The recent dramatic plunge in oil and natural gas prices, to their lowest level since the global recession in 2009, has some observers worried about the effect on clean tech. Conventional wisdom has it that renewables have a tougher time competing when fossil fuels are cheap, making grid parity (in the case of natural gas-fired electricity) more elusive for solar and wind power.
But could it be that the current environment – with gasoline at less than $2 a gallon in much of the U.S. – is actually a good time to double down on policies to move away from fossil fuels to more renewables and efficiency?
That was the conclusion of a special report on energy last month in The Economist headlined “Seize the Day.” “The fall in the price of oil and gas,” wrote the venerable magazine that dates back to 1843, “provides a once-in-a-generation opportunity to fix bad energy policies.” Chief among these policies are fossil fuel subsidies, at least some of which were born out of decades-old governmental fear of oil scarcity and soaring prices (I’ll let others debate how many came from mere lobbying power). The Economist called fossil fuel subsidies a “rathole” which swallowed an estimated $550 billion from governments across the globe last year. “Falling prices provide an opportunity to rethink this nonsense,” the magazine continued. “Why should American taxpayers pay for Exxon to find hydrocarbons?”
The Economist is not a big fan of subsidies for clean energy either, and my Clean Edge colleague Ron Pernick and I recommended phasing out all energy subsidies in the Seven-Point Action Plan presented in our 2012 book Clean Tech Nation. Renewables and efficiency could compete on their own merits on a truly level playing field, if that is ever possible in the energy sector. The recent plummet of oil and natural gas prices may be grabbing headlines, but it’s nothing compared to the (longer-term) drop in the cost of solar PV panels – by a factor of five in the past six years, according to the International Energy Agency.