Falling energy costs should trigger investment in renewables

by Search Gate staff. Published Wed 20 May 2016 10:49
Renewable power can help boost energy security
Renewable power can help boost energy security

As the price for crude oil is set to remain below $100 a barrel in the short-term future, investing savings in renewable technologies is now a ‘no brainer’ for businesses, according to new analysis.

Energy prices followed a familiar seasonal trend, increasing by 9% between the third and fourth quarters of 2014, remaining 3% lower than for the same period the previous year, latest data from the Lorien Energy Index (LEI) has revealed. For a typical industrial fuel mix, Q4 2013 to Q4 2014 saw relatively small fluctuations in electricity prices, with a higher level of volatility in gas.

Against this backdrop of falling fossil fuel prices, Lorien Engineering Solutions, which produces the Energy Index, anticipates stability and moderate growth in the short term, enabling industry to invest savings in efficiency measures and alternative renewable and low carbon technologies.

The Lorien Energy Index, which is produced by Lorien Engineering Solutions, monitors the overall cost of energy for business users. It enables companies of all sizes to make sense of their current energy consumption and look at ways they can make savings in the future, by being energy efficient and utilising low carbon and renewable technologies to boost energy security.

Lorien’s sustainability consultant Tom Jordan said, “With energy costs overall not expected to increase dramatically in the short to medium term, we see this relative stability as a strategic opportunity for businesses to focus on reducing energy intensity and investing in low carbon and renewable means of generation. Over the long term, it will deliver significant competitive advantages.”

Brent crude fell below $66 a barrel in May 2016, with WTI at $60. OPEC has recently said it doesn’t expect oil prices to trade consistently at $100 a barrel within the next decade, and predicts a price of $76 a barrel in 2025.

Tom Jordan said: “The downturn in US gas production has been met with unexpected resilience. Recent developments suggest a US flip to aggressive exporting of liquefied natural gas (LNG), beginning as soon as early 2017. Expectations are that this could release the stranglehold of Russian production within Europe.

“Whilst gas prices on the wholesale UK markets are down 16% on 12 months ago, gas storage is 20% full (compared with 52% in 2014), due to buyers offloading supplies in expectation of discounted gas becoming available later in the year.

He concluded: “It really is a ‘no brainer’ for businesses to invest savings now to enhance their resilience to future increases, provide energy security and realise a marked competitive advantage over the longer term.”

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