Tuesday, March 29, 2016

Renewables Decoupled from the Price of Oil

Low oil prices are no longer holding back renewables, in fact they are proving to be a boon. Historically the price of oil has been tied to renewable energy. The higher the price of oil the more it benefited the growth of renewables. Conversely the low oil prices slowed the growth of renewables. However, according to recent statistical analysis this link appears to have been broken.

As explained by Philip Killeen in a World Watch post, the "increasingly unprofitable global oil market" and the "hemorrhaging investment in conventional energy sources."

"[C]heap oil no longer foretells disaster for renewable energy companies. On the contrary, disillusioned fossil fuel investors are seeking high-growth opportunities—just in time to ride the renewables wave in the wake of the 2015 Paris climate talks," Killeen said.

Investors are selling their oil shares and overall investment in oil has declined. "[I]nvestors remain skeptical of underlying oil market fundamentals and are reducing their exposure," Killeen added.

Renewable energy is increasingly attractive to investors and new financing schemes are reducing risk and eating away at investments in fossil fuels. Buoyed by the UNFCCC's climate finance mechanism in the Green Climate Fund the GCF Private Sector Facility (PSF) is using innovative tools and concessional funding mechanisms to promote private sector involvement.

This trend away from fossil fuels and towards renewables is well under way. "The global shift from fossil fuels to sustainable energy has already begun—it’s time for investors to ride the wave," Killeen said.

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