Renewable Energy Must Be Competitive With Oil
Renewable Energy Must Be Competitive With Oil At $30 A
Barrel
30th May 2006. Cambridge, UK: Recent turmoil in the
commodity markets
illustrates just how vulnerable the
renewable energy sector is to any easing
of oil
prices.
According to Cambridge UK analysts CarbonFree,environmentally friendly energy products and technologies, even those based on photovoltaic solar cells, will need to produce energy that is competitively priced in a market where oil costs as little as $30 per barrel. At this price, renewable energy produced on either a large or small scale will gain traction and may eventually displace fossil fuels as a primary energy source.
During the last
two years the market for renewable energy technology
has
been driven by two key factors: concerns that the
burning of fossil fuels
contributes to global warming,
and rising domestic fuel bills. Fears over
spiralling
energy costs have caused a degree of investment overshoot.
Based
on long term projections of rapidly rising energy
prices householders
approaching retirement saw a time
when they could no longer afford to heat
their homes. For
them especially purchasing a small-scale renewable
energy
system seemed an ideal long-term investment.
As
oil prices ease, the incentive to invest in renewable energy
technology
is reduced. The overshoot that inflated the
market for renewable energy is
replaced by a second
overshoot based on anticipated energy price
reductions.
Eventually this negative sentiment will
impact on the renewable energy
sector.
Heavily exposed
in the current investment climate are hedge funds that
are
using the renewable energy sector to offset risks in
markets depressed by
rising oil prices. While industry in
general may benefit from a lower oil
price this may not
compensate for a heavily funded renewable energy
sector
that comes to a dead stop – as the dot com sector
did in 2002. Even more
vulnerable are investors who have
taken long-term positions in the
polysilicon market in
the expectation that both semiconductor and
photovoltaic
solar manufacturers will compete for the same limited
supplies.
Currently most photovoltaic solar systems are
only economic if heavily
supported by grants paid to
householders, building developers and power
generators.
CarbonFree predict a shift in the market when innovations
such
as thin film and nanotechonology-based photovoltaics
replace the current
generation of devices. Longer-term it
sees technology that uses the sun’s
energy to split water
into oxygen and hydrogen having a significant impact
on
the energy market.
CarbonFree notes that the small-scale
wind technology sector is coming
tantalisingly close to
reaching critical mass – in part due to the
significant
media coverage the technology is receiving. Again, the price
of
the technology is a critical factor for the
householder as presently the
payback period for equipment
exceeds the time a typical householder resides
in a
particular property. However, some retail outlets have
identified a
potentially large market for wind power
based microgeneration and are
attempting to source
low-cost roof top turbines to sell in their stores.
This
should both drive down unit prices and increase the
credibility of wind
technology in the domestic energy
supply market.
CarbonFree have produced reports that
examine both large-scale and
small-scale renewable energy
generation markets and see both becoming
realistic
propositions if the technology can produce energy at the
right
price. The reports see both sectors remaining
resilient if energy derived
from renewable sources
remains competitive in an energy market where oil
is
available for $30 per barrel. The reports describe
technologies and
scenarios that would make this possible.
At $30 per barrel of oil
equivalent, given that renewable
energy is cleaner for the consumer and has
less
environmental impact than burning fossil fuels, CarbonFree
predicts
that renewables would eventually displace most
other incumbent energy
sources.
Both reports “Farming
Renewable Energy” and “Householders As Energy
Providers”
are available as part of CarbonFree’s report
subscription
service.
http://www.carbonfree.co.uk
About
CarbonFree
CarbonFree carries out research and analysis in
a wide range of alternative
energy related fields and
disseminates results in its highly focussed
CarbonFree
reports.
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