A Free Fuel That Tackles Oil Price Rises

Conventional economic wisdom goes something like this. Traditional energy is cheap and renewable energy expensive. Therefore we should ‘wait’ until the day renewables become cost competitive before they can be considered a realistic proposition. This viewpoint may have been true for the last two oil crises – in the 1970s, when modern wind power had not been invented, and in the 1980s, when wind was in its R&D phase. But with wind energy now an advanced technology it is an outdated fallacy, overtaken by today’s energy realities.

The price of oil has more than tripled since 2001. Less than a year ago crude oil prices were in the range of US$25 to US$35 a barrel, but this past summer they reached an all-time high of almost US$70. And fossil fuels have an economic dark side. The last three global recessions were caused by oil price rises. The International Monetary Fund says that “oil prices will continue to present a serious risk to the global economy”, while according to the International Energy Agency, world economic growth in 2005 might have been reduced by 0.8 percent as a result of record prices. Even before this past summer’s price rises, a Financial Times oil market survey suggested that “governments would be wise to bring in policies that speed the end of the age of oil.” Oil and Renewables Although oil consumption is typically perceived in terms of vehicles, with Americans having seen a gallon of gasoline rise USD $1.20 in the past year to reach more than USD $3.00, the link between oil and renewables is becoming stronger. The European Commission reacted to the surge in oil prices by launching a five-point plan which states that “the second main response to oil prices in the medium and long term is to switch to using alternative energy sources and to increase reliance on other forms of energy. Specific attention needs to be given in this respect to renewable and clean forms of energy”. Energy Commissioner Andris Piebalgs commented that “Europe leads the world in providing an intelligent, coherent and environmentally sound response to this challenge… we need to redouble our efforts.” Rising Power Prices Gas is what binds a wind farm to a barrel of oil. Any increase in oil price has a significant effect on energy prices and in particular on those of gas and electricity. Gas prices largely follow those of oil. As some 30 percent of EU electricity generated by fossil fuels comes from natural gas, this has a direct effect on electricity prices. Power prices have already risen in many European countries. Before the oil price rises, the European Commission’s Green Paper on Security of Energy Supply concluded that in the next 20-30 years Europe will be importing 70% of its energy, up from 50% today. The baseline EU energy scenario projects that by 2030, oil imports will rise from 76% to 88% and gas imports from 50% to 81%. At the same time, new power generation capacity will need to increase by about 400 GW. 80% of the incremental energy consumption is expected to come from gas. Free Fuel Forever Compared with these constraints, wind power has zero fuel price risk, zero fuel costs and extremely low operation and maintenance costs. In addition, wind provides total protection from carbon costs, and zero geo-political risk associated with supply and infrastructure constraints or political dependence on other countries. Wind power has no resource constraints; the fuel is free and endless. Unlike conventional fuels, wind is a massive indigenous power source permanently available. Wind power stations can be constructed and deliver power far quicker than conventional sources. As electricity prices rise and imports increase, wind power is the obvious choice in Europe both for economics and security of supply. With the world talking about how expensive fuel is, the merits of a technology providing a free fuel supply are indisputable. In the context of rising oil prices, a reappraisal of the economic value of wind energy is overdue. Forward price assumptions of USD $20 to USD $28 a barrel, as used in the EU’s current energy scenario up to 2030, now appear patently unrealistic. As oil prices continue to spiral upwards, the era of cheap fossil fuels is coming to an end. The era of free fuel, which is what wind energy delivers, is coming into its own. About the author… The Chief Executive Officer of the European Wind Energy Association, Corin Millais, has announced that he is leaving his position at the end of February 2006 to become Executive Director of the newly-established Climate Institute in Sydney, Australia. The Institute has been set up with AUD$10 million of funding from a philanthropic group to develop and implement a five – year campaign to persuade Australians of the dangers of climate change and the need for governments to take urgent action.

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