Electric Cars Hurt Most in Renewables Industry From Oil’s Slump

(Bloomberg) — 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.

Reshaping Debate

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.

To contact the reporter on this story:
Reed Landberg in London at
landberg@bloomberg.net

To contact the editors responsible for this story:
Reed Landberg at
landberg@bloomberg.net
Tony Barrett

About Bloomberg New Energy Finance

Bloomberg New Energy Finance (BNEF) is an industry research firm focused on helping energy professionals generate opportunities. With a team of experts spread across six continents, BNEF provides independent analysis and insight, enabling decision-makers to navigate change in an evolving energy economy.
 
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