Fossil Fuel Making It’s Comeback – Renewable Energy Sector’s Still In War of Competitiveness
October 19, 2012 Editor 0
After a few years of blissful running, the renewable-energy sector has suffered some blows. Now, casting shadows on the feasibility of its reputation as the energy source of the future is likely to change things.
Speaking from Pembina Institute, Matt Horne, the climate-change director at the Institute agreed to the fact that the situation is quite bleak. “..There is now a way to sugarcoat it,” said Matt, adding that the situation is, however, not hopeless.
In the current economic crisis, all sectors have suffered major setbacks but the ones in the renewable-energy sectors are far reaching. This is because policymaker’s hands are tied when it comes to extension of funding and grants in this sector, especially with the deepening fiscal crisis.
What is more, the fossil fuel sector has taken advantage of these setbacks to clean up their image in the eyes of the public. Fossil fuels are definitely cleaner than renewable-energy sources but economically, they offer a persuasive case that is hard to resist at a time when economic growth is relatively slow.
However, various determinants can attribute to the sudden deviation from investing in renewable energy. First on the list is the availability of cheap oil and natural gas in Canada and the United States. Secondly, the oil and gas sector has the potential to create employment; an allure that most governments cannot resist especially with the high unemployment rates.
North American regions, for instance, Quebec, are still skeptical about hydraulic fracturing many others are embracing its advantages.
Natural gas can be commended for easing the use of other carbon fuels. According to Ann-Louise Hittle, Wood Mackenzie’s head of macro oil, natural gas has drastically reduced the use of coal. It is one of the largest emitters of greenhouse gases. This is beneficial for environmentalists; it has had its toll on the renewable-energy sources as the low prices are an obstacle.
The setbacks experienced in the renewable sector are felt most in Europe; a leading advocate of the technology. The current economic crisis in the continent makes it impossible for policymakers to justify funding to the sector amidst immense budget cuts in every other sector. Consequently, the continent’s target of cutting emission levels to 20% below the 1990 levels seems farfetched.
According to a September report by HSBC, Global Climate Index which involved monitoring the performance of major beneficiary companies of climate-change policies, a decline of 5% was recorded. The report further noted that with the global economy continuing to be in turmoil, the resulting environment did not favor investments in the climate sector.
Alternative and renewable-energy revenues dipped to US$310 billion in 2011, a 12% drop compared to 2010. Bio energy, geothermal, hydro, wind and solar energy combined recorded approximately 10.5% losses every other year.
HSBC was, however, optimistic that: even though the global economic crisis and competition from natural gas and oil seems to destabilize the renewable-energy sector, new market entrants who are passionate about reducing emissions will continue to emerge.
The renewable-energy sector is not about to be rendered obsolete but the setbacks it has suffered have provided an opportunity for Big Oil and Gas to market itself as a cheaper and employment creating alternative. This seems to reverberate well with US voters at who are soon going to provide their contribution to the next election. What is more, the renewable-energy sector has suffered major blows in terms of failing companies, and some energy sources such as bio fuel are being held responsible for the increased cost of food production and higher food prices.
According to Wood Mackenzie data, the oil and gas industry invested a record figure of $490 billion this year, something that extends its lead over the renewable sector significantly. As Horne notes, the projects that are being started will last 40 to 50 years during which investment in the renewable sector will be delayed.
Aggressiveness to increase production is being seen among the largest oil producers such as US, Russia, Canada and Iraq. Consumers are not disappointing with countries such as India and China attaining hydrocarbon assets and building their own oil reserves.
Renewable energy, on the other hand, are reeling from setbacks after six years of continued improvement. Estimates from the United Nations Environment Program state that; even though the investments in the entire renewable sector rose by 17% to reach US$271 billion in 2011, the sector is on a downward trend in terms of growth momentum.
As UNEP notes, massive cuts in the renewable-energy sector will tamper with investments in developed countries long before the renewable-energy sources can effectively compete with fossil fuels. This will affect the businesses in the green energy sector negatively and impede the resolve to limit carbon emissions.
Statistics from the renewable-energy sector reflect the recession that has hit this sector, with a reported 13% downward growth in government-led R&D and 16% decline in research and advancement of renewable globally.
In Canada, investment in the renewable-energy sector was worth US$5 billion, an 8% decline from the previous year. On the other hand, around $18.5 billion is supposed to be invested in the oil sands alone this year by oil companies. Critics have blamed the government for the tax in environmental regulations in order to favor fossil fuels development.
Pembina Institute laments the slack policies governing the coal-fired plants which represent seven of the top 10 polluters in Canada. Amends to the draft rules is giving old coal-fired plants the right to run for about 50 years without making any major changes to their polluting effect. Regulations would have been an easy way to reduce carbon emissions in Canada, the current ones will be weaker when implemented and as such not achieve this feat.
Pembina Institute, however, applauded British Columbia’s implementation of carbon tax to reduce emissions.
Alongside Canada, Germany, the stronghold of renewable and alternative energy has had to make do with coal after the government started stalling the nuclear energy plans. Likewise, coal consumption in China is up by 10% making up 80% of total energy production, while in South Korea and India; it has increased by 11%.
Japan’s coal consumption is at 45%, and it is likely to remain this way as nuclear projects get cancelled. As Jeff Largey, a Macquarie analyst informs Reuters, it is not globally possible to do away with coal based on the above happenings.
Nuclear suffered a major blow with the Fukushiyama disaster and this has led to the closure of nuclear projects by Japan and Germany and a return to coal and natural gas. As the International Atomic Energy Agency reckons, nuclear energy growth will slow down, but it will not reverse.
There is still hoped for the green movement amidst the turmoil as oil consumers globally are keen on reducing dependence on expensive oil and gas. However, it will take a reverse of the global economic crisis to rekindle interest in the currently more expensive renewable energy and courage from policymakers to ensure continued investment in the renewable industry even in the wake of the crisis. Notably, the latter is harder to find.
Source: Ottawa Citizen
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