By Drs. Robert and Sonia Vogl
President and Vice President,
Illinois Renewable Energy Association
Renewable energy and efficiency interests benefited when oil prices rose during the 1970s but were set back when oil prices collapsed during the 1980s. Saudi Arabia flooded the market with oil driving its costs down to around $10 per barrel.
Currently Saudi Arabia continues to pump oil to protect its market share by driving out high cost producers. The oil glut and low cost of fossil fuels has caused a major cutback in the industry and has delayed $380 billion of investments in new oil developments according to a report by Bloomberg. About 27 billion barrels of oil equivalents have been delayed which is about three million barrels per day. Development of costly unconventional oil reserves from arctic, deep offshore, tar sands and dense shale formations are being postponed.
While many analysts believe the glut could last for years, Arthur Berman, an oil geologist, estimates the glut is around 1.5 million barrels per day which could disappear quickly as we are not investing in finding the oil to replace what is being consumed.
The expected adverse impact from the oil glut on renewable energy installations has not occurred. Bloomberg news reported that in 2015 the world added more renewable power capacity than coal, natural gas and oil combined. China’s investment in renewable energy rose 17 percent and U.S. investment was up 7.5 percent contributing to a global increase of 121 gigawatts. By 2030 global renewable investments are projected to increase fourfold from current levels. The International Energy Agency expects solar to be the global leader in electrical production by 2050.
The need to curb air pollution and reduce carbon emissions in urban areas stimulated an interest in electric vehicles. According to Mazor’s Edge, BYD Chinese vehicle manufacturer is the world’s leading producer of electric buses and cars. In 2015 the firm secured a Washington State Department of Transportation contract for up to 800 electric buses. They recently signed a contract to deliver 300 electric buses to the Chinese city of Shanwei and anticipate having 3010 electric buses in service there by 2019.
The outlook for electric vehicles provided in the OPEC’s World Energy Outlook forecasts only moderate increases in the sale of electric vehicles by 2040 due to the need to cut battery costs by 30-50 percent to make them economically viable. Battery costs have already fallen by 50 percent over the last five years and manufacturers expect them to continue to fall.
Low oil prices have hurt sales of all fuel efficient vehicles, including the popular Prius hybrid. With low fuel prices some automakers question the need to reach the federal mandate of a fleetwide average of 54.5 mpg by 2025. The standards are under review and if abandoned the incentive for manufacturing electric vehicles would weaken. Support for retaining the standards are driven by the need to cut carbon emissions.
One drawback of electric vehicles has been their limited range. An electric vehicle owner recently made an overnight round trip from Rockford to Chicago and recharged the batteries once. If the new Chevy Bolt lives up to its billing it will be able to travel 200 miles between charges further reducing the range issue. Since utility earnings are suffering from a drop in electrical demand, they could benefit from increased use of electric vehicles.