Category Archives: energy

How will cheap oil affect clean energy?

Over the last few weeks I’ve been trying to make sense of the debate around falling oil prices. A barrel (159 litres) of Brent crude oil, the main benchmark for oil trading worldwide, fell under 50US$ last month.

I found this infographic (click to open the original) that shows how oil prices, far from being just a matter of availability of the raw material, are regulated by financial, natural and political factors.

oil price

The chart shows the variation of oil prices over the past 30 years, ending in 2014 with 104US$ per barrel. Imagine a decreasing curve even steeper than in 2009, when prices dropped as a result of the financial crisis in 2008.

Now analysts have been wondering what the recent fall may mean for the fossil fuel industry and its stakeholders. For example shale gas, which in the past few years boomed as a cheaper alternative to oil, won’t be as competitive as before. Good news for the environment, as the controversial extraction technique used to produce shale gas, hydraulic fracturing or fracking, is known to have severe environmental impacts.

But cheaper oil also means cheaper petrol, so for example more and bigger cars on the streets.

Also, cheap oil seems to be damaging the clean energy industry, that was just recently starting to catch up with fossil fuels, thanks to subsidies, technological breaktrhoughs and high fossil fuel prices.

Last December, at the UN conference on climate change in Lima, I spoke with a few scientists and members of the private sector about how to promote the transition to a climate friendly economy. All of them stressed the importance of the cooperation between private and public sector. They believe that governments won’t be able to bridge the gap between the current carbon based economy and what’s needed to mitigate and adapt to climate change. The private sector has to step in with money and capacity for implementation, but a climate friendly industry there is need of an ‘enabling environment’.

In other words, investors won’t go for renewables if they have a cheaper and more profitable option.

But there are other factors playing a part, that are unique to the current socioeconomic context. For example, diesel is today less relevant in the global energy mix, so the development of renewables is not affected as heavily as in the past.

Big oil companies are cutting their investments, and though this could potentially reduce the availability of oil resetting the prices, some say this time recovery could be more difficult, due to the implementation of carbon pricing and incentives for clean energy development.

My conclusions so far somehow overlap with the starting point of this video (strongly recommended, very clear and informative) . The volatility of oil price affects the global economy in a such a complex way that drawing an ultimate conclusion on the benefit or damages of a new age of cheap oil would be misleading.

How this will affect clean energy progress will also depend on how long the prices will stay low, what type of incentives the international community will put in place globally as well as locally, what sanctions will be issued to discourage countries from relying on fossil fuels.

On Africa, energy and what’s next

aeepgroup

Looking back to my feelings about my first trip to Africa, I remember thinking – should I hate it (after having written so much about it) would I have to quit my job?

Now that was a joke, but in truth I didn’t know what to expect and I was rather nervous at the idea of catching strange diseases of parasites. Someone told me you can get maggots that grow under your skin. No joke he still has tiny scars on his forearm.

Anyway at the end of the two weeks I spent in Ethiopia I was struck by the difference between my Europe and what felt like another world, and I decided to go back to Africa as soon as possible. So South Africa is waiting for me in May, this time for holiday and I will probably be offline for a while.

Addis will linger in my memory as city of contrast, with mothers and babies sitting on the side of dusty roads while businessmen and diplomats eat expensive meals in the restaurant of a luxury hotel just a few meters away.

A room in an average hotel costs about 175 US$ per night, equivalent to 3380 birrs, the local currency. The average monthly salary of a chef or an experienced waiter is around 2000 birrs.

My two weeks were spent working on two very different tasks. For the first week I’ve been covering a conference of the African EU Energy Partnership. It was a very interesting meeting where I had the chance to meet awesome people from different countries, had a lot of fun and tested my skills with some data journalism.

The partners from Africa and the EU gathered for the first time in 2010, in Vienna, to set goals for energy progress in Africa to be met by 2020.The goal involved different fields, the most important of which were energy security, to be achieved through increased energy production from a mix of renewables and fossil fuels, and energy access for additional 100 million Africans by the end of the decade.

But the first status report, published during the conference, unveiled a rather upsetting situation. None of the target is likely to be met and a serious lack of planning leaves little room for hope. You can read a blog I wrote on the topic here, and the full report here.

Among other things, here’s an infographic I produced with Piktochart (here the interactive version). It shows how long would it take to meet the targets at the present rate of increase. Pretty striking figures: wind energy would meet the goals set for 2020 in… 2117.

That of course raises questions about the baseline used to set the goals, and about the data collection capacity underlying it. You will hear more on that in my next podcast, to be published in a few days.

Africa energy performance