An ill wind for renewables?

David Adam
The Guardian, Friday November 21 2008

The falling gas price could hit investment in expensive renewable energy projects, said Cameron Hepburn, an environmental economist at Oxford University - but that outcome is not certain.
"Oil and gas price falls are not good for renewables per se," he said. "If you knew for certain that the gas price would stay low, that would be an incentive not to invest in renewables.
"But I don't think people expect the gas price to stay low, because that would mean gas was plentiful and there were no problems with supply."
Investors in renewable projects tend to look 20 and 30 years ahead, he said, and most analysts expect gas prices to rise again after the recession. "This would actually make it quite a good time to invest."
Jim Watson, an energy expert at Sussex University, said other factors - such as the price of steel and cement - had hit large-scale renewables.
"I'm not sure how much of a tradeoff there is between gas price and investment in renewables," he said. "Energy companies have been queuing up to build gas stations over the last couple of years, even when the gas price was very high. What a lower gas price does is make gas more attractive - but most big energy companies do both."
A bigger impact from the gas price fall could be on the use of coal. Although Britain largely switched from coal to cheaper gas in the early 90s, most power companies retain both gas and coal capacity, which allows them to toggle between the two as prices fluctuate. Higher gas prices recently meant more coal burnt, and so higher carbon dioxide emissions.
Hepburn said: "When the oil and gas price was high, people said that would drive investments in renewables, but companies switched to coal. The opposite could apply on the way back down, with a switch back to gas."