Guardian Unlimited: Now it's a new game and clean energy is no longer a dream

Now it's a new game and clean energy is no longer a dream

While motorists may be alarmed at the inexorable rise in the price of oil, which is setting new records almost daily, environmentalists and alert investors see a silver lining in the cloud.

Not only should high prices for oil (and coal and gas, which have also jumped) prompt a reduction in usage, but they will encourage the use of renewable energy, the price of which is now falling relative to fossil fuels.

A decade ago greens were always told that a switch to sustainable energies was a pipe dream with oil trading at just $10-$15 a barrel. But yesterday crude set yet another all-time high of $97.07 a barrel. Few are betting against the price soon going through $100.

"The game has changed now," said Steve Mahon, chief investment officer at green fund Low Carbon Accelerator. "We have moved away from the world of cheap energy that existed 10 years ago. There is an incredible transformation going on and it will drive us towards cleaner energy as fossil fuels are finite and will be exhausted at some point."

Calculations of the relative costs of different energies are difficult because they depend on whether the energy is used for transport, heating or electricity. The comparison between any renewable energy and fossil fuel is also difficult because the fuel - for example, sun or wind - is free and inexhaustible, so the costs involve the building and running of, say, a wind farm.

Dr David Toke, of Birmingham University, has calculated that onshore wind power is viable at the equivalent oil price of $50-60 a barrel and $70-80 a barrel for offshore wind farms, assuming a guaranteed income flow for 15-20 years, but not counting any government subsidies.

Researchers at the German Aerospace Centre have run calculations for desert-based concentrated solar power, which use mirrors to concentrate the sun's power on to a fluid and drive turbines. This technology exists in California and Spain and is growing rapidly. The cost is around $50 a barrel of oil equivalent for generating heat, falling to $20 when the technology is scaled up. For electricity production, the figure could be double that, close to the current oil price. But again, that is expected to fall rapidly with scale and will be made even more attractive when fossil fuels have to pay the cost of carbon they emit, either through carbon taxes or a carbon trading scheme.

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