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Testing the Insolubility of oil

posted May 26, 2016, 8:17 AM by Nate Shanklin

Renewable energy has little to fear or to offer to the US thirst for oil.


Each morning, millions of Americans listen to the news on their way to work.  A statistic of particular fascination seems always to be the price per barrel of light sweet crude.  For most, this price reflects the cost of gasoline, energy, and somehow the nature of global business. For those in or around the renewable energy business, the brutal fascination with the ebb and flow of oil, is largely becoming a fascination unfounded.

The US Energy Information Administration reports that at present, oil presently supplies 1% of the fuel for current electrical generation. If anything, solar is fighting its greatest battle against coal and natural gas representing at present 62% of electric production.

Given the disassociated nature of oil and renewables, the oil lobby has become a motivated advocate of renewable energy policy, sort of. The recent extension of the ITC and PTC (Investment Tax Credit and Production Tax Credit) were neatly packaged with a lucrative lift on the export of oil that had been in place since 1975.  Still, it would be hard to find anyone in the renewable business that regrets the extension of the tax credits, so vital to this industry, no matter how they may have been sustained.

While oil may make for strange bedfellows for renewables, natural gas more clearly defines the battles to come.  In late 2015, North Carolina state legislatures began debate of a bill that would cap the state’s utilities need for renewable energy at 6%, halving the current obligation and eliminating it entirely by 2021.

NC Republican House Whip, Mike Hager was recently quoted as saying: “We could never have imagined in 2007 such an abundance of domestic natural gas,” Hager said in an interview. “We need that Marcellus shale gas to offset the high cost of renewables and prevent electricity prices from rising further. It’s like raising children: they need to grow up learn to live in the real world.”

The real world may not be as clear as Mr. Hager would indicate.  At present, the Energy Information Administration (EIA) has indicated that at present the levelized cost of power from now until 2020 is estimated at $125.30/MWh for renewables and between $141.30 and $113.50/MWh for natural gas dependent on varying uses of the fuel. Given this, renewables are surely not responsible for rising energy costs. Mr. Hager’s prior employment and ongoing relationship with Duke Energy is surely informing his decision on these matters. As an engineer at Duke’s fossil fuel plants for more than 23 years, his attachment to his former company’s significant investments in gas and coal is not surprising.

Up and down the East coast, utilities and lobby groups are proving to have varying effects on state governments.  While many states such as New Jersey and Massachusetts have proceeded to expand their RPS standards thus backing renewable energy, the Carolinas, and much of the South have a much closer and more complex relationship with their utilities and natural gas and coal.  This is a relationship which is not likely to change without sweeping federal regulations, which these states regularly oppose.

As the installed cost of utility scale solar plunges to $1.18 halving its cost from five years ago, renewables continue to make an argument that only grows stronger. And while oil prices will continue to dominate headlines and power the transportation sector, they are unlikely to ever cross paths, for better or worse. Each will have their own battles to fight.