After reaching a record high of $147 in July, the price of North Sea Brent Blend plummeted to sub-$40 a few weeks ago, causing many industry players to reassess their cost structures and planned capital investments.
While a low oil price is clearly good news for consumers and most businesses, the energy industry has been hit severely, and this includes renewables, according to Adrian Clamp, a resource industries partner at Accenture.
This is sobering news for Scotland given the role the industry – especially oil&gas – has played over recent years in creating new jobs.
“Paradoxically, it was also the sustained high oil price that helped to fund many of Scotland’s successful alternative energy business ventures,” Clamp told Energy.
He warned that companies could desert Scotland in favour of other locations to develop and, more particularly, manufacture new-generation renewables technologies.
However, he acknowledged that the impacts would be mixed, depending on the cash-flow requirements of the business and the competitiveness of the new technologies.
“Although the industry remains a critical part of Scotland’s future, unfortunately, some businesses with early-stage technologies and weak cash flow may struggle to survive,” said Clamp.
“Others with leading technologies may be acquired by more traditional energy companies, and the strong will no doubt grow stronger.
“Some renewable investments are also likely to shift to more profitable locations rather than being cut back. As a result, high-cost locations like Scotland face increasing competition for renewables investment against lower-cost countries.
“For all sectors of Scotland’s vital energy industry, the next two years will be an uncertain and turbulent time. It is a time for focus and attention on short-term cost-saving priorities without losing sight of strong medium-term growth investments.
“Our industry must get this balance right if Scotland is to achieve its ambitions for a greener future and secure a leadership position in alternative energy.”
On a brighter note, Clamp also pointed out that, despite the downturn, the low-carbon agenda is not going away.
“The drivers for low-carbon energy production continue to intensify, and government spending in the US and Europe is likely to increase.
“The key short-term challenge for many businesses, however, will be access to capital.”