While the drop in prices of fossil fuels, particularly coal and gas, does pose a challenge to the renewable power industry in the short term, according to ReNew Power’s Sumant Sinha said there won’t be a long term impact.
Oil prices fell as Covid-19 outbreak hurt demand. Brent Crude further spiralled down after the breakdown of talks between OPEC and Russia to cut output and Saudi Arabia’s price war. The commodity has tumbled by half since its February peak, and has also driven down prices of coal and gas.
Prices of gas and coal have a much bigger impact on their competitiveness with renewable energy that petrol, Sinha, chairman and managing director of the renewable energy company, told BloombergQuint. “Market dislocation is affecting prices of fossil fuels but they will recover at some point. Whether the prices go back to the earlier levels, it remains is to be seen.”
Cheaper prices do make fossil fuels more competitive and increase demand but Sinha expects the long-term trend of renewable energy replacing them to continue. As a purchaser, one cannot compare price of coal-based power to renewable power, he said. “In renewable, the price is somewhat fixed for the next 25 years, but for coal price might shrink today but can go back up in the future.”
There might be a compression in power demand because of the slowdown, Sinha said, but renewable constitutes merely 10 percent to the total power mix and it’s share is unlikely to change. “I don’t anticipate any fundamental changes in how and what proportion of different sources of power are being purchased,” he said. “But if the disruption lasts for another six months, there might be some changes.