The Middle East, Caribbean, and Central America get the most power in their countries from oil.
For these countries, the case for shifting toward alternative sources of energy depends heavily on the price and supply of oil.
In other places in the world, there’s less of a direct relationship because power generation comes from various other sources: coal, natural gas, biofuels, etc.
In places where oil is a major power resource, it’s in direct competition with renewable sources like wind and solar. That means there’s a worry that cheap oil will put renewables out of business in these places.
Citi doesn’t think so, at least for wind and solar: “The conclusion is clear: oil prices would have to drop significantly lower — into the 20’s — before mature renewables might seriously be threatened in these regions.”
The chart below comes from Citi’s research report, “Fight for the Future of Energy: cheap oil vs. renewables.”
Citi explains this dynamic in more detail:
Taking a survey of the global power sector, oil accounts for only 5% of total power generation. At first glance oil and renewables rarely compete … But this high level statistic hides hard realities in some regions where oil is a major part of power generation. Isolating those countries and regions is worthwhile because in those places, oil and renewables may in fact be in direct competition.
Saudi [Arabia] burned 900k bbls/d of oil for power generation in 2014. In fact, with high subsidies in place, the pace of oil consumption growth in Middle East power generation is so rapid that it has led some to question whether domestic oil demand growth might seriously jeopardize oil exports in places like Saudi Arabia. In Kuwait, power generation is projected to utilise more than 20% of oil production by 2030. In such situations oil not only oil impacts renewables, but the penetration of renewables can impact long term oil supply and export availability. Latin America, too, has its share of oil saturated power sectors, with island nations particularly dependent.
Looks like there could be a bright future for renewables in these markets.