Westward Group Alternative: Why Cheap Oil Won’t Kill Alternative Energy

JEFFREY BALL: The price of oil is plummeting, bestowing a bonanza on drivers and upending the geopolitical order. That’s good for the U.S. Will it kill the drive toward alternative energy sources?

Almost certainly not.

In the past, interest in energy options has risen and fallen with the price of oil. When oil prices rose, so did the rush toward nuclear, solar, wind and other fossil-fuel alternatives. When oil prices fell, interest in kicking the oil habit waned too. The upshot of this roller-coaster history: In most of the world, alternative energy sources never got the chance to take root; fossil fuels remain overwhelmingly dominant.

But this time there are powerful reasons to believe things are different.

A bevy of non-fossil energy sources have experienced big technological gains over roughly the past decade, a time when oil prices were high. Those advances—from cheaper solar panels to more-efficient wind turbines to smaller nuclear reactors—mean these alternatives are more economically competitive than they were in prior oil-price plunges.

Moreover, the advances in alternative sources have come primarily in a swath of the energy world that’s largely unaffected by the price of oil. Nuclear, solar and wind power are sources of electricity—the juice that comes out of the wall. In all but a few countries, oil ceased decades ago to be burned to produce electricity, replaced mostly by coal and natural gas. Today, oil is overwhelmingly a fuel for transportation—and few alternatives to it have gained much traction.

The oil-price drop may induce policy makers to roll back subsidies for renewable energy, given that popular demand for energy diversity of any sort tends to wane absent pain at the pump. And a recent rise in sales of gas-guzzlers suggests that, with oil cheaper, motorists are burning more of it. But several fossil-fuel alternatives have zoomed ahead in recent years, and there’s little reason to think they’ll make a U-turn now.

Jeffrey Ball (@jeff_ball), formerly The Wall Street Journal’s environment editor and a longtime energy reporter at the paper, is scholar-in-residence at Stanford University’s Steyer-Taylor Center for Energy Policy and Finance, a joint initiative of Stanford’s law and business schools. He writes about energy and heads a project exploring the relationships among countries in the globalizing clean-energy industry.