Gas hits $2.67 a gallon and America celebrates by buying gas-thirsty SUVs and trucks



Consider the curse of cheap oil.

When energy prices are high, consumers want fuel-efficient autos, and interest in alternative energy from all sources runs hot.

When energy prices fall, it’s not so easy being green.

Nationwide, gas prices averaged $2.67 a gallon as of Monday, according to AAA – the lowest they’ve been in four years. There’s been a nearly 60-cent drop per gallon in gasoline from this time a year ago. That’s spurred some new-car shoppers to buy gas-guzzling vehicles again.

According to November auto sales data, four of the top five sellers were pickup trucks or SUVs, including the Ford F-150 and the Chevy Silverado. Demand for these vehicles rose significantly – 9.6% versus a 1.3% increase in car sales.

It’s the paradox of cheap gas: people always want to use more of it – and that may not be great for the economy or the environment.

That means consumers also buy fewer hybrid or electric vehicles, and stop urging utilities to use more wind and solar technology.

“That is a trend we’ve seen in the US, those purchases follow fuel prices. [Sales of] hybrids go up when gas prices go up. It’s surprising people make those decisions, because you’ll have a car for 15 years, generally,” said Ellen Anderson, director of University of Minnesota’s Energy Transition Lab.

Now with the swift fall in crude oil prices – down about 30% this year – will people consider their interest in green energy just another fad, along with pet rocks and crop tops?

There’s some encouraging news for the environmentally minded: Cheap gasoline may influence people’s driving habits, but when it comes to other uses of alternative energy, namely in power generation, cheap fossil fuels won’t shut out the gains made in wind and solar.

The vast majority of crude oil used in the US is for transportation. Power generation – electricity and home heating – comes mostly from coal, natural gas and nuclear power.

“While there might not be direct correlation between oil prices and renewables, there is in people’s perception of renewables”, said Dan Bedell executive vice president, strategic and corporate development at Principal Solar, a solar utility.

The US Energy Department said as of 2013, about 13% of electricity generation was green-based. State mandates and tax incentives helped the solar and wind energy industries grow, but what really helped drive down the cost of green energy is scale and technology.

A global push – supported by the public – meant more solar panels were installed, and research into better technology improved efficiency.

Bedell said when they first installed solar panels for utilities around 2007, the all-in cost – everything that goes into creating a panel – was between $7 to $8 a watt.

Now they can install utility-scale panels for $1.50 a watt.

Cheaper costs over the past five to six years boosted US solar installations from virtually zero to almost 19 gigawatts now, if you count panels at utilities and those at homes and businesses, said Matt Mooren, with PA Consulting Group.

That’s about as much power as 19 large coal-fired power plants.

A man dressed as the superhero Captain Planet stands outside a conference room used by the Climate Change Conference in Lima, Peru on 4 December 2014. Photograph: Martin Mejia/AP
At the wholesale level in certain regions, wind prices can be cheaper than coal, and can remain cost-competitive even when removing subsidies, said Elias Moosa, portfolio manager for energy efficiency at EcoAlpha Asset Management.

Research from financial advisory firm Lazard backs up green energy’s competitiveness versus fossil fuels.

Comparing the cost of financing, building and operating power-generating plants, Lazard said energy costs from new utility-scale solar plants will be between $72-$86 per megawatt-hour (mwh). Wind is much cheaper: $37 to $81 mwh.

That compares to the most-efficient new natural gas plants, at $67 to $127 mwh, and new coal plants, at $66 to $171 mwh.

Rooftop solar panels are less competitive because of the higher cost, the Lazard study said, at $180 mwh for homes and $126 mwh for businesses.

There are those who dismiss alternative energy’s reliance on subsidies such as tax incentives. Anderson said all forms of energy, whether green energy or oil and natural gas from fossil fuels, receive subsidies.

Green energy is now an established part of US energy output, but how much it will grow from current levels is up for debate.

Men walk along a road with cattle near turbines at Ashegoda wind farm in Ethiopia’s northern Tigray region. As gas prices fall, wind and solar energy may temporarily go out of vogue, even though it has become much cheaper. Photograph: AFP/AFP/Getty Images
The strong push seen a few years ago for more renewable energy has lessened because the US is now using more natural-gas fired power plants rather than coal because of all the gas produced from fracking, said Rashed Haq, vice president of energy and commerce at Sapient Global Markets.

Natural gas burns clean and has much less carbon emissions compared with coal, meaning there is now a less-pressing need to reduce emissions via renewables, Haq said. Bedell also said for now the US’s electricity future will be a combination of natural gas and green energy.

There are a few events on the horizon that could work in green energy’s favor. One is improvement in battery technology that will allow utilities to store energy – alternative or fossil fuel-based – for peak demand times. Battery technology will also put to rest criticisms of green energy’s intermittency, which is that you can only generate it on sunny days or when it’s windy.

That’s why there’s so much interest in Tesla’s plan to build battery infrastructure, Bedell said. It would not only be a boon to electric cars, but also to utility providers.

Second, there are big plans to start exporting natural gas, too. If that occurs, it will be a “massive draw on the power supply,” Haq said. That will raise natural gas prices and make more renewables attractive, he said.

Finally, Haq said, if the planned Tres Amigas SuperStation in New Mexico can connect the three separate power grids in the US, it would help with renewable adoption.

“There are so many wind farms in Texas, when the wind blows, especially at night, we go into negative pricing because nobody wants the generation. At that same time, LA is still pricing high. If you can connect those grids and draw that [power] into LA, [the price] will be zero in Texas and lower in LA,” Haq said.

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