Cheap oil won’t hurt renewables

Bloomberg business has a post explaining 7 reasons why oil won’t slow down the growth of renewables.  Here they are, explanations edited:

1. The Sun Doesn’t Compete With Oil

Oil is for cars; renewables are for electricity. The two don’t really compete. Oil is just too expensive to power the grid, even with prices well below $50 a barrel.

2. Electricity Prices Are Still Going Up

The real threat to renewables isn’t cheap oil; it’s cheap electricity. In the U.S., abundant natural gas has made power production exceedingly inexpensive. So why are electricity bills still going up?

Fuel isn’t the only component of the electricity bill. Consumers also pay to get the electricity from power plant to home. In recent years, those costs have soared. Annual investments in the grid increased fourfold since 1980, to $27 billion in 2010, according to a report by Deutsche Bank analyst Vishal Shah. That’s driving bills higher and making rooftop solar attractive.

3. Solar Prices Are Still Going Down

… the reason solar will soon dominate: It’s a technology, not a fuel. As time passes, the efficiency of solar power increases and prices fall.

4. Sales of Plug-Ins Are Doing Just Fine, Actually

Conventional wisdom says cheap oil is an existential threat to electric vehicles. It’s been true in the past, notably when Congress retreated from funding EV research in the 1980s as oil prices tanked. Things are different now, and global sales of plug-ins rose by about a third last year, according to BNEF.

Here’s why cheap oil won’t stop electric vehicles:

  1. Since 2010 there’s been no relationship between gasoline price and electric vehicle sales, according to BNEF analyst Alejandro Zamorano Cadavid. Electric cars are still in the early-adopter phase, and someone paying $100,000 for a Tesla doesn’t care that gasoline costs a buck less per gallon.

  2. In Europe, gas taxes are so high that it makes the price of crude less important. If you’re in Norway, and gas drops from $10 a gallon to $9 a gallon, electric cars are still a deal.

  3. In China, the government is stepping up support for electric vehicles. Pollution has become a serious problem, and the Chinese are getting serious about fixing it. Plug-in sales are soaring.

NOTE:  I would add here that Tesla is forcing the issue.  That is, Tesla is determined, and it seems unlikely that they will fail, to sell a car, in substantial volumes, priced at the mid range of combustion engine cars, within the next 2 or 3 years.  In response to that many other auto companies have begun to produce their own EVs.  Both the investments and the intentions simply cannot be reversed.

Electric vehicles are moving like a Tesla: quietly, but with great acceleration. Let’s bookmark this conversation for two years from now, when Chevy and Tesla plan to release the first affordable mass-market plug-ins with a range of 200+ miles per charge. At that point, the price of fuel might be a real consideration for car buyers, and at that point it’s more likely to tip the scales toward EVs, not away from them.

5. Pump Prices Haven’t Dropped as Much as Oil Prices

6. Oil Prices Won’t Stay This Low Forever

7. Global Investment in Clean Energy Keeps Flowing

The bottom line is that momentum is too far toward renewables to swing back the other way.  We are too far along the path of not only not using oil for electricity, but also closing down coal generating plants.  Not only are the changes listed above already in motion, but also it’s simply common sense that we would not go back.  If we could know for certain that an unlimited supply of oil would be available for $50/BBL for an unlimited amount of time, that might change the equation.  But that is clearly not a reasonable option to consider, which means that the path toward renewables will not be abandoned.

 

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