Oil and Industry

Advances in drilling technology have turned America into a big oil producer which has undermined the power of the OPEC to influence price. The increase in supply and falling demand of oil has led to a fall in oil prices.

Nevertheless, the main focus is on how low oil prices affect the shift towards low-carbon energy since renewable energy has recently benefitted from unprecedented investments and showed its potential in areas such as Hawaii. But their relationship is not always straightforward since renewable electricity does not directly competes with oil. Additionally, support for renewables has been for political and environmental reasons rather than price.

Nonetheless, in light of the low oil price, some renewables such as biofuels and electric cars are losing their appeal.

Future prospect

In the long run however, there is a bright future for renewable energy. In particular solar electricity where storage are becoming more affordable and better, which would put off fossil fuel investors.

Old energy industries are changing as well. Gas will be more abundant and easier to trade while improvement in processing technologies are making energy cleaner, albeit the high cost. But nuclear energy is losing its appeal as it is viewed as dangerous.

Despite various challenges, the technology for a clean and green future is already available. Due to solid-state technology, transmission costs for electricity are falling. Power grids can also be connected, such as the one between Britain and Iceland. Granted, these projects are costly upfront, but they offer long term savings from cheaper power and storage. Sensors and computer are also able to collect information and offer incentives to consumers to limit their consumption at peak times.

Business models which can turn a profit from energy-savings are also developing, with capital markets rising in response to their potential.

Renewables

Looking back, investing in renewable energy seems wasteful due to its mediocre results . Recent statistics however, have shown otherwise. In 2013, global renewable capacity in the power industry has increased by 8% from 2012 even though subsidies and investments fell. Renewable energy now plays a significant role as part of the energy mix. As shown in Denmark where wind turbines provided a third of the country’s energy supply.

Solar Energy

The reason for the growth in solar energy is due to its innovation and most importantly, decreasing costs. IEA expects the cost of solar panels to halve within 20 years. Moreover, in the right conditions, solar is already cheaper than oil and Asian LNG, despite the decreasing oil price.

New technology

Furthermore, these forecasts are based on current technologies. New technology such as the third generation solar, could turn any man-made surface into a solar panel like the one in Netherlands, where solar electricity is generated by roads.

Other new technologies which provide power for local use and storage are also rising. For example, the domestic fuel cells in Japan where households can now convert their gas into electricity which is cheaper and more reliable.

Besides costs, storage has always been a problem since power produced is of limited use if they cannot be stored. Hence, breakthroughs in storage are creating opportunities as businesses and households can now store electricity as thermal heat.

Storage and generation presents new opportunities where in rich countries, new forms are replacing the old forms and in the developing world, they provide the best opportunity for the whole populations to get power.

New business models

Renewables, are changing the way old business model works, in which demand can now be tweaked to match supply. This has transformed power grids which works differently from traditional ones. Hence, old power stations and grids now play a less significant role.

Nowadays, companies are paying consumers to switch off electricity instead, especially during peak period, where it is most expensive. This has achieved outstanding results where American wholesale electricity market PJM took $11.8 billion off electricity bills through demand and efficiency savings in 2013.

Traditional model of energy supply is coming to an end with the presence of plentiful solar power where marginal cost is zero. With new competitors and independent generators who are changing the way electricity is sold and used, the 21st century model will be ever more different.

New & Traditional

This model, a combination of cheaper storage, distributed and intermittent generations and intelligent consumption has nevertheless posed a threat to the utilities companies in Europe. These companies are stuck with the costs of maintaining their facilities amidst the falling demand. Moreover, they have to pay for electricity generated by consumers, such as for the case in Hawaii, where consumers may have an electricity bill of zero because of “net metering.” While traditional companies are asking regulators to impose a fixed monthly charge, consumers are resisting such efforts.

Howbeit, the biggest threat is consumers who can afford to operate their own energy system, often called microgrid. Most of these large organizations went independent to save money. For example, the University of California, San Diego is using their personal combined-heat-and-power plant which saves them $8m a year.

The IEA estimated that such microgrid approach can cut peak demand for power in industrialized countries by 20%.

Energy Efficiency

With the current usage of energy, it is impossible to keep the rise in global temperatures below 2°C by 2100. The best hope is to increase energy efficiency and certainly, the cheapest and cleanest energy choice is simply not to waste it. Improvements in energy efficiency since the 1970s in 11 IEA

member countries saved an equivalent 1.4 billion tonnes of oil in 2011, which was worth $743 billion.

However, much of the energy consumption in buildings are wasted because design of pipework was of least priority to past architects. There is also a dearth of such skilled workers in countries with no tradition for energy conservation. Moreover, adapting existing buildings is difficult. Retrofitting an existing house to be energy efficient is costly which tenants and owners would rather not spend. Additionally, there are cheaper ways such to combat insulation such as wearing lighter clothes.

Nevertheless, one solution is to impose mandatory standards for landlords and properties sellers. Another way involves energy-service-companies whom will develop economies of scale and tap financial markets for the upfront costs. The savings are shared with owners and tenants.

For new buildings though, energy efficiency is an important factor. For example, the Pertamina Energy Tower in Jakarta will be so thrifty that, wind, solar and geothermal energy can meet all its energy needs.

The growth of a bond market is an encouraging sign about the future of energy. An example is solar energy, which is now a predictable source of income drawing huge money.

Conclusion

All in all, the existence of abundant energy in particular solar, better and cheaper storage for intermittent power, extensive distribution which provides resilience in the network, smarter ways of managing energy used and a thriving renewable business model have led to energy become cheaper, cleaner and more plentiful.