Plummeting oil prices could adversely affect off-grid uptake

The research centers around global oil prices, which fell – according to a report in The Week – from $115 a barrel last summer to less than $47 a week ago. Figures from OPEC tell a similar if slightly different story: the organisation’s Oil Basket Price index shows an overall decrease between in the last twelve months in the price per barrel of oil from $104.71 to $45.

In light of this, THEnergy has released a statement with 14 claimed interviews with "specialists from the mining and solar industry." Thomas Hillig, founder of THEnergy, clarified that 10 of those experts came from the mining industry while four specialised in renewable energy. The statement posits the question of whether the argument that cheap renewable energy replaces diesel is still valid. The conclusion drawn is that costs from PV are still regularly 50% to 60% lower than those of diesel electricity at remote locations.

Retail price just part of diesel cost

THEnergy states, “However, the retail diesel price only accounts for a fraction of the effective diesel price at site. Three other factors enter the equation: transport, theft, and taxes. Transport and theft during transportation are the most important of these aspects. In many cases the retail diesel price makes up for less than 50% of the total fuel price.”

The report did not specify which proportion of the more-than-doubling effect was held individually by transport, theft, or taxes, although it could be surmised that these would vary given due to the location of the off-grid plants in question. Hillig confirmed that proportions changed region-by-region. He clarified, “In the different expert interviews, several combinations of transport, theft, and taxes were discovered. It depends, obviously, very much on the actual location in regards to transport. By the way, there is hardly any effect from the oil price on the cost of transport.”

He concluded, “In the majority of cases, the taxes on industry diesel were not very high; this explains why the other factors were, overall, more important. Estimations for theft were often in the range of twenty to thirty per cent in unstable economies.”

The following observations are also drawn out: decision makers still look on the past as being more positive, electricity costs have become less important for mining companies, and the idea of continually increasing diesel prices will become more difficult to defend.