The plunging price of oil has hurt the stock price of some investments in solar and wind energy, but industry experts say it is having surprisingly little impact on renewable energy industries in the United States.
The Solar Energy Industries Association reports that 2015, a year that saw oil prices fall drastically, is on track to be a time of record growth for solar alternatives to traditional energy sources. SEIA also predicts the first part of 2016 also is likely to see strong sales and growth in the United States.
Most solar-energy facilities produce electric power, by converting sunlight into electrical energy. Very few electricity generating stations in the United States are fueled by oil — natural gas, coal or nuclear reactors are other energy sources in addition to the sun energy — so fluctuating oil prices have little impact, according to industry experts.
The government’s Energy Information Agency reports that oil is currently used to generate less than one-fifth of the U.S. electricity supply. Coal accounts for nearly two-fifths of electricity production and renewable sources account for a little over one-tenth.
Renewable energy, from the sun, wind and biomass projects, is expected to power more than a quarter of all electricity production by 2040, EIA estimates, while coal usage will decline sharply. Oil's role in producing electric power also will be slightly lower than current levels.
The U.S. renewable-energy sector has shown strong growth since 1990, although China is by far the world leader, with renewable-energy capacity of 450 gigawatts. The U.S. can produce 200 gigawatts of electricity from renewables, about twice as much as Brazil, Germany or Canada.
Further growth in U.S. renewables is expected from congressional approval of a five-year extension of tax reductions for investments in renewable-energy projects. Without such tax breaks, experts say, the biggest U.S. solar projects would not be economically viable.
Most Democrats in Congress support favorable tax treatment for renewable-energy projects in the hope that industry expansion will create jobs and curb pollution. To gain approval from the Republican majority on Capitol Hill, Democrats had to agree to permit international exports by U.S. oil producers, which they have traditionally opposed.
Meantime, the U.S. Energy Information Administration predicts that U.S. crude oil production will slow next year, since low prices discourage investment in new production. That expected decline may be one reason the EIA also predicts the price of oil will increase slightly in 2016, to an average of nearly $51 a barrel for U.S. benchmark crude.
That same agency pegged the average oil price for 2015 at a bit over $49 a barrel; since current prices are under $35 a barrel, that projection looks to be too high.
EIA experts say solar energy facilities will continue growing rapidly in the United States next year, particularly large-scale projects that serve utility companies. They also predict continued growth during 2016 in the amount of electricity generated by wind power.