Low oil prices have wreaked havoc on financial markets around the world, but they’ll do little to change the expanding implementation of solar energy for three good reasons:
1. Falling cost of solar
PV module costs have dropped nearly 80% between 2007 and 2014, while balance of system costs have fallen between 39% and 64% in the same period, as noted in a recent report by Greentech Media. In addition to falling prices, government policies in different parts of the world, such as the US Investment Tax Credit, help to incentivize solar, are further dropping the initial financial outlay. According to a study by the Fraunhofer Institute for Solar Energy Systems, the cost of electricity generated with solar power is already lower than that generated from new coal and gas-fired plants, predicting that solar-produced electricity will be as low as 2 to 4 cents per kilowatt hour. The same study suggests that better regulation is needed to lower interest rates on investments in solar power plants. But as the solar industry evolves, many of the financial mechanisms will mature and lower volatility.
2. Economic stability of solar
According to analysis by the International Renewable Energy Agency (IRENA), achieving a 36% share of renewable energy in the global energy mix by 2030 would increase global gross domestic product by up to 1.1% (approximately $1.3 trillion USD). IRENA reports that an increase in the use of renewables would have an even greater impact on human welfare as a result of a range of social and environmental benefits, not the least of which is jobs. The flip side of this for the oil industry, of course, is the detrimental impact that fossil fuels have on the environment from procurement to use.
3. New mandates for renewables
Nearly 200 countries approved a Climate Accord in Paris in December of 2015, the goal of which is to lower greenhouse emissions to no more than 2 degrees Celsius above pre-industrial averages. Nations signing the agreement are required to outline their plans for cutting carbon, and the agreement lays out a set of rules for monitoring and verification, with an assessment in 2018.
Where renewable portfolio standards exist, solar will play a part in the energy mix because utilities and other electricity providers are required to meet a minimum portion of their portfolio through renewable energy. In the US, forward-looking states like California and New York, have set their own clean energy goals. In October, California Governor Brown signed SB 350 into law, which aims to increase the amount of electricity from renewables by 50% by 2030. Last week New York Governor Cuomo approved a $5 Billion Clean Energy Fund and proposed the creation of a Clean Energy Standard that also proposes to generate 50% from renewables by 2030.
These are just three of the many reasons that the low price of oil should not affect rapid adoption of solar energy and other forms of renewables. From a moral obligation to improve our climate to a social obligation to provide jobs in a less volatile, safe and clean industry, the reasons are abundant, and they are sound. Solar is a smart investment now, even if oil prices continue to drop or remain at the lowest price in more than a decade.
Written by Anne Fischer, Managing Editor, Solar Novus Today