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23

May 2015

Are Oil Prices Also Down Because of Clean Energy & Energy Efficiency?

23 May 2015 | Posted by Zachary

The common assumption is that the fall in oil prices over the past year would hurt clean energy investment. However, that's really coming from a simplistic view of how the energy world works.

Oil is primarily used for transport, while renewables are primarily used for electricity product, so they don't often directly compete. Furthermore, with oil prices down, the investment case for oil is also down, while the investment case for renewables is clearly up.

Lastly, clean energy is now more competitive than oil in most cases where they compete in the electricity generation market, and energy efficiency is driving down demand for oil. So, clean energy & energy efficiency are actually reducing demand, which Economics 101 will tell you results in lower prices.

In a Financial Times—IRENA event held in the UAE during Abu Dhabi Sustainability Week, Michael Liebreich discusses the situation more elegantly than I can, so have a watch:

I love that last line: “Ask not only what the oil price will do to renewables, but ask also what renewables will do to oil prices.”

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Are Oil Prices Also Down Because of Clean Energy & Energy Efficiency?

23 May 2015 | Posted by Zachary

The common assumption is that the fall in oil prices over the past year would hurt clean energy investment. However, that's really coming from a simplistic view of how the energy world works.

Oil is primarily used for transport, while renewables are primarily used for electricity product, so they don't often directly compete. Furthermore, with oil prices down, the investment case for oil is also down, while the investment case for renewables is clearly up.

Lastly, clean energy is now more competitive than oil in most cases where they compete in the electricity generation market, and energy efficiency is driving down demand for oil. So, clean energy & energy efficiency are actually reducing demand, which Economics 101 will tell you results in lower prices.

In a Financial Times—IRENA event held in the UAE during Abu Dhabi Sustainability Week, Michael Liebreich discusses the situation more elegantly than I can, so have a watch:

I love that last line: “Ask not only what the oil price will do to renewables, but ask also what renewables will do to oil prices.”

Post a Comment

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