Do Falling Oil Prices Affect the Renewable Energy Market?
- Aug 16, 2019 7:10 am GMT
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Between the years 2011 and 2016, the price of WTI crude oil collapsed from a multi-year high of about $113 per barrel to a 13-year low of about $26. This represented one of the biggest declines in oil prices to mirror the collapse of the early 1980s, 1990s, and 2008.
However, unlike in the previous cases where a collapse in oil prices triggered a slowdown in investments in green energy technologies, the 2016 oil price collapse did not affect the renewable energy market in the way many would have anticipated.
In fact, reports indicate that the renewable energy market has continued to grow since the turn of the decade to the point that in the US, solar power now accounts for about 10% of all energy consumption in the country.
In some countries like Germany, the figures are higher, which shows just how independent renewable energy has now become. Investors in the market have stopped treating renewable energy as a substitute product to oil and gas and this is playing a crucial role in the growth of the industry.
Renewable energy uptake affected at the consumer level
However, this does not completely rule out the possibility of oil and gas energy affecting the consumption of renewable energy at the consumer level. In fact, research already shows that natural gas is emerging as a major source of power that could potentially slow down the growth of the green energy market within the next few decades.
This is primarily due to the reliability and the low prices of natural gas. On the contrary, energy experts have pointed out that because of the high costs involved in setting up renewable energy plants and the unreliability of some of the sources like solar, it could take time before green energy catches up with oil and gas in terms of consumption.
According to a report published last year by IEA, the global renewable energy market is expected to account for at least a third of the total energy consumption in the world by the year 2022. This shows just how big the disparity between fossil fuels and clean energy is in the power industry. Therefore, while the renewable energy market continues to grow, crude oil and related petroleum products will still be around for many years to come.
The emergence of advanced technologies to cushion green energy market growth against falling oil and gas prices
One of the main reasons why the renewable energy market will continue to witness growth in the coming year despite falling oil and gas prices is the emergence of new technologies. Due to technological advances, companies are now developing technologies that will lower the cost of renewable energy production per unit of output.
In the wind power industry, multi-million dollar startups are investing heavily in offshore wind power, which statistically results in more power output per every invested dollar. Offshore wind power eliminates the problem of obstacles that block the wind which slows the speed by the time it reaches the target plant site. With offshore wind power, there are no mountains, forests or skyscrapers to obstruct the flow of wind.
On the other hand, solar energy is also tipped to grow at a rapid rate following the innovation of perovskite solar cell, which reportedly improves the efficiency of solar energy by enhancing light absorption capabilities of the solar cells.
These technologies coupled with a growing demand for renewable energy certificates for social responsibility in the corporate sector will continue to drive investments in the industry. On the other hand, the campaign against climate change will influence more people to embrace clean energy.
In summary, regardless of what happens to oil and gas prices in the coming years, the renewable energy market will continue to experience exponential growth as efficiency levels improve with the use of advanced technologies.