While much attention is devoted to the fall of oil prices, 2016 has seen a significant expansion in the development of renewable energies.
The global oil price slump has dominated the news for months, as exporting nations and energy companies worry about losses. Low prices are affecting both established exporters, such as OPEC, as well as newer competitors like U.S shale production. Cheap oil has led many to raise questions about the impact on renewable energy. Much has also been made about cheap oil hampering investment in renewables.
This may have been the case ten years ago, yet throughout the second half of 2015, and first six months of 2016, renewables weathered the global price slump handily. Eight million people now work in renewable energy sector, and countries from Jamaica to Japan are increasing investment.
Keep calm and carry on (generating)
We have a tendency (especially with all the coverage on oil) to still think about renewables as a fringe market, yet green energy has entered the mainstream in an understated, yet surprising way. In 2015, investment in renewables was almost twice as high as investment in oil and gas, reaching $286 billion and resulting in 147 GW in new capacity. In other words, 2015 saw the equivalent of Africa’s entire generating capacity come online.
While part of this disparity is because of reduced oil and gas investment due to low prices, one should not discount what this fact heralds.
Firstly, it must be noted that while oil and gas investment slowed, you cannot solely attribute the performance of renewables to this, especially as both within OPEC and without, exporters continued to increase production in an effort to retain market share and “out-pump” competitors. While many are citing Iran’s re-entry into global energy markets as the key story of the year, the real scoop is Saudi Arabia’s declaration of a shift away from oil. If even the poster child of petro-states is changing track, we would all be wise to pay closer attention.
Secondly, the scale of investment – in both relative and absolute terms – in renewables runs counter to the oft repeated trope that green energy is not cost effective. We are now witnessing the first time in history that developing countries are spending more on renewable energy than developed nations. With China leading the way, representing a third of global construction, emerging nations are cutting out a step, and jumping straight to renewables, as green energy reaches parity with oil and gas.
Indeed the countries with the largest investments in renewables relative to GDP are Mauritania, Jamaica, Honduras, and Uruguay; not to mention the fact that Morocco has the world’s largest solar farm. Green energy investment has become a truly global phenomenon, as 173 countries now have renewable energy targets in place.
Free or best offer
To demonstrate the extent to which renewables have become competitive, you just need to look at Chile. As the region’s leading solar energy producer, Chile has constructed 29 solar farms, with a further 15 planned. This has resulted in a four-fold increase in solar energy generation since 2013, and an over-capacity which as of April, saw 113 days in which electricity prices reached zero.
While Chile has to deal with effective energy management and infrastructure issues, the fact remains that renewables have shed the stigma of expense once and for all. Indeed, despite overcapacity, Chile is still planning on creating 1.4 GW of new solar generation in 2016.
Alongside Chile, Europe has long been a centre for green energy investment. While the Euro Crisis and other woes have seen a 22% decrease in renewables investment, green energy now accounts for the largest single source of Europe generating capacity, at 44%. Moreover, several European countries have passed exciting green energy milestones.
For instance, for first time in over 150 years, the UK experienced its first week of coal free electricity production in May. As the birthplace of the Industrial Revolution, coal has long played a prominent role in the UK’s energy portfolio. The aforementioned week in May occurred due to repairs at coal stations, yet it provided a reassuring sneak peak at a future coal-less UK grid.
More impressively, in 2015 consistent winds saw Denmark hit 140% generation rates. Denmark was able to power the entire country on wind, while simultaneously exporting energy to Germany, Sweden, and Norway. Similarly, on May 15th, 2016 Germany produced 45.5 GW (of a total demand of 45.8 GW) from renewable energy. This resulted in prices becoming negative for several 15 minute periods, reaching as low as negative €50.
May 2016 also saw an even greater milestone for green energy, as Portugal managed to run the entire country on renewables for four days. Optimal solar and wind conditions allowed Portugal to reap the benefits of its substantial green energy investments. The country has followed Spain’s example and capitalized on the Iberian Peninsula’s rich renewable energy potential.
Even with the instability in Europe, Portugal still managed to add 530MW of green energy generating capacity from 2013 to 2016. Such investments have led Portugal to become one of Europe’s green energy leaders, with 48% of the nation’s energy stemming from renewables in 2015.
News cycles invariably focus on sudden shifts, and the coverage on global oil prices certainly reflects this bias. While the story itself is not without merit, especially given the historic highs from which prices fell, the trends surrounding renewables have far greater lasting consequences for the global economy. Talk of the green technology revolution is somewhat of a misnomer, as the word ‘revolution’ conjures up images of drastic upheaval. Renewable energy is shifting paradigms, albeit at a more methodical pace.
If you briefly adopt a retrospective lens, the changes that have occurred, even in the last few years, make for a much better story.