Implementing more renewable energy schemes have long been said to eventually drive down the cost of conventional resources – at least as soon as renewable energy technology became more cost competitive. Germany has proven the theory as its solar and wind power production has driven European coal prices below South Africa’s for the first time in almost a year.
Coal in northwest Europe is running $3.55 per metric ton less than supplies from South Africa’s Richards Bay, according to IHS McCloskey. This is the largest price gap since May 2010, and Barclays Plc expects the gap to continue to widen as European demand decreases. The price of coal has dropped 7.5% over the past year as Europe continues to rely more on renewable energy sources.
London Commodity Brokers Ltd. general manager Bevan Jones told Bloomberg, “Producers are asking themselves if this is a seismic shift, and I think this move probably is sustainable.”
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