One problem: the value of renewable energy rises and falls with fossil fuels. If oil is dirt cheap, well, solar panels aren't worth much. A few people will pay a premium for cleaner energy but most can't afford it.
Oil and renewables don't overlap perfectly competitively. Renewables are pure electricity, oil is a portable power source. Some oil is burned for power, but only when other energy sources (Coal, renewables, natural gas) are unavailable. You might have a gas generator to back up a solar panel, but you are never going to replace a solar panel with a generator.
The cost to extract shale oil is roughly $40/ barrel. Oil sands are similarly expensive to extract. If oil were to stay at a low enough price for a prolonged period, shale oil and tar sands operations would cease production entirely, limiting supply and increasing the prices.
At $40 per barrel, oil is not economical to produce electricity, but remains viable as a vehicle fuel.
It's almost entirely reversed. As more and more vehicles become electric (and less expensive to operate), demand for oil declines.
The thing about renewables is that almost all the cost is upfront. I have solar panels on my roof and they're going to keep producing energy at the same rate regardless of what the price is, because the marginal price of running them is basically zero. If places are installing them to meet carbon targets, that's also unaffected by price.
Also, oil and electricity aren't so much directly in competition with each other while the EV market remains small. Natural gas, yes, but that was already cheap.
Solar panel degradation is tiny nowadays. For monocrystalline cells the degradation rate is around 0.36% per year, which means in 10 years your panels will still be outputting about 96.5% of what they output brand new. Polycrystalline cells are around 0.64% degradation per year.
Solar generally comes with a warranty, in the range of 80% of nameplate capacity after 20-25 years. There is some degredation but at 20 years that is in line with utility replacement rates.
3.8kW of bog-standard polycrystalline cells, installed by a local company in less than a day. £5500, five years ago; I receive over £500 in feed-in-tarriffs every year. And this is at 56 degrees north.
(I never considered doing it myself - a dangerous hassle, and in any case the FIT scheme required an approved installer and a <4kW scheme. Storage or offgrid would be completely infeasible, it's too seasonal.)
In Alberta, solar panels and other renewable sources of electricity, would compete with the price of natural gas [1], since that is what a new conventional generating station would likely use.
Natural gas and oil prices [2] are not tightly coupled [3].
Because oil is the competition. If I can burn oil to generate electricity very cheaply, then I'll do that. I might be willing to pay a little more for renewables, but not a lot more. If oil prices drop, renewables will have to cut their prices too or else lose their customers. The cost of making solar panels probably don't fall that much, so renewable energy companies will lose money.
Only very strict regulations could decouple the prices of oil and renewables.
Not the OP, but I can say in Japan the spot electric market price is set by the marginal generator: LNG peaker plants.
Thus if renewables were selling into the open market the price for their electricity would indeed be determined by the fossil fuel plants. Yet the vast majority of renewables being installed world wide are doing so under more favorable deals.
Renewables are cheaper than all other forms of generation [1] (yes, rooftop solar is more expensive, but most renewables being installed in the US are utility scale). Oil does not compete with renewables.
Coal is rapidly falling out of the mix [2] [3] [4], and natural gas is complimenting renewables due to its firm dispatchability and throttling speed (evening duck curves). As soon as the price of natural gas spikes, battery storage becomes incredibly attractive financially (its already attractive enough to replace the most expensive single cycle gas peakers).
Electricity when the sun is shinning and the wind is blowing will be incredibly cheap (1-2 cents/kWh), and you’ll end up paying a premium (6-8x multiplier) if you need power when renewables aren’t generating (and your power comes from natural gas or batteries). Market forces working as intended.
Google shifts compute to when and where is the most environmentally friendly based on renewables generation [5], powered in part by Tomorrow/electricitymap.org [6] [7]. Expect to see more large electrical consumers take similar actions in the future, further increasing the rate of renewable deployment. You’ll also see electric vehicles charging when renewables are producing, using market price signaling.
(Replying to my comment because it's edit window has expired)
Fun fact: On sunny days, California alone generates more electricity (10GW/hr) from solar than Australia generates from coal across the entire country. There’s a lot of sunlight hitting the Earth each day.
Reduction in the cost of oil will also reduce the cost of expanding renewable energy. Along with social distancing that might last a year, I wouldn't be surprised if we didn't reach the level of oil consumption from 2019 ever again.
However, I also wouldn't be surprised if we went the other direction as well. The expanse of possibility is so wide that it invokes some anxiety. I have no predictive capability in this environment, which terrifies me.
