The price of energy is at rock bottom in the face of global oversupply in oil. However, despite oil and coal prices falling below the break-even price for many energy companies, the price of renewables is falling faster.
Ed Crooks at the Financial Times provides several recent examples, including:
“The Dubai Electricity and Water Authority said in May it had received bids to develop solar power projects that would deliver electricity costing less than three cents per kilowatt hour. This established a new worldwide low for the contracted cost of delivering solar power to the grid — and is priced well below the benchmark of what the emirate and other countries typically pay for electricity from coal-fired stations.
“In energy-hungry Los Angeles, the electricity company AES is installing the world’s largest battery, with capacity to power hundreds of thousands of homes at times of high demand, replacing gas-fired plants which are often used at short notice to increase supply to the grid.
“Trina Solar, the Chinese company that is the world’s largest solar panel manufacturer, said it had started selling in 20 new markets last year, from Poland to Mauritius and Nepal to Uruguay.”
Crooks argues that these headline stories signal momentous changes in the global energy system, with gas – often touted as a “bridging fuel” – the only fossil carbon fuel holding ground. With coal and oil companies struggling to remain profitable at current prices, the world has witnessed massive disinvestment in future discovery and recovery. There is, however, concern that renewables may not be able to take up the slack:
“While renewable energy has been growing fast, it is coming from a very low base. “Modern renewables” — mostly biofuels, wind and solar, but not hydro or traditional biomass — provided just 2.5 per cent of the world’s primary energy last year, according to BP.”
Even with rapid exponential growth, it will take decades for renewable energy to replace fossil fuels – and that assumes that the global economy does not continue to expand its energy use. In the absence of concerted political efforts there is a real risk that disinvestment will leave us with shortages of coal and oil long before we have deployed sufficient renewables to take their place.