One thing we have learnt this week – good time for renewables

CAT solar roofWith the collapse in the oil price ongoing is this a good time for renewables?  On the face of it it would seem not.  However Lord Stern has been speaking at the annual richfest at Davos trying to persuade people that counter-intuitively it is a good time for renewables.

His arguments are very simple, fossil fuel energy prices are very volatile.  The price of renewables is falling and the only way they are going is downwards.  Since he brought out his seminal report the cost of renewables have fallen 10x.   Oil and gas prices?  With the recent falls around about 50-60%.  Certainly nothing of the same magnitude as renewable costs have fallen.  His argument is also you cannot tell where fossil fuels prices are going to go next.  You can with renewables.

Lord Stern went onto claim that green growth would be better growth with less traffic jams and respiratory diseases.  He reckons pollution in China knocks an astonishing 10-11% off its GDP.   Given the images of Beijing we see on the TV this seems plausible.  He didn’t mention peak oil or energy security but should have done since we have argued on this blog the recent fall in oil prices does fundamentally alter the theory.  In fact in some ways it confirms it. (One idea being that oil prices after global production of oil peaks are very volatile with huge swings up and down).

Stern also thinks its a good time for renewables since we should think about carbon taxes or reducing fossil fuel subsidies when prices are low since higher costs of such moves will be offset by falling crude prices.  Good luck to him on that one.  All over the world governments are continuing to subsidise the fossil fuel industry the latest being fracking.  Whether Stern had any impact at Davos only time will tell but he speaks the right language.

Neil

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