THE EFFECT OF OIL PRICE ON RENEWABLE ENERGY (solar as a case study)

Depleting quality of the environment, and an alarming climatic change upsurge happening worldwide have both culminated in the advent of practices in the energy world that ensures the protection of the environment-practices that would make the environment safe and habitable for us and generations to come.

Asides from the effect of greenhouse gases as a driving force to achieving a sustainable environment, the fluctuation of the oil price is one of the reasons that countries find renewable energy to be predominantly an escape route from crude oil. Therefore, there is a shift leading to an increase in demand for renewable sources.

It is with no doubt that an increase in the price of oil in a country like Nigeria would increase the prices of commodities. This is because most of these commodities in one way or the other depends on the utilization of crude oil, especially for transport. Fossil fuel and Solar panels can be seen as substitute goods, as it is most often seen that an increase in the price of one leads to a corresponding increase in demand for the other.

The upfront investment cost of renewable power supply (e.g. solar) is known to be very high. This is a major discouragement for the implementation of these alternative energy sources in oil-producing countries like Nigeria. Alternatively, with the current hike in the price of oil, people would rather pay high to ensure energy security for their household for the next 20 years (the lifespan of a solar panel) than to stick with or rely solely on fossil fuel that is attributed with several uncertainties. Hence, there is an increase in demand for renewables owing to their relatively cheaper prices (in the terms of total project lifespan).

More so, in recent times, there has been a decline in the average cost of renewable energy to a large extent. As stated by the International Renewable Energy Agency (IRENA 2019), the globally estimated average cost of solar power between the years 2010 and 2018 has declined, and it is almost matching the cost of generating electricity from fossil fuel especially crude oil.
Therefore, adopting renewables is a major escape for the world from future expenses, which could result from another upsurge in the price of oil.