Ural Federal University: Rising Oil Prices May Reduce Green Energy Development

The economists have found that the rising oil prices could lead to a decline in green energy development. The reason for this is that the production of components for green energy requires minerals, which are concentrated mainly in a few countries. One of the key factors influencing the amount of imports of minerals used in various green energy technologies and sectors is oil. For deploying clean energy capacity or infrastructure, oil is the source.

This relationship was revealed by an international team of scientists from Russia, Bangladesh, and Malaysia using the cross-sectional autoregressive distributed lag (CS-ARDL) method. The scientists obtained their data by analyzing the experience of nine leading mineral-importing countries: Russia, Australia, the United States, Brazil, Canada, Chile, Mexico, South Africa and Ukraine. The results of the study are published in the journal Resources Policy.

“On the one hand, oil can be seen as an alternative to clean energy based on minerals. For example, as a cheaper fuel for cars than creating electric lithium batteries for electric cars. On the other hand, oil is used for transportation, to maintain energy-intensive technologies, and to create the equipment needed for green energy. Making solar panels, for example, requires oil. The production of batteries requires the transportation of materials and equipment for mining. Therefore, in the process of providing renewable electricity, serious financial expenses are also spent on non-renewable resources,” explains Kazi Sohag, the Head of the Laboratory of International and Regional Economics at UrFU.

The level of demand for minerals also depends on the amount of solar and wind energy produced in the country. For example, photovoltaic modules and films created from various fossil metals – copper, tellurium, cadmium, etc. – are the main tools in the production of solar energy. Researchers predict that by 2022 the capacity of solar energy in electricity production will increase by 45% annually. Consequently, the demand for these and other minerals will increase due to the mass use of solar technology in the production process.

“This fact can be useful for Russia as a country that is a major exporter of oil and at the same time a major importer of minerals. The Russian Federation imports copper, essential for solar power, as well as lithium, chromium, cobalt and nickel, used in the production of batteries for electric cars. Given the potential growth in demand and rising mineral prices, the redistribution of oil revenues can now increase imported metals and accelerate the transition to clean electricity,” says Kazi Sohag.

In addition, demand for minerals depends on average prices for metals, especially copper and nickel, as well as on exchange rates. Thus, fluctuations in mineral prices and unstable exchange rates limit the volume of imports of minerals.

“At the moment, the amount of consumption and production of renewable energy in Russia is very small, despite the large amount of imported minerals. To increase the share of green energy in the country, more attention should be paid to the development of regional cohesion to use renewable energy sources, creating solar and wind farms using imported minerals. This strategy will allow Russia to achieve the Sustainable Development Goals by 2030,” adds Kazi Sohag.

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