Falling oil and gas prices have short-circuited rollouts of renewable energy and alternative vehicle use, setting back progress toward reaching climate goals, the world’s top energy body said Monday.
In a new report, the International Energy Agency warns much more investment will be needed in technologies like the one Tesla unveiled Friday because current rates of financing are not enough to allow by less than the 2° Celsius.
Many analysts had been hopeful that renewable investment could withstand the price drop brought about by America’s shale oil and gas boom.
"Even with the price of oil being lower, cheaper materials have made solar still far more practical," Jeff Osborne, an analyst with financial services company Cowen Group, told CNBC in December.
But the IEA says it’s not happening.
“It is troubling that advances in those areas that were showing strong promise – such as electric vehicles and all but solar photovoltaics (PV) in renewable power technologies – are no longer on track to meet [2° Celsius] targets,” the group said.
“While the recent drop in fossil fuel prices changes the short-term economic outlook of energy markets, using it to justify a delay in energy system transformation would be misguided in the long term. Short-term economic gains and delaying investment in clean energy technologies will be outweighed by longer-term costs.”
They outline which countries are making progress the most progress toward decarbonizing their energy systems. The largest fossil fuel producers, like the U.S. and Russia, have shown almost none.
That’s despite the fact that renewable energy is no longer more expensive than fossil fuels — one utility CEO, for instance, has said electricity from residential rooftop solar is now as cheap as power from the local grid in half the states in the Union.
“Utility scale solar PV and onshore wind are now competitive with electricity generated by new conventional power plants in an increasing number of locations,” the IEA says. “While the cost gap between electricity from renewables and that from fossil fuels is narrowing, fossil plants still dominate recent capacity additions. Together with a slowdown in deployment rates of PV and wind, this undermines the trajectory needed to decarbonise energy supply and meet the 2DS renewable power targets.”
Meanwhile, electric vehicle purchases in the U.S. have stagnated. According to auto analysts at Edmunds.com,only 45 percent of this year's hybrid and EV trade-ins have gone toward the purchase of another alternative fuel vehicle. That’s down from just over 60 percent in 2012.
“Never before have loyalty rates for alt-fuel vehicles fallen below 50 percent,” they said.“For better or worse, it looks like many hybrid and EV owners are driven more by financial motives rather than a responsibility to the environment.”
On Friday, electric automaker Tesla announced it was entering the energy business, unveiling a home battery pack that can be paired with rooftop solar panels to provide solar power throughout the day (since the sun doesn’t always shine). Batteries are one of the last major hurdles to having reliable renewable energy (since the sun doesn’t always shine), and Tesla’s is now among the cheapest on the market, and it relies heavily on states incentives. Yet many of these subsidies are under attack by fossil fuel friendly- utility commissions.
The IEA says trends like these will have to be snuffed out to make climate goals.
“For very high deployment levels of wind and PV, innovation is needed in demand-side integration, energy storage and smart grid infrastructure,” the IEA says. “Widespread deployment of wind and PV technologies, consistent with the 2DS, now requires an integrated and well-designed policy and market regulatory framework.”
Finally the group makes an argument made by some in the fossil fuel divestment movement, that investing in those resources represents a financial risk, since they represent an inherent higher price risk.
“In fact, shifting to clean energy and achieving more efficient energy production and consumption can provide an energy security hedge against future market uncertainty,” . Deployment of innovative technologies that exploit clean domestic sources would reduce dependence on resources exposed to market price fluctuations.”
Rob covers business, economics and the environment for Fusion. He previously worked at Business Insider. He grew up in Chicago.