with traditional power project financing.”

    An indication of this kind of investment decision, Le said, was last year’s announcement of a move from fossil fuels to alternatives by the $860 millionRockefeller Brothers Fund, founded with John D. Rockefeller’s oil fortune.

    Though the fund did not specifically identify divestment from oil, it noted “uncertain and volatile markets” as part of the basis for its move. It was an example of investors “making the call to shift their investment to wind or solar or hydro-electric,” Le said.

    Between the fast-falling costs of wind and solar and the significant progress toward affordable energy storage, the paper finds, “renewable energy could leverage the opportunity spurred on by the current state of crude oil to depress or possibly reverse further penetration of conventional power sources.”

    Fossil fuel subsidies

    The International Energy Agency has made a strong case for the detriment fossil fuel subsidies do to the climate change effort. And Pope Francis made a strong moral case against them in his recent encyclical as well. But there is an economic case to be made as well, Le believes.

    “The drop in crude oil prices has caused many nations to reconsider the allocation of their current subsidies,” the paper reports. “With crude oil prices cut by more than half, at least 27 countries have elected to decrease or end subsidies that currently regulate fuel costs for electricity generation (including coal and natural gas).”

    This offers an opportunity for renewables “to transition from an energy alternative and into an energy staple,” the paper explains, because it “could potentially drive renewable energy technologies to reach a strong competitive position against their fossil fuel-based alternates for power generation.”

    The topic of subsidies is complicated and specific to the government providing them, its energy mix, and its intentions, Le explained. One possible speculation is that fossil fuel subsidies could migrate to renewables.

    Another possibility is that a country would recommit to its fossil fuels, Le said.The OPEC nations decided to continue the current rate of production because of their determination not to lose market share to the U.S., and other fossil interests aren't likely to allow their position as incumbent transportation energy providers to be compromised.

    It is important for countries developing subsidy policies to remember that subsidies distort markets and the 2014 crude price drop was not the first time that led to oil price volatility, Le said. Countries tend to want to look past such episodes when they should be thinking about what the impacts will be on their economies in the long run.

    But even if nations don't make a coordinated effort to reduce their fossil subsidies, Le thinks that the private sector may shift resources to renewables anyway. It just may take some time to get financiers comfortable with the capital requirements of renewable energy investment.

    “The point I am making is that with renewable energy you have a high upfront capital cost which many banks are not comfortable with, but you have a relatively zero raw material cost moving forward and much lower risk,” Le said. “With a petro-chemical based project tied to crude oil and exposed to crude oil price fluctuations, the revenue from operating the plant or trying to get the investment back in the future is much more subjected to uncertainty.”

    NO QUICK NEWS TODAY

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