BONN // A boom in cheap gas in the United States is igniting American dreams of energy independence.
At the same time, it is stalling growth in nuclear plants and even forcing Opec to study its long-term strategy.
Now the bounty in shale gas - blasted from the rock using high-pressure jets of water and chemicals - is set to slow the growth of "green" energy.
The arrival of vast quantities of previously inaccessible hydrocarbons has driven down the price of natural gas in the US from its 2003 peak of US$20 per million British thermal units to today's $2.
Continued low prices pose a threat to the pace of growth for wind and solar energy, at least until 2030, according to the International Renewable Energy Agency (Irena), a United Nations agency with headquarters in Bonn, Germany, and Abu Dhabi.
"In the next two decades, I would say probably there will be less of a gas-price increase than projected five years ago," says Dolf Gielen, the director of Irena's Innovation and Technology Centre in Bonn. "And the net effect, of course, of less increase in gas prices is less rapid growth of renewables."
The boom and bust cycle for hydrocarbons and renewables mirrors another that took place several decades ago in the US.
The price of oil shot up in the 1970s with the Arab oil embargo, creating high fuel prices for consumers across the world and sparking in the US a search for energy independence through government incentives for renewables and the establishment of many solar companies. Americans were so taken with the promise of renewable energy that Jimmy Carter, the US president at the time, installed solar panels on the White House roof.
"A generation from now, this solar heater can either be a curiosity, a museum piece, an example of a road not taken, or it can be a small part of one of the greatest and most exciting adventures ever undertaken by the American people - harnessing the power of the sun to enrich our lives as we move away from our crippling dependence on foreign oil," Mr Carter said at the time. But the embargo ended, prices eased and several renewable energy companies went bankrupt in the years that followed. Ronald Reagan, who succeeded Mr Carter as the president, had the White House solar panels removed in 1986.
The question today is whether the arrival of cheaper hydrocarbons, in the form of shale gas, could also spell the end of renewable energy as a major player.
Other factors complicate the outlook. Already, the global economic crisis has pushed nations such as Spain and the Czech Republic to roll back subsidies that made the costs of green power more equal to fossil fuels and motivated homeowners to pitch solar panels on their roofs.
Meanwhile, competition between western solar-panel makers and Chinese manufacturers creating a glut of low-cost products is responsible for halving the price of solar modules in the past year. Wind is set to be the subject of the same East-West face-off.
And, in the long term, the failure of nations to come to a meaningful climate change agreement to curb greenhouse-gas emissions has sapped confidence in cap-and-trade carbon markets and investor appetite for projects from carbon burial to nuclear to solar.
A replacement for the Kyoto Protocol, which expires at the end of this year, is not set to come into force until 2020 and it is widely expected to be much weaker than its eco-friendly predecessor.
In power generation, renewables account for a little more than 20 per cent of the world capacity, and Mr Gielen forecasts that will rise to 50 per cent with new hydropower, wind and solar plants that are becoming increasingly cost competitive.
Low solar-panel prices are a double-edged sword, making power plants more affordable but driving the makers of panels out of business. The solar manufacturing industry that has undergone rounds of bankruptcies and consolidation over the past year seems to have finally bottomed out. "We've reached a situation where most of the solar cell and module manufacturers are making losses," said Mr Gielen. "To me it looks like we've reached the bottom of the cycle."
Executives also point out it is highly likely the price of shale has will rise. "It's a little bit similar to [photovoltaics], in the sense that suddenly there is this market glut now of conventional natural gas and shale gas, which has resulted in very low prices," said Mr Gielen.
"But probably you'll see in the coming years some price increases, because this cannot not be sustainable … companies are making losses."