How will falling oil prices affect solar?Posted by Rob Baxter in News, Our News, on February 4, 2015
It’s not just economists whose eyes have been fixed on falling oil prices and the value of the Canadian dollar. Whenever fossil fuel prices fall, the overall financial appeal of renewable resources is bound to be questioned.
But this blanket assessment can be deceiving. While some large-scale renewable energy investments may be delayed due to cheap oil, the financial metrics of small-scale solar projects change very little. Consider VREC’s principal service, the installation of grid-tied and off-grid photovoltaic systems. Because BC Hydro rate increases are set on a 5-10 year plan, relying heavily on an infrastructure of hydroelectric production, the financial metrics of net-metered solar installations are quite steady.
For off-grid applications, a different set of factors still make solar an attractive option. Less moving parts, quiet operation, and on-site production are always beneficial when compared to generator maintenance, noise, and schlepping jerry cans. For weekend-use cabins, a battery bank and a small PV array can often supply enough power so that a backup generator doesn’t have to run at all. With the exception of heavy-energy-use residences, the savings from lower gas prices would be negligible.
The indirect effects of falling oil prices do, however, have far-reaching consequences. When overall investment declines, it is because policy-makers and manufacturers see short-term benefits elsewhere. In turn, innovation slows, incentive programs for businesses and individuals dry up (BC has none at the moment), and the political will to champion the renewable energy sector wanes.
Renewable energy is a toolkit of technologies that will benefit from their widespread application. This requires continued infrastructure investment, innovations in efficiency, and government policies that encourage further development.
A silver lining?
As oil prices fall, so does the price of liquified natural gas. Currently, large-scale damming and flooding of the Peace River Valley’s prime agricultural land has become a real possibility, seen by many as a power plant for the LNG industry. With LNG exports losing some of their appeal, perhaps such a dam will be delayed, with funding instead being earmarked for far-less-invasive renewable energy solutions.