Will renewables survive the oil downturn?

The seven-month-long plunge in oil prices appeared to be enough to re-establish gasoline as the default fuel for motorists, while stunting the progress of replacement fuels.

But attendees at last month’s North American International Auto Show in Detroit would have thought differently. Prominently displayed were various alternative vehicles that have been making headway and are just building momentum in the auto market, so they may be able to shrug off the precipitous fall in oil prices.

Also exhibited in Detroit was the first generation of hydrogen vehicles from Japan, which are challenging both the gasoline monopoly and the electric car, which is much more popular in America and Europe. The Honda FCV concept car boasts a driving range of about 300 miles and a refueling time of just three minutes, marking another step forward for the hydrogen fuel industry. California, where the cars are to be introduced later this year, is already preparing its “hydrogen highway,” which will make the cars feasible for drivers. Toyota’s fuel-cell offering, the Mirai — which also runs on hydrogen — is also scheduled to hit showrooms this year.

Chevrolet has had middling success with its electric-gasoline hybrid the Volt, but the maker has another generation planned with its concept car, the Bolt. The car will be made of extremely lightweight material and will have an all-glass roof and aluminum wheels for further weight reduction. Its lithium-ion battery will give the car a range of 200 miles and a recharging time of 40 minutes for an 80 percent charge. The price of $30,000 is likely to expand the market for electric cars.

Analysts note that oil is not used much for electricity anymore. The 1980s are the benchmark and generally remembered as the “Valley of Death” for renewables. Wind and solar were undercut by falling oil prices and lost their place in the generation of electricity. At the time, oil was providing 17 percent of our electricity. Now it provides barely 5 percent, and wind and solar energy have not felt any effect from oil prices.

Of course, natural gas has largely replaced oil, and a drop in gas prices could cut into the advance of renewables. Gas prices have traditionally been between one-sixth and one-twelfth of oil prices but have uncoupled themselves in recent years. This could work both ways, since gas prices have not fallen by the same degree that oil prices have.

Gas still holds its edge, however, and this means the attempt to use natural gas as an oil substitute may not slow. T. Boone Pickens has had some success in switching long-haul trucks to compressed natural gas, and this effort may be slowed only a little by gasoline’s new low price. However, if natural gas prices fall as well, then it may be able to keep pace with lower oil prices. The possibility that cheaper natural gas might encourage the conversion to methanol as a gasoline substitute would also be encouraged by falling natural gas prices.

That leaves the big question of whether ethanol can survive in the face of falling gasoline prices. In the first place, low gas prices are not likely to last forever. Some analysts are predicting crude oil prices will probably bounce back to $75 a barrel in the near future. Second, ethanol is protected by the federal mandate that says each gallon must contain 10 percent ethanol. If falling gas prices encourage the purchase of more gasoline – which it already has – then ethanol consumption must climb as well.

Ethanol has been under fire recently from studies that say it competes with food resources. The latest is a report from the World Resources Institute in Washington, which argues that “There are other, more effective routes to get to a low-carbon world.” But the rapid development of cellulosic ethanol severely reduces the possibility that ethanol will compete with food crops. And the possibility that natural-gas-based methanol might begin substituting for ethanol makes the threat of competing with food crops even less.

Altogether, it appears that renewable energy and alternate vehicles are going to survive the dramatic fall in oil prices. Alternative vehicles and other related technologies are now too far along to be crushed by falling oil prices the way they were in the 1980s.

(Photo: The Toyota Mirai at the Los Angeles Auto Show in November. Credit: Vision Automotriz, Flickr)

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