Renewable energy investment in China: the impact of low oil prices

Abstract

The promotion of renewable energy (RE) technology in China has been paramount in the country’s policy to reinforce energy security, reduce air pollution from coal, oil and gas, and tackle climate change. This study examines whether the RE sector in China (primarily solar and wind) might suffer an immediate or long-term backlash as the result of cuts in oil import costs. The demand for oil in China has increased at an astounding rate since the 1980s. In the face of its burgeoning economy and multiplying vehicle fleet, energy security has become a significant preoccupation for policy makers. The rapid fall in oil prices on the international market since June 2014 is likely to improve security of supply and positively impact the nation’s economy. However, the fate of another energy sector, RE technology is less predictable. The article proposes a quantitative model to compare oil demand and prices over recent years with the impact on investment in RE, taking into account that the main competitor of RE is coal rather than oil. How energy policy has evolved and adapted over this period is also discussed. It is observed that lower oil prices decrease RE investments but reduce concerns over energy security. But, the strength of the impact depends on the duration of low oil prices and its volatility. The commitment of the government to reduce global CO₂ emissions may not be overlooked.

Keywords:

• Renewable energy
• oil price
• energy policy
• investment in renewables
• China

Disclosure statement

The authors report no conflicts of interest. The authors alone are responsible for the content and writing of this article.