Dec 14th 2014

Six Reasons Lower Oil Prices won’t Stop Solar, Wind and Electric Cars

by Juan Cole

Juan Cole is the Richard P. Mitchell Professor of History and the director of the Center for South Asian Studies at the University of Michigan. His latest book, Engaging the Muslim World, is just out in a revised paperback edition from Palgrave Macmillan. He runs the Informed Commentwebsite.

Some observers have alleged that lower oil prices will slow down the green energy revolution. This allegation is unlikely to be true even in the short term, and it is laughable in the medium to long term.

1. Solar and wind power are for electricity generation. For the most part, petroleum is not used to generate electricity. Some 70% of it is used for vehicular transportation. There are exceptions, such as Hawaii and Saudi Arabia. But both places have firm plans to move to solar; in the case of Saudi Arabia it is because the country’s leaders want to save the oil for export rather than burning it up at home.

2. It is therefore the price of coal and natural gas against which solar energy is competing. Natural gas prices are actually up slightly. In most of the US and in most of the world, solar panels are now grid parity with hydrocarbons. That is, if you were building new electricity generating capacity, you could do it as cheaply with solar panels as with a new gas or coal plant. Utility-scale solar costs can be as little nowadays as 4.3 cents per kilowatt hour, less than the natural gas equivalent. The price of petroleum is irrelevant to these considerations. Moreover, solar panels are now estimated to last for some 25 years. Once they are paid off, typically in 6 or 7 years, the fuel can be considered free, and they can not only make household electricity but also can fuel automobiles, for free. Hydrocarbons would have to be awfully cheap to compete with that.

3. Solar and wind power are still at the relative beginning of a rapid fall in manufacturing costs and efficiency improvements. Most current solar panels have an efficiency of less than 20%, i.e. they are transforming only a fifth of the photons that fall on them into electricity. But in the laboratory, scientists in Sydney have just achieved 40% efficiency. Northwestern University scientists used a different technique, of imprinting panels with grooves a la blu-ray discs to achieve similar results. I wonder if the two can be combined to get a tripling of current efficiency? Another possibility is to use less expensive materials such as perovskites, which would drop the price of the panels considerably. If real-world solar panels can be manufactured that are twice as efficient and half as expensive, it is pretty much game over for hydrocarbons. Some observers think this development is less than a decade away. Wind turbines have also seen big increases in efficiency and a drop in prices.

4. Basically, it is impossible for petroleum and natural gas prices to go anywhere but up in the medium to long run. The current fall in oil prices is mostly being driven by lower Chinese demand. But Asia is full of economies that will take up the slack over time. If most of the 1.3 billion Indians decided to drive automobiles and have air conditioning, they’d run through even the fracked hydrocarbons pretty quickly and would put enormous upward pressure on prices. Fossil fuels are relics of the past and they aren’t making any more of them, so they will run out eventually. In contrast, there is no place for solar and wind energy to go, with regard to costs, but down– because of the now-rapid pace of technological and materials innovation. The only question is when the threshold will be passed, when building a new solar plant is actually cheaper than continuing to operate an old coal or natural gas plant. Again, it could easily happen within a decade.

5. Critics underline that wind and solar only work part time as energy sources. Wind does not blow all the time, and the sun does not shine at night. Germany and Portugal, however, have shown how wind and solar can complement one another (winds often pick up at night, e.g.) if the grid is properly configured, which removes some of the problem. Computers can be used so that when there is more wind, other sources of power are scaled back until the wind subsides. Concentrated solar power plants can also used molten salt to store the sun’s energy. One such plant, now functioning in Arizona, continues to make electricity for 6 hours after sunset. Another such is being built in Nevada. But the really big next thing is more efficient, affordable household and car batteries, which may well be produced by Elon Musk’s Tesla gigafactory. Intermittency is not as big a problem as critics of renewables suggest, and it certainly will be less and less of a problem in coming years. If Tesla can increase battery efficiency by just one third, they’ll be able to put a $35,000 car on the road with a 200 mile range that can be recharged in only half an hour. More battery breakthroughs will make for a $25,000 car, and so forth. These battery improvements are coming, and coming fast, and it is irrelevant to them what the price of petroleum is.

6. Public opinion is rapidly shifting against oil, gas and coal. A recent USA Today poll found that 81% of Americans agree that the climate is changing; 60% believe that the changes are man-made, owing to burning hydrocarbons; and 71% believe that the way to deal with the problem is to turn to renewable energy! It is only a matter of time until we have a big ocean surge somewhere like Miami, produced by an antarctic ice shelf falling into the sea, which will impel many consumers to go green, even at a premium. A lot of Americans will increasingly find it unconscionable for us to burn coal. We are only at the beginning of conscience-buying. In all of the US, only about 86,000 electric cars (the majority being plug-in hybrids) were sold in 2014. That is so few that the number could well expand substantially just among environmentalists. People buy cars in part to impress their friends, and people with green friends want EVs. It isn’t just about the price of gasoline. But on the cost issue, it bears repeating that if you combine an electric vehicle with rooftop solar panels, after you pay off the panels you could get much of your fuel for free, which rather beats the average $2.60 a gallon to which gasoline has fallen on average in the US.



For Juan Cole's own web site, please click here.


To follow what's new on Facts & Arts please click here.


Browse articles by author

More Current Affairs

Mar 18th 2024
EXTRACT: "....the UK’s current economic woes – falling exports, slowing growth, low productivity, high taxes, and strained public finances – underscore the urgency of confronting Brexit’s catastrophic consequences."
Mar 18th 2024
EXTRACTS: Most significant of all, Russia’s Black Sea fleet has suffered significant losses over the past two years. As a result of these Ukrainian successes, the Kremlin decided to relocate the Black Sea fleet from Sevastopol to Novorossiysk on the Russian mainland. Compare that with the situation prior to the annexation of Crimea in 2014 when Russia had a secure lease on the naval base of Sevastopol until 2042." --- "Ukrainian efforts have clearly demonstrated, however, that the Kremlin’s, and Putin’s personal, commitment may not be enough to secure Russia’s hold forever. Kyiv’s western partners would do well to remember that among the spreading gloom over the trajectory of the war."
Mar 8th 2024
EXTRACT: "As the saying goes, 'It’s the economy, stupid.' Trump’s proposed economic-policy agenda is now the greatest threat to economies and markets around the world."
Mar 8th 2024
EXTRACT: "Russia, of course, brought all these problems on itself. It most certainly is not winning the war, either militarily or on the economic front. Ukraine is recovering from the initial shock, and if robust foreign assistance continues, it will have an upper hand in the war of attrition."
Mar 8th 2024
EXTRACT: "...... with good timing and good luck, enabled Trump to defeat [in 2016] political icon Hillary Clinton in a race that appeared tailor-made for her. But contrary to what Trump might claim, his victory was extremely narrow. In fact, he lost the popular vote by 2.8 million votes – a larger margin than any other US president in history. Since then, Trump has proved toxic at the ballot box. " -----"The old wisdom that 'demographics is destiny' – coined by the French philosopher Auguste Comte – may well be more relevant to the outcome than it has been to any previous presidential election. "----- "Between the 2016 and 2024 elections, some 20 million older voters will have died, and about 32 million younger Americans will have reached voting age. Many young voters disdain both parties, and Republicans are actively recruiting (mostly white men) on college campuses. But the issues that are dearest to Gen Z’s heart – such as reproductive rights, democracy, and the environment – will keep most of them voting Democratic."
Mar 8th 2024
EXTRACTS: "How can America’s fundamentalist Christians be so enthusiastic about so thoroughly un-Christian a politician?" ---- "If you see and think outside the hermeneutic code of Christian fundamentalism, you might be forgiven for viewing Trump as a ruthless, wholly self-interested man intent on maximizing power, wealth, and carnal pleasure. What your spiritual blindness prevents you from seeing is how the Holy Spirit uses him – channeling the 'secret power of lawlessness,' as the Book of 2 Thessalonians describes it – to restrain the advent of ultimate evil, or to produce something immeasurably greater: the eschaton (end of history), when the messiah comes again."
Mar 1st 2024
EXTRACT: "The lesson is that laws and regulatory structures are critical to state activities that produce local-level benefits. If citizens are to push for reforms and interventions that increase efficiency, promote inclusion, and enable entrepreneurship, innovation, and long-term growth, they need to recognize this. The kind of effective civil society Nilekani envisions thus requires civic engagement, empowerment, and education, including an understanding of the rights and responsibilities implied by citizenship."
Feb 9th 2024
EXTRACT: "Despite the widespread belief that the global economy is headed for a soft landing, recent trends offer little cause for optimism."
Feb 9th 2024
EXTRACT: " Consider, for example, the ongoing revolution in robotics and automation, which will soon lead to the development of robots with human-like features that can learn and multitask the way we do. Or consider what AI will do for biotech, medicine, and ultimately human health and lifespans. No less intriguing are the developments in quantum computing, which will eventually merge with AI to produce advanced cryptography and cybersecurity applications."
Feb 9th 2024
EXTRACTS: "The implication is clear. If Hamas is toppled, and there is no legitimate Palestinian political authority capable of filling the vacuum it leaves behind, Israel will probably find itself in a new kind of hell." ----- "As long as the PLO fails to co-opt Hamas into the political process, it will be impossible to establish a legitimate Palestinian government in post-conflict Gaza, let alone achieve the dream of Palestinian statehood. This is bad news for both Israelis and Palestinians. But it serves Netanyahu and his coalition of extremists just fine."
Jan 28th 2024
EXTRACTS: "According to estimates by the United Nations, China’s working-age population peaked in 2015 and will decline by nearly 220 million by 2049. Basic economics tells us that maintaining steady GDP growth with fewer workers requires extracting more value-added from each one, meaning that productivity growth is vital. But with China now drawing more support from low-productivity state-owned enterprises, and with the higher-productivity private sector remaining under intense regulatory pressure, the prospects for an acceleration of productivity growth appear dim."
Jan 28th 2024
EXTRACT: "When Chamberlain negotiated the notorious Munich agreement with Hitler in September 1938, The Times did not oppose the transfer of the Sudetenland to Germany without Czech consent. Instead, Britain’s most prestigious establishment broadsheet declared that: “The volume of applause for Mr Chamberlain, which continues to grow throughout the globe, registers a popular judgement that neither politicians nor historians are likely to reverse.” "
Jan 4th 2024
EXTRACTS: "Another Trump presidency, however, represents the greatest threat to global stability, because the fate of liberal democracy would be entrusted to a leader who attacks its fundamental principles." ------"While European countries have relied too heavily on US security guarantees, America has been the greatest beneficiary of the post-war political and economic order. By persuading much of the world to embrace the principles of liberal democracy (at least rhetorically), the US expanded its global influence and established itself as the world’s “shining city on a hill.” Given China and Russia’s growing assertiveness, it is not an exaggeration to say that the rules-based international order might not survive a second Trump term."
Dec 28th 2023
EXTRACT: "For the most vulnerable countries, we must create conditions that enable them to finance their climate-change mitigation" ........ "The results are already there: in two years, following the initiative we took in Paris in the spring of 2021, we have released over $100 billion in special drawing rights (SDRs, the International Monetary Fund’s reserve asset) for vulnerable countries.By activating this “dormant asset,” we are extending 20-year loans at near-zero interest rates to finance climate action and pandemic preparedness in the poorest countries. We have begun to change debt rules to suspend payments for such countries, should a climate shock occur. And we have changed the mandate of multilateral development banks, such as the World Bank, so that they take more risks and mobilize more private money."
Dec 27th 2023
EXTRACT: "....if AI causes truly catastrophic increases in inequality – say, if the top 1% were to receive all pretax income – there might be limits to what tax reforms could accomplish. Consider a country where the top 1% earns 20% of pretax income – roughly the current world average. If, owing to AI, this group eventually received all pretax income, it would need to be taxed at a rate of 80%, with the revenue redistributed as tax credits to the 99%, just to achieve today’s pretax income distribution; funding the government and achieving today’s post-tax income distribution would require an even higher rate. Given that such high rates could discourage work, we would likely have to settle for partial inequality insurance, analogous to having a deductible on a conventional insurance policy to reduce moral hazard."
Dec 21st 2023
EXTRACT: "Shocks are here to stay, and our task is not to predict the next one – although someone always does – but to sharpen our focus on resilience. Staying the course of politically mandated policies while minimizing the inevitable dislocations is easier said than done. But that is no excuse to fall for the myth of being victimized by the unprecedented."
Dec 21st 2023
EXTRACTS: "A new world is indeed emerging. It will be characterized not only by more interdependencies, but also by more insecurity, danger, and war. Stability in international relations will become a foreign concept from a bygone age – one that we did not fully appreciate until it was gone."
Dec 14th 2023
EXTRACT: "Yet one must never forget that Putin is first and foremost an intelligence officer whose dominant trait is suspicion."
Dec 2nd 2023
EXTRACTS: "In a recent commentary for the Financial Times, Martin Wolf trots out the specter of a 'public-debt disaster,' that recurrent staple of bond-market chatter. The essence of his argument is that since debt-to-GDP ratios are high, and eminent authorities are alarmed, 'fiscal crises' in the form of debt defaults or inflation “loom. And that means something must be done.' ----- "If, as Wolf fears, 'real interest rates might be permanently higher than they used to be,' the culprit is monetary policy, and the real risk is not rich-country public-debt defaults or inflation. It is recession, bankruptcies, and unemployment, along with inflation." ---- "Wolf surely knows that the proper remedy is for rich-country central banks to bring interest rates back down. Yet he doesn’t want to say it. He seems to be caught up, possibly against his better judgment, in bond vigilantes’ evergreen campaign against the remnants of the welfare state."
Nov 27th 2023
EXTRACT: "The first Russia, comprising those living in Russia’s two biggest cities, Moscow and Saint Petersburg, can pretend there is no war at all." ---- "Then there is the other Russia, the one you find in small towns and villages scattered across the country’s massive territory. Here, the Ukraine war is a source of patriotic pride,"