The Rise of Renewable Energy Is the Most Significant Challenge for the Oil Industry


The current research paper is devoted to the study of development of renewable energy sources and problems that arise in the traditional oil industry. In recent years, there have been some noticeable changes in the world energy markets. There are the signs of the onset of a new cycle in the evolution of energy and the structure of the world energy area that has been considerably transformed. These shifts can be a serious challenge for the traditional oil sphere. The oil industry can experience great losses because of the appearance of the new competition on the arena. Several oil companies have already understood the importance to develop alternative energy sources. However, their attempts to enter a new area have failed. Today, more and more countries worldwide try to develop the sector of renewable energy. Therefore, in several decades, it can completely remove the oil industry from its position.

Keywords: development, oil industry, fossil fuels, renewable energy, competition

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The Rise of Renewable Energy Is the Most Significant Challenge for the Oil Industry


In the modern world economy, energy is considered a system-forming industry that develops extremely fast. The rapid evolution of scientific and technological progress, as well as the growth of the world population has resulted in an exponential increase in the demand for energy. These days, the major raw material, which is applied to produce energy, is being extracted from the bowels of the earth, i.e. hydrocarbon fuels, such as gas, coal, and oil. The boost  in the need for energy necessitates the enlargement in hydrocarbon extraction. However, in the end of the XX century, significant premises for changes in the world energy have appeared. The weightiest assertion consists in the evidence of the accelerating climate shift on the earth. Today, there is a scientific consensus in the scientific community that such change poses a great threat to the planet. Besides, a direct connection between it and increasing emissions of greenhouse gases has been proved. What is more, burning of fossil fuels results in the accumulation of these diffusions in the atmosphere contributing to the increase in the temperature on the earth. Apparently, the continuation of the current energy policy based on the burning of gas, oil, and coal will have a more threatening effect on the climate of the planet. In such a way, alternative energy sources are an only solution to save the planet. Despite this fact, the oil sector prevents developing alternative energy sources because of strong competition in the market, possible losses, and an inability to further develop.

Development of Renewable Energy

Obviously, renewable energy is regarded one of the most promising directions for today. Annually, it attracts about $ 250 billion of capital investments around the world (Cameron & Stanley, 2017). Moreover, its potential is far from exhausted. Therefore, a great number of states set ambitious goals for the future. For instance, Germany is planning to ensure approximately 80% of needful energy from renewable sources by 2050 (Cameron & Stanley, 2017). The United Nations believe that by the middle of the XXI century, it will be possible to provide more than half of the needs of people for energy from renewable sources (De Santi, Waldau, Taylor, & Ossenbrink, 2013). Despite this fact, there is much difference in the development of such energy in various countries. It depends on economic and political realities. For instance, not all states are as active as Germany within the European Union (Cameron & Stanley, 2017). There is a large number of countries that greatly rely on old energy sources. They do not strive for the development of renewable points, as a rule. Natural characteristics of states play a significant role (Cameron & Stanley, 2017). However, they are not the most crucial ones. For example, Germany, which is not the sunniest country in the world, is among the world leaders in solar energy. Nonetheless, the Russian Federation, which has an extremely rich potential of renewable point, does not use it in practice. The oil industry plays a decisive part in developing some alternative energy sources.

Loss of Market Position

Today, there is no researcher having some doubts that the cost of electricity production and capital costs in renewable energy, especially in the solar segment, will decrease further, and the cost and complexity of fossil fuel production increase, on the contrary. In such a way, electricity produced by renewable energy ways will become constantly cheaper than hydrocarbon generation products in the nearest future (Mormann, 2012). It means that fossil fuels such as gas, oil, and coal will lose the market as the points of electricity (Mormann, 2012). It is considered the major cause why the development of renewable energy sources is unprofitable for the oil industry.

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However, if renewable energy points continue to grow, it means that new power stations operating on hydrocarbons will not be built. Therefore, the outgoing capacity will be replaced by alternative energy. Moreover, it is already happening as in 2013. It means that 70% of the newly introduced generating capacities in the countries of the European Union pertained to renewable energy. Only a decade ago, they accounted for not more than 20% of the capacity growth (Cameron & Stanley, 2017). One year later, the share of renewable energy in the new energy capacity of the European Union included about 80%. Moreover, if to take into consideration the volume of decommissioned hydrocarbon power plants, renewable energy provided 100% of the net increase (Cameron & Stanley, 2017). The same year, its segment in the United States accounted for more than half of the new capacity in the electricity sector (Cameron & Stanley, 2017). There are several reasons for such decisive energy transition. Firstly, the price instability of commodity markets drives to find new opportunities of alternative energy supply. Dependence on states that provide energy pushes the countries, which do not have significant fossil resources, to policies of import substitution and efforts to shorten this dependence (Cameron & Stanley, 2017). At last, global warming caused by the destructive human activities calls for new accesses to energy supply. They can allow decreasing emissions of greenhouse gases and removing or reducing an anthropogenic factor of climate changes.

Since 1973, the volume of emissions of CO2 into the atmosphere has doubled (Jones, 2011). Moreover, the modern energy sector is responsible for more than two-thirds of the world’s emissions of greenhouse gases (Jones, 2011). It is connected with the fact that fossil fuels provide approximately 80% of global energy consumption (Jones, 2011). Preservation of the current structure of application and the production of energy will result definitely in catastrophic consequences for the planet. In 2010, the agreement was signed in Mexico (Lauber, 2012). Regarding this contract, global warming must be limited to two degrees Celsius above the pre-industrial level. Such a rise in the temperature conforms to the concentration of CO2 in the atmosphere at 450 ppm. Therefore, the level of about 280 parts was typical for the pre-industrial period (Lauber, 2012). However, if the situation remains the same one, energy consumption will double and emissions of greenhouse gases will have been even greater by 2050 (Lauber, 2012). In such a way, even a greater rise in the temperature is expected resulting in catastrophic consequences. Therefore, renewable energy sources serve as a solution to terrible results faced by humanity. However, it is necessary to provide the more rapid development of alternative energy. However, in this case, it threatens the stable market of the oil industry.


In addition, technologies of renewable energy sources, particularly wind and solar power, have achieved such a high level of evolution that they have become the competitors of traditional methods of energy production based on fossil fuels. It is another challenge for the oil sector. The development of renewable energy is highly important for the preservation of life on the planet (Haug, 2011). Alternative energy is ready to suggest people some competitive and efficient methods of energy supply becoming a great competitor to the oil area (Haug, 2011). However, trillions of dollars are at stake of the latter one. If the 450 ppm scenario is realized, the global raw materials industry will lose about $ 30 trillion of revenue in the next several decades (Lauber, 2012). Besides, the oil industry will waste more than $ 19 trillion (Lauber, 2012). Therefore, the oil sphere will meet great losses if such a competitor enters the market in full.

Many traditional energy companies are already suffering wastes with renewable energy points on the market. A great number of influential European players on the energy arena have lost approximately half of the value since 2008 (Jenner, Chan, Frankenberger, & Gabel, 2012). Certain companies have already surrendered when they tried to reorient themselves to renewable energy and realize the hydrocarbon energy assets. The most likely is that the US energy organizations will meet the losses of about $ 17 billion in revenues per year and $ 50 billion in Europe in the following decade (Jenner et al., 2012). However, if the development of the sector of renewable energy develops, end users will give the preference to distributed alternative technologies. Therefore, the cost of technology continues to fall, and the losses of energy companies can increase to $ 140 billion per year by 2025 (Jenner et al., 2012). Respectively, it is extremely risky to work out new capital-intensive projects for the growth of hydrocarbon deposits. It is mainly connected with the fact that there will be the competition of new energy sources in several years (Jenner et al., 2012). In the current form, traditional energy companies can lose half of the market. In turn, the sphere will transfer to storage systems, solar energy, energy efficiency, and other kinds of distributed generation.

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Inability to Develop

Not to lose the market share, several traditional oil companies have made an attempt to switch to the sector of alternative energy. Nonetheless, it has become one more challenge to the oil industry. In 2011, BP ended its solar business (Cameron & Stanley, 2017). In 2014, Chevron sold the successful project in the field of renewable energy (Cameron & Stanley, 2017). Nevertheless, there are also good examples. The well-known French company Total understood that the oil sector would come to an end soon and decided to develop the endless potential of the sun (Cameron & Stanley, 2017). Today, the company buys successfully the assets in the sphere of renewable energy. Total has 66% stake in the US SunPower (Cameron & Stanley, 2017). The latter one produces the most effective solar panels and cells. The company also makes some investments in power plants, which SunPower builds in various states around the world (Cameron & Stanley, 2017). Therefore, there are successful examples when traditional oil companies switch to renewable energy sources but they are very rare.

Opportunities for Renewable Energy

It is expected that in the nearest forty years, hydrocarbons will continue to be a major source of energy. However, the production of renewable energy will increase including wind and solar energy, as well as bioenergy. By 2050, renewable energy production may exceed 35% of the total energy supply (Chojna, Losoncz, & Suni, 2013). It is assumed that on the global scale, natural gas supplies will increase. Nonetheless, it is possible to achieve the boost through the involvement of non-traditional points in the economic circulation (Chojna et al., 2013). Despite the fact that coal will remain the dominant fuel source in the energy sector over the next few years, the production of natural gas-based energy will increase to 2035 (Chojna et al., 2013). It is projected that the rise in the gas usage in the energy sector will depend on the duration and intensity of growth of the shale gas production sphere and its impact on the price level. Moreover, it will be dependent on the penetration of renewable energy into the market, and the efficiency of measures conducted by governments to reduce emissions of greenhouse gases.

It is obvious that everything new contains an element of uncertainty. Considerable changes in the energy sector serve as a challenge not only to traditional energy companies and raw materials but to the reliability and stability of the state’s energy systems as well (McKillop, 2011). It should be noted that the nature of solar and wind generation is rather unstable and weather-dependent. In such a way, it poses a set of problems for people in creating the completely new network solutions and integrating whimsical renewable energy sources into electric chains (McKillop, 2011). However, it is possible to achieve success with well thought out state policies.

The corresponding political solution is needed for the development of renewable energy and much depends on governments. It is highly important to perform substantial legislative work with the purpose to provide all necessary conditions for the growth of renewable sources. These circumstances include various subsidies that can attract business to this sector, obligation to buy renewable energy, favorable tariffs, and others (Klass, 2013). However, these actions require financial costs, efforts, and time, as well as the understanding of modern tendencies in energy. All officials should understand the necessity of transition to clean energy sources (Klass, 2013). Governments of the most developed countries should know that renewable energy is called green because it is regarded the most favorable application of natural resources to generate energy.


These days, people have achieved the external limits, to which the global economy based on oil and other types of fossil fuels can grow. Therefore, it is high time when it is necessary to develop the sector of alternative energy. Due to substantial climate changes, renewable energy has a favorable effect on the planet. With its development, it is still possible to prevent catastrophic consequences of the climate change. Despite it, the oil industry prevents in achieving this prevention. It is connected with the fact that renewable energy represents the most significant challenge for the oil sector. There are several reasons for that. Firstly, renewable energy sources suppress the market traditional oil industry. Secondly, this fact has created competition depriving oil companies of treasured profits. In addition, there are some cases when oil organizations cannot enter the market of alternative energy. These factors contribute to the following fact. During these days, the oil industry experiences great difficulties and will do everything possible to prevent the development of renewable energy.

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