dhcp=dynamic host configuration protocol. it's responsible for distributing ips, dns servers, gateways - and can be reponsible for 25 other things to distribute.
You can't 'renew' an ip address that is not distributed via dhcp. 169.254.x.y address is distributed via automatic private ip addressing, and is not renewable.
Your both computers need to have ip address of 169.254.x.y and subnet mask of 255.255.0.0 for the connection to work.
-M