4 May 2020
We are currently in an all-consuming health crisis. You may then ask yourself: what about the climate problem? Under the influence of the current lockdown, the effect of our activities on the climate is very clear: less air pollution, cleaner waterways ...
In the near future we will gradually return to normal life, and the associated industrial activities and heightened mobility. And then, the recent evolution of the price of oil is a phenomenon that gives us food for thought. What is the effect of this moment on the development and the future of electric driving?
On 20 April, the price of a barrel of WTI oil dropped below zero with delivery in May 2020 in the United States (see: US oil prices fall below $0 ...). In other words, you got money when you bought oil. In Europe, the price of a barrel of Brent oil has never been so low in the last 5 years.
Good news for everyone's wallet, you'd think. But also: the ultimate boost for our classic mobility and the death knell for electric driving? The supporters of this idea will certainly endorse this. Only, is this really so or is it just vain hope?
Oil production is a global market serving the global economy. As a global market it is dominated by the laws of supply & demand. In addition, oil is also a means of power. For decades it has been an important factor in world politics. In recent times, the planning of production capacity did not take into account the current health crisis precisely because of disagreements between the various oil superpowers. With the current situation as a consequence.
If you produce too much oil - oil being a physical and liquid product, it has to be stored - and you cannot store or sell it, this has a direct effect on the price. Low prices are bad news for the oil producers themselves. After all, in this situation production prices (especially for the US) are higher than sales prices. The whole system suffers as a result.
In Belgium about 40% of the electricity is produced in nuclear power plants, supplemented by green electricity production from sun, wind and biomass and gas plants.
Although the production capacity still has to increase significantly, the share of green electricity production in Belgium has increased in recent years. On sunny days with wind, 40 to 45% of our electricity needs are produced from sun and wind.
Origin Belgian electricity d.d. 21 april 2020
At the same time the oil price went below zero, we witnessed an interesting situation in our electricity market. The price of electricity went below zero a few days in a row and for several hours a day, a phenomenon caused by the production of green electricity. Instead of paying roughly 30 EUR/MWh, you got 90 EUR when you bought electricity (price from spot electricity market).
Nature is responsible for the negative prices In the case of green electricity production, whereas the current world situation is the source of the negative oil prices. After all, green electricity is only dependent on the presence of sun & wind. In general public opinion there is still the idea that little green electricity can be produced. Nothing could be further from the truth !
The image we sketch here is a snapshot. The question for the end user is how sustainable these price fluctuations are and what effect they have on the wallet.
If we look at the low oil price, we can say that it is not sustainable at all. After all, it is the result of the current market situation. Oil producers are experiencing how fragile the market situation is for them. Moreover, the production of oil is always a costly business.
When we look at green energy, we see a completely different story. The production costs of solar and wind energy will evolve to zero in the longer term. After all, the fuel cost is zero! These sustainable and cheap energy sources are the basis of a new industrial revolution that is taking off. After all, our economy is using more and more electricity as an energy source. It is the driving force behind the 4th industrial revolution. The growth of renewable, cheap electricity supports this evolution and is important to its success. Moreover, local energy sources make us less dependent on fossil fuels that we need to import!
With traditional mobility, i.e. the internal combustion engine, you have to take into account, in addition to the unsustainable aspect of oil production, the low efficiency of the internal combustion engine. You need a lot of energy (fossil fuel) to move around.
The cost of electricity has a relatively small share in the total cost of electric driving. And yet the origin of the electricity and its cost price often play a major role in the transition to electric driving. All cards must be right.
Electric driving makes optimal use of the available energy. We are convinced that the advance of the electric car will only reinforce the trend towards green electricity production. What's more, by means of intelligent charging and energy storage, electric driving will allow maximum use of 'free' electricity.
Producing your own energy will also play an important role as it will be one of the conditions for energy networks to be able to guarantee supply. And that includes a reward for the self-producer. Right now, this may still be a utopian vision, but it is a necessary evolution if we want to evolve towards a large percentage of green electricity.
Electric driving is a way to have a positive impact on the climate in an individual way. Post-corona we have an influence with our mobility choice !
Follow us in the coming months!
Take care of each other and stay safe!
The VitaeMobility team
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