Low prices for coal and gas are likely to persist, but will fail to prevent a fundamental transformation of the world electricity system over coming decades toward renewable sources such as wind and solar, and toward balancing options such as batteries. The latest longterm forecast from Bloomberg New Energy Finance (BNEF), New Energy Outlook (NEO) 2016, charts a significantly lower track for global coal, gas, and oil prices than did the equivalent projection a year ago. Crucially, however, it also shows a steeper decline for wind and solar costs.
The forecast, covering the 2016-2040 period, has mixed news on carbon emissions. Weaker GDP growth in China and a rebalancing of its economy will mean emissions there peak as early as 2025. However, rising coal-fired generation in India and other Asian emerging markets indicate that the global emissions figure in 2040 will still be about 5 percent above 2015 levels.
Seb Henbest, head of Europe, Middle East, and Africa for BNEF, and lead author of NEO 2016, said, “Some $7.8 trillion will be invested globally in renewables between 2016 and 2040, two thirds of the investment in all power generating capacity, but it would require trillions more to bring world emissions onto a track compatible with the United Nations 2°C climate target.”
Following are 10 findings from NEO 2016:
- Coal and gas prices to stay low — BNEF has reduced its longterm forecasts for coal and gas prices by 33 percent and 30 percent, respectively, reflecting a projected supply glut for both commodities. This cuts the cost of generating power by burning coal or gas.
- Wind and solar costs fall sharply — The levelized costs of generation per MWh for onshore wind will fall 41 percent by 2040, and solar photovoltaics by 60 percent, making these two technologies the cheapest ways of producing electricity in many countries during the 2020s and in most of the world in the 2030s.
- Fossil fuel power attracts $2.1 trillion — Investment in coal and gas generation will continue, predominantly in emerging economies. Some $1.2 trillion will go into new coal-burning capacity, and $892 billion into new gas-fired plants.
- Renewables take lion’s share — Some $7.8 trillion will be invested in green power, with onshore and offshore wind attracting $3.1 trillion; utility-scale, rooftop, and other small-scale solar $3.4 trillion; and hydro-electric $911 billion.
- The 2°C scenario would require much more money — On top of the $7.8 trillion, the world would need to invest another $5.3 trillion in zero-carbon power by 2040 to prevent CO2 in the atmosphere rising above the Intergovernmental Panel on Climate Change’s “safe” limit of 450 parts per million.
- Electric car boom supports electricity demand — Electric vehicles (EVs) will add 2,701 terawatt-hours (TWh), or 8 percent, to global electricity demand in 2040 — reflecting BNEF’s forecast that they will represent 35 percent of worldwide new light-duty vehicle sales in that year, equivalent to 41 million cars — about 90 times the 2015 figure.
- Small-scale battery storage, a $250 billion market — The rise of EVs will drive down the cost of lithium-ion batteries, making them increasingly attractive to be deployed alongside residential and commercial solar systems. BNEF expects total behind-the-meter energy storage to rise dramatically from around 400 MWh today to nearly 760 GWh in 2040.
- China coal-fired generation will follow weaker trend than previously projected — Changes in the Chinese economy, and a move to renewables, mean that coal-fired generation there in 10 years’ time will be 1,000 TWh, or 21 percent below the figure predicted in last year’s NEO.
- India the key to the future global emissions trend — India’s electricity demand is forecast to grow 3.8 times between 2016 and 2040. Despite investing $611 billion in renewables during the next 24 years and $115 billion in nuclear, it will continue to rely heavily on coal power stations to meet rising demand. This is forecast to result in a trebling of its annual power sector emissions by 2040.
- Renewables to dominate in Europe, overtake gas in the U.S. — Wind, solar, hydro, and other renewable energy plants will generate 70 percent of Europe’s power in 2040, up from 32 percent in 2015. In the United States, their share will jump from 14 percent in 2015 to 44 percent in 2040, as that from gas slips from 33 percent to 31 percent.
Jon Moore, chief executive of BNEF, said, “The New Energy Outlook incorporates a significantly lower trajectory for coal and gas prices than the 2015 edition did a year ago but, strikingly, still shows rapid transition towards clean power over the next 25 years.”
Elena Giannakopoulou, senior energy economist on the NEO 2016 project, added, “One conclusion that may surprise is that our forecast shows no golden age for gas, except in North America. As a global generation source, gas will be overtaken by renewables in 2027. It will be 2037 before renewables overtake coal.”
The outlook for coal is crucial for international ambitions on climate. At the Paris conference last December, 196 nations agreed to limit global warming to “well below” 2°C, and to aim to reach “global peaking of emissions as soon as possible.” NEO 2016 indicates that, despite the global move towards renewables, power sector emissions will not peak for another 11 years.
NEO 2016 is based on a combination of the project pipeline in each country, current policies, plus modeled paths for future electricity demand, power system dynamics, and technology costs. It does not assume any further policy measures post-2020 to speed up decarbonization. Approximately 65 specialist analysts worked on the forecast.
Information provided by Bloomberg New Energy Finance (http://about.bnef. com).