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.
