Back then, the argument for renewables was based on energy security, the idea that America and other industrial countries needed to wean themselves from uncertain oil supplies from unstable regions. US President Jimmy Carter installed solar panels on the White House and provided federal tax credits for installing solar energy systems, and serious research began on developing wind, solar and other renewables.
By 1986, the world was awash in cheap oil, and President Ronald Reagan had removed the White House solar panels (they ended up at Unity College in Maine, where they continue to heat water for the school's cafeteria). For the next two decades Republican and Democratic administrations alike reaped the advantages of low oil prices to drive economic growth while relegating renewables to a quaint-but-impractical niche.
The competitiveness of renewable energy, then, long has been linked to the price of oil. When Brent prices passed $140/barrel last year, many observers heralded the dawn of another renewables age, and when oil prices collapsed renewables again were dismissed as uncompetitive.
A new factor, though, has entered the equation: climate change.
Concerns about global warming are beginning to trump forecasts on oil markets, and a separation could be emerging between renewable energy and oil prices. Belgium retailer Colruyt is the latest major company to commit to carbon neutrality -- whatever the cost of oil -- joining corporate titans like HSBC, Nike, Dell and Google. In Israel, the government is offering to help homeowners pay for solar energy to achieve its goal of cutting CO2 releases, not to conserve oil.
In addition, Platts Emissions Daily reports that in recent weeks the European Union market for carbon emissions has at times decoupled from oil prices, in contrast to past markets where prices for the two tended to rise and fall in tandem. It's too soon to tell whether the pattern will hold, but it does show that oil prices are not inextricably linked to other energy markets.
The price of oil, in theory, should have only a modest relation to renewables' prices. Most oil is used to fuel vehicles and produce petrochemicals, not to generate electricity, though oil markets traditionally have served as a standard for pricing most if not all power resources. Events over the past year, though, indicate that, like prices for carbon credits, oil prices might be separating from other commodities. The dramatic fall in oil prices, for instance, did not produce a similar collapse in natural gas prices.
Oil prices are and will continue to be a key determinant of renewable energy's competitiveness, but companies like US utility FPL maintain that renewables can thrive only if the price of carbon is incorporated into everyday business in response to climate change threats. In the years to come, oil markets might become less a bellwether for the renewables industry and more of a crude benchmark.
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