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Oil price slump should not affect clean energy investment

Investors in renewable energy have been urged not to make short-term decisions based on the slump in oil prices.


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The fall in oil price may have an impact on investment decisions, experts have said
The fall in oil price may have an impact on investment decisions, experts have said

Experts said the decline in price from more than US$100 (£71) a barrel 18 months ago to this week’s low of US$28 (£19.80) a barrel would undoubtedly have an impact on investment decisions, but clean energy would win out in the long run.

 

Strutt and Parker resources and energy partner Alexander Creed said: “I think it will have an impact, although it should not.

 

“When the price of oil comes down and the effect of this is it brings your heating bills down, renewable energy, for example using biomass to heat your home, is not as attractive.

 

“But, how long will the price stay as it is? You have to look at it in the longer term.”

 

Mr Creed pointed to stringent EU and UK Government targets to reduce carbon emissions.

 

“Oil, and heating oil in particular, is one-and-a-half-times more polluting than gas,” he added. “It might be cheap fuel, but it is not a good fuel.

 

“You have to look at policy. Feed-in Tariffs and the Renewable Heat Incentive are all about reducing carbon emissions.

 

“Gas is less polluting than oil, but renewable energy is better still.”

 

Mr Creed also pointed to the phasing out of coal-fired power stations due to ‘emissions, rather than cost’.

 

“Take a farmer who rents out a cottage on his estate. If the house has an old boiler with a low energy performance certificate efficiency rating, they could have problems letting it out in 2018,” he said.

 

Regulations are due to come into force in April 2018 which will make it unlawful to let properties in England and Wales which do not meet a prescribed minimum energy performance standard.

 

Merlin Hyman, chief executive of Regen SW, said: "The volatility of the oil price is a challenge for all energy generation investment as it affects the wholesale price for power produced.

 

"History tells us the lower it falls the higher it tends to rise. This volatility of fossil fuels prices illustrates the important role renewable energy – using local natural resources - can play in our energy security."

 

Stuart Pocock, chief operating officer at the Renewable Energy Association, predicted investment in renewable energy would continue to grow.

 

He said: “The technology is now more efficient and can be deployed quickly and reliably – to the point certain deployments are viable without subsidy.

 

“Certain green sectors, such as renewable heat and transport, are hit harder than others by the low oil price.

 

“These technologies have an important role to play in the larger move towards our targets for de-carbonising our energy sector."

 

 


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