Electric cars are likely to be hurt the most by lower oil prices within the renewable energy industry, according to a report that predicts a limited impact on wind-and solar-power companies.
The 45 percent plunge in Brent crude oil prices since the end of June also will slow the shift away from fossil fuels in oil producing nations such as Saudi Arabia and drive up the cost of natural gas in the U.S., Bloomberg New Energy Finance said.
The findings show the effect of cheaper oil will vary from region to region, helping renewables in some parts and hurting the prospects for low-carbon energy in others. Electric vehicles are likely to be the clearest victim of cheaper oil, since they’re less competitive with gasoline-powered cars when oil is cheaper.
“It won’t stop growth, but it will have some dampening effect,” said Angus McCrone, senior analyst at Bloomberg New Energy Finance. “There will be more marginal buyers who are looking at the relative economics, and if you have lower gasoline prices that tilts the equation.”
If gasoline averages $2.09 a gallon in the U.S., electric vehicles may reach 6 percent of the market by 2020, the London-based research arm of Bloomberg LP forecasts. That’s lower than the 9 percent share they could command if gasoline cost $3.34 a gallon, BNEF said. The current market share is less than 1 percent.
The report is aimed at reshaping the debate over how cheap oil prices will affect renewables away from how it will damage the industry. Instead, the push toward cleaner forms of energy is behind some of the slump in oil prices, BNEF said.
In the U.S., BNEF found that demand for finished petroleum products has fallen 10.5 percent since 2007 while economic growth has advanced 8.9 percent. Better fuel economy in cars, action to cut pollution and the rise of electric vehicles are part of what’s reducing oil demand.
“The story should not be how falling oil prices will impact the shift to clean energy,” said Michael Liebreich, chairman of the advisory board to BNEF. “It should be how the shift to clean energy is impacting the oil price.”
The report also said that cheap oil would slow the shift away from oil and diesel fuel in some of the poorest nations and in places that produce the most of the commodity. Cheaper oil “could be a question mark” over Saudi Arabia’s plan to spend $109 billion on solar power by 2032, part of a program to reduce the 900,000 barrels of oil a day it uses to generate half its electricity, BNEF said.
Elsewhere, oil’s plunge will not have such a big impact. It may boost natural gas prices in the U.S., since many oil wells that will be shut in because of lower prices also produce some gas. BNEF estimated that oil at $60 a barrel could mean gas prices 90 cents per million British thermal units higher than if oil were at $100.
In Europe, natural gas prices are more often linked to oil. Lower gas prices along with a 44 percent jump in the cost of carbon emissions certificates will make burning coal for power generation less profitable, the researcher said.