Falling energy costs prompt concerns over the appetite for renewables

Paul Boughton

Energy prices fell by a further 3% between the second and third quarters of 2014, 11% lower than for the same period the previous year, latest data from the Lorien Energy Index (LEI) has revealed. Meanwhile, wholesale gas prices have fallen by around 20% since the end of November.

Against this backdrop of falling fossil fuel prices, Lorien Engineering Solutions, which produces the Energy Index, is cautioning business against losing sight of progress made on energy efficiency campaigns and self-producing projects.

The Lorien Energy Index, which is produced by Lorien Engineering Solutions, monitors the overall cost of energy for business users. It enables companies of all sizes to make sense of their current energy consumption and look at ways they can make savings in the future, by being energy efficient and utilising low carbon and renewable technologies to boost energy security.

Lorien’s sustainability consultant Tom Jordan said: “In the UK particularly, lower energy prices are expected to have a positive effect on GDP during 2015, offering stimulus to manufacturers and consumers as prices pressures ease. Last quarter (October 2014) Brent crude fell to $85 a barrel. 2015 has seen this slide continue, with prices dropping below $50 a barrel, which hasn’t been seen since 2009. Gas prices are also expected to show reductions in coming months as the glut in the UK market continues.

“However, there is a concern that ultimately, lower energy prices will stimulate an increase in fossil fuel usage, which could diminish the headway made in driving energy efficiency and renewables take-up.  The International Energy Agency, for example, has said that policy makers can take advantage of cheaper oil to make meaningful changes in the way they price energy, potentially looking to increase taxes on carbon.”

Lorien is advising that now is the time to justify an investment in renewable energy provision, particularly with the first reporting deadline for the Energy Saving Opportunity Scheme (ESOS) on the horizon at the end of this year.

Tom Jordan concluded: “Lower energy prices shouldn’t be seen as a negative when considering the current attractiveness of renewables, which benefit from schemes such as the feed-in tariffs (FiTs) and the Renewable Heat Incentive (RHI). A protracted period of lower fossil prices may yet see these initiatives reduce the payments required from eligible generating schemes.”

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