The Renewables MMI fell 3.6% this month, erasing last month’s gains and losing a bit more to hit a fresh all-time low.
As we cautioned last month, renewables look like they have farther to fall. The low-price range they have been trading in for the past six months is, itself, a downward departure from its previous range, in the 60s, where it had been since January 2013.
Why Renewables Prices Stay Low
The bearish commodity picture is certainly a part of the problem for renewables but the sector looks increasingly price-challenged as most of the metals trading in this range, such as steel, had sharp losses and selloffs in the last year whereas renewables have lost comparatively little of their value in 2014 and 2015.
Steel plate, itself, has been a big part of renewables’ falling price range this year. Used in the construction of wind turbines and some certified sustainable construction projects, steel plate prices have dipped under pressure from cheaper overseas imports and a strong dollar.
Silicon and cobalt have fallen, as well, despite strong demand for photovoltaic solar panels. Both wind and solar have proven themselves as power generating technologies, so much so that this week, unlikely advocate BP said the cost of producing energy from renewable sources will fall sharply over the next 35 years. BP’s statement went on to say without a system in place that levies a charge for carbon emitted into the atmosphere, natural gas and coal will remain the cheapest source of supply to 2050.
We’re BP and We’re Here to Help
Hard to believe that BP is truly on the cap and trade bandwagon but, as an entity, it would know energy markets better than most.
BP’s report analyzed the impact of technology on energy production and consumption in coming decades. The oil giant said that a carbon price of $40 a metric ton would make gas a more economical power source then coal—a more carbon-intensive fuel—but a higher carbon price will be needed to make wind and solar more competitive.
“Without a price on carbon, fossil fuels are fiercely competitive,” said David Eyton, BP’s technology chief.
The oil giant’s long-term forecasts project that coal will remain the dominant fuel in power generation by 2035, but will lose market share to natural gas and renewables. In transportation, liquid fuels are expected to continue to dominate in coming decades.
BP and other large oil companies are producing an increasing volume of natural gas, with BP expecting it to comprise 60% of its production by the end of the decade.
The coal industry has defended its role in the energy mix, highlighting that advanced technologies can sharply reduce carbon emissions and that coal remains a critical fuel, particularly in fast-industrializing emerging markets. Mass market adoption will be needed for solar, particularly, to be anything but a power generation pawn in the war between coal and natural gas.
Actual Renewables Prices
US steel plate tumbled 5.8% this month, dropping to $489 a short ton from $519 per set in October. Chinese silicon dropped to $2,018.04 a metric ton from $2,028.14 in October, a .5% drop.
Follow Jeff Yoders on twitter at @jyoders19.