Most Oil And Gas Producers Could Go Bankrupt Over The Next Decade

Solar Costs To Fall By Another Whopping 60% Over The Next 10 Years

Solar prices have already fallen by a jaw dropping 80% over the last 5 years and this has made solar energy cheaper than all other energy forms in a large number of places in the world. In India the solar price is only INR 2.44/kWh which is far cheaper than the average thermal coal electricity price of INR 3.2/kWh. Even in other countries like Dubai, Mexico etc. where solar energy is abundant and where land is cheap, solar prices discovered in auctions is coming to be cheaper than other energy sources. It is expected that a solar tender in Abu Dhabi might see prices go to an all-time low of just 2 cents/kWh. Already solar energy capacity forecasts are increasing on the back of the cheap price which will lead to a sharp demand creation through price elasticity.

What is even worse for other energy sources such as oil, gas and coal is that solar prices are expected to fall by a further 60% over the next decade as per a forecast given by international renewable energy specialist IRENA. This would make the death knell of other energy forms which are already struggling with where solar energy prices are today. Just imagine solar energy price coming to somewhere around INR 1/kWh! This would effectively mean that not only new conventional energy plants would not be built, but even the existing plants would be junked as they would be noncompetitive with new solar energy prices. The power utilities which have signed long-term contracts to purchase power at high prices let us say INR 4/kWh or more, which is the case for most long-term PPAs of power in the world would become noncompetitive and have no choice but to shut down.

While oil and gas producers have remained relatively insulated from the solar energy disruption till date, this would not be the case if solar energy prices fall so low. Already most coal companies are now bankrupt or facing bankruptcy as they cannot compete with solar energy in pure electricity markets. With cheap solar along with storage and EVs disrupting the transport sector, even oil and gas producers could see their business going kaput. Solar at 1-2 cents/kWh would even start making sense in the transport market. Ships and trains have already started using solar energy for their ancillary uses. This could drastically go up as solar energy plus storage becomes cheaper and cheaper. The massive oil and gas industry which easily racks up a trillion dollars a year could start to see serious pressure over the next 5 years. Already oil prices are starting to get affected by solar prices.

France has already decided to stop giving new oil and gas licenses as part of its transition to a renewable energy future. This does not portend good things for the oil and gas industry which still continues to be smug about its future prospects.

Well, the cost equation has changed so much. Why is India so gung-ho on solar? Because solar PV costs have come down by about 80 per cent in the last six years. We just released, earlier this year, a very in-depth analysis of the costs of renewable energy technology going down and we see over the next decade that solar PV will come down by another 60 per cent, minimum.

Source: Business Line