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Less competition for green energy


According to the Commodity Markets Outlook, released by the World Bank earlier this year, in 2016 prices for energy carriers will go down 25% compared to 2015. While the authors of the Bloomberg New Energy Finance (BNEF) report disproves the common opinion that lower oil prices will result in lower investments in renewables.

In reality, however, quite on the contrary, dollar investment in renewables grew six times compared to 2004. Michael Liebreich, Chair of the Advisory Board at BNEF, said: “These figures are a stunning riposte to all those who expected clean energy investment to stall on falling oil and gas prices. They highlight the improving cost-competitiveness of solar and wind power…”

According to Bloomberg report, 2015 was also the highest ever for installation of renewable power capacity, with 64GW of wind and 57GW of solar PV commissioned during the year, an increase of nearly 30% over 2014.

Many analysts say that the reign of coal and gas on the energy marker, and oil – on the transport market, is coming to an end. The first “victim” to fall to energy transformations is going to be coal, which is very unlikely to endure the carbon tax.

The fate of natural gas is uncertain. Only four years ago the International Energy Agency (IEA) announced the golden age of natural gas, however, now it is losing its market position to other forms of energy generation economically, despite low prices for raw materials.

Oil is hardly ever used for electric energy production, thus the development of renewable energy does not pose any direct threat to the oil sector. Meanwhile, renewable energy has grown into a huge business area with over eight million people employed globally.

In Russia, the common opinion is that renewables are still significantly more costly than the traditional ways of electricity production based on the use of coal and gas. It is no longer true, writes E-xecutive.ru.
In November 2015, Lazard investment bank issued an annual report titled “Levelized Cost of Energy Analysis – 9.0”, which analyzes the costs of generating electricity from conventional and alternative technologies. According to the report, wind and solar energy are the cheapest ways of generating electricity.

Costs of electricity generation, not including subsidies (per mWh)

Wind - $32-77
Industrial scale solar power (photovoltaic, silicon)- $58-70
Industrial scale solar power (photovoltaic, thin film technology) - $50-60
Gas - $68-101
Gas (combination cycle) - $52-78
Gas (peak-load plants) - $165-218
Coal - $65-150
Nuclear - $97-136
Diesel - $212-281

The fact of the matter is that renewable energy development in South-Eastern and Eastern Europe, as well as Caucasus and Central Asia is lagging behind the global trends despite their large potential, say the authors of REN report
The economy of most of them is very energy intensive and dependent on fossil fuels, while the subsidies are way above the world’s average. A good example to this are Russia’s plans to support its energy sector. Until 2035, Russia is planning to invest $53 billion into renewables, while $220 billion are allocated for nuclear energy, $95 billion for coal and over 2 trillion for oil and gas.

Among the key obstacles for green energy is the concentration of energy production ownership in the hands of the state, the lack of liberalization on the energy market and difficulties for new players trying to enter the market. The existence of relatively cheap raw fossil materials and electricity also has a role to play, along with underdeveloped Russian technologies and consequential high equipment costs.

In Russia, experts say, renewable energy development is going to be way below its full potential. The only thing that could trigger it is the obsolescence of energy infrastructure and the need to decommission the existing industrial capacities in the coming decade.

Energy efficiency and renewable energy sources must become the priority of Russia’s low-carbon development, which requires an increase in governmental support of these areas, – state Russian environmental NGOs in their Position paper - We stand for the re-routing of subsidies from fossil fuels towards renewables and energy efficiency, while providing assistance to vulnerable social groups and creating green jobs.