Cheap oil will do “little to derail” the long-term growth of renewable power, according to Citigroup Inc.
Oil generates about 5 percent of global electricity and doesn’t generally compete directly with wind and solar power, Citigroup researchers wrote in a report Monday. Only 11 countries get more than 20 percent of their electricity from oil, mainly in the Middle East and the Caribbean.
Large-scale solar farms in the Middle East are competitive with oil at $30 a barrel, and on-shore wind can hold its own against oil at $23 a barrel. Oil would have to drop into the $20 to $30 range before mature renewable energy sources like wind and solar could be “seriously threatened,” according to the report.
“Citi expects the long-term outlook for renewables will only get brighter, despite the price fall” for oil, according to the report.
Citi sees the price of Brent crude, the global benchmark, averaging $54 a barrel this year. West Texas Intermediate, the benchmark in the U.S., will average $46 in 2015, down from a high of more than $107 in June.
Researchers at Goldman Sachs Group Inc. and Deutsche Bank AG also expect renewable energy to shrug off crude’s decline, and expect significant investment in wind and solar projects this year.
Slumping oil prices may even increase demand for clean power, especially if fossil fuel companies curtail production. That could lead to a shortage of natural gas, driving up prices and making wind and solar more competitive.
“The underlying drivers of renewable energy adoption – policy, increasing competitiveness, and energy security – point to continued long term growth” of renewables, the report said.