The Coronavirus-spurred collapse in the global oil markets will not cause a major set-back in renewable energy capital spending but may impact on demand for electrical vehicles, the head of the International Renewable Energy Agency (Irena), Francesco La Camera, has said.

Cruce price volatility, the Irena director-general said, could instead provide a “window of opportunity” to channel fossil fuel subsidies towards clean-energy projects, while offering a means of lessening the likelihood of social disruption.

“Oil plays a negligible role in power generation and therefore does not compete with renewables in this respect,” said La Camera, in a statement.

“Renewables have become the dominant source of new power generation capacity over the last six years because they are competitive at the bottom end of the conventional fossil fuel power generation cost range – primarily with coal.

“Conversely, oil price volatility may undermine the viability of unconventional oil and gas resources as well long-term contracts, providing a window of opportunity to reduce or redirect fossil fuel subsidies towards clean energy, while minimising the potential of social disruption.”

La Camera pointed to data from the 2014 oil price crash as showing “no evidence of a link between the two”, with renewables investment climbing to “new heights” that year and in 2015.

He nonetheless cautioned that the “severity and duration of the impacts this time remain to be seen”, adding that the Covid-19 outbreak did “threaten global supply chains in many sectors” which would hit renewable energy markets.

“What is critical to understand, is that the long-term planning horizons involved, and the momentum that currently exists in the energy transformation, means neither low oil prices nor Covid-19 will interrupt or change our path towards decarbonisation of our societies and towards the achievement of the sustainable development goals,” said La Camera.

He noted the “ much more important role” played by oil in the transport sector, accounting for half of total global crude demand. “Without low-emission transport policies in place, an extended period of low oil prices, may impact the speed of electric vehicle adoption,” he said.

Analysts at BloombergNEF said last week there was “considerable downside risk” to its earlier forecasts for global wind deployment in 2020, while IHS Markit sees the coronavirus pandemic’s impact on worldwide economic growth putting the brakes on electricity demand and leading to intensified competition among coal, gas, nuclear, and renewables in many markets

Novel Coronavirus Corvid-19 has been declared a global pandemic by the World Heath Organization, with over 168,000 cases now confirmed worldwide and some 6,600 deaths, at last count.

Transition

Oil price crash'window of opportunity' to channel fossil subsidies into renewables: Irena