The collapse of oil prices to below zero last week is bad news for the Cyprus government, which should be developing its vast renewable energy potential instead of remaining obsessed with the mirage of wealth from hydrocarbons under Cypriot waters.
The costs of pumping oil and gas from the Aphrodite field mean their selling prices would still be more than the cost of renewable energy once proper efforts are made to develop wind and solar power in Cyprus.
An unfortunate deal by the government to pay chosen renewable energy suppliers a huge 16.6 cents per kilowatt hour may have scared off many people in Cyprus from backing further wind power.
But prices of a few centres per kilowatt hour recently achieved in capacity auctions in many countries around the world have shown the way forward that Cyprus should take.
Abu Dhabi has just received a world record low bid of 1.35 US cents per kwh for a proposed new solar array. If Abu Dhabi can obtain solar power so cheaply, perhaps Cyprus could achieve similar prices? See https://www.greentechmedia.com/amp/article/worlds-largest-solar-project-will-also-be-worlds-cheapest?__twitter_impression=true
The Electricity Authority of Cyprus should invite fresh tenders for a stated amount of wind and/or solar capacity and I am certain bids would be very affordable, given Cyprus’s baking sunshine and frequent strong winds.
If the bids received were more than EAC is prepared to pay, then the authority could simply refrain from accelting any of them.
On the other hand, if the best tenders were proposing a price of a few pence per kwh, as I belive they would be, then the EAC could snap them up and finally start to end Cyprus’s appalling dependence on oil-fired power stations and start to remove the ghastly climate-altering fumes they emit.
Oil prices turned negative for the first time on record after oil producers ran out of space to store the oversupply of crude left by the coronavirus crisis, triggering an historic market collapse which left oil traders reeling.
The price of US crude oil crashed from $18 a barrel to -$38 in a matter of hours, as rising stockpiles of crude threatened to overwhelm storage facilities.
Prices have bounced back to positive but remain very low, with gas prices correspondingly weak. If current price ranges continue, as many predict, the potential cost of producing gas from the Aphrodite field or any other deep water field will remain well above the potential selling price.
Meanwhile, wind and sunshine will forever remain free to whoever can capture it. Once construction costs are paid, the ‘fuel’ of wind farms and solar arrays is free for all time and their owners can generate electricity very cheaply.
So come on EAC and Cyprus government, let’s seek out tenders for a decent amount of onshore wind and solar power and don’t just invite tenders from your cronies. Open the tenders up to global renewable energy developers like Orsted and Vattenfall.
They will be at least as eager to gain access to Cyprus’s glorious sunshine and strong winds as oil and gas producers were when they thought the Aphrodite field would be profitable.
The market crash underlined the impact of the coronavirus outbreak on oil demand as the global economy slumps.
Prospects of the Aphrodite field ever being developed are almost zero because once the Covid-19 crisis is over, the acceleration of climate changes means there will still be huge pressure for the world to reduce its use of hydrocarbons.
Oil producers have continued to pump near-record levels of crude into the global market even as analysts warned that the impact of the coronavirus outbreak would drive oil demand to its lowest levels since 1995. The emergence of negative oil prices is expected to prompt some oil companies to hasten the shutdown of their rigs and oil wells to avoid plunging deeper into debt or bankruptcy.
Brett Fleishman, from climate campaign group at 350.org, told The Guardian: “The collapse of oil prices is “another powerful example of how fossil fuels are too volatile to be the basis of a resilient economy”.
“We are experiencing an unparalleled upending in our economies. And it is time for the fossil fuel industry to recognize that, from now on, the cheapest and best place to store oil is in the ground,” he said.
“While this recession shows us that we desperately need sustainable, resilient, and stable economic systems, based on renewable, accessible and just energy sources, the fossil fuel industry is not only trying to profit off of the current chaos, but continues to drive us further into climate breakdown,” Fleishman added.