21 July 2017 2017 09:15 AM GMT

New BNEF Report Highlights A Massive Shift to Wind And Solar, While Coal Fades

A new independent report from Bloomberg New Energy Finance (BNEF) states that clean energy such as wind and solar will account for almost 75% of investment in power generation worldwide, between now and 2014.  In New Energy Outlook 2017, its latest long-term forecast, BNEF estimates that overall $10.2 trillion will be spent on power generation technology in the next 22 years, with $7.4 trillion being spent on renewables. New Energy Outlook 2017 also shows earlier progress than its equivalent a year ago towards decarbonisation of the world’s power system – with global emissions projected to peak in 2026 and to be 4% lower in 2040 than they were in 2016.

The following are some key findings from this year’s forecast:

Solar and wind dominate the future of electricity. We expect $7.4 trillion to be invested in new renewable energy plants by 2040 – which is 72% of the $10.2 trillion that is projected to be spent on new power generation worldwide. Solar takes $2.8 trillion and sees a 14-fold jump in capacity. Wind draws $3.3 trillion and sees a fourfold increase in capacity. As a result, wind and solar will make up 48% of the world’s installed capacity and 34% of electricity generation by 2040, compared with just 12% and 5% now.

Solar energy’s challenge to coal gets broader. The levelized cost of electricity from solar PV, which is now almost a quarter of what it was just in 2009, is set to drop another 66% by 2040. By then a dollar will buy 2.3 times as much solar energy than it does today. Solar is already at least as cheap as coal in Germany, Australia, the U.S., Spain and Italy. By 2021, it will be cheaper than coal in China, India, Mexico, the U.K. and Brazil as well. (For definition of levelized costs, see note below.)

Onshore wind costs fall fast, and offshore falls faster. Offshore wind levelized costs will slide a whopping 71% by 2040, helped by development experience, competition and reduced risk, and economies of scale resulting from larger projects and bigger turbines. The cost of onshore wind will fall 47% in the same period, on top of the 30% drop of the past eight years, thanks to cheaper, more efficient turbines and streamlined operating and maintenance procedures.

China and India are a $4 trillion opportunity for the energy sector. China and India account for 28% and 11% of all investment in power generation by 2040. Asia Pacific sees almost as much investment in generation as the rest of the world combined. Of this, just under a third goes to wind and solar each, 18% to nuclear and 10% to coal and gas.

Batteries and new sources of flexibility bolster reach of renewables. We expect the lithium-ion battery market for energy storage to be worth at least $239 billion between now and 2040. Utility-scale batteries increasingly compete with natural gas to provide system flexibility at times of peak demand. Small-scale batteries installed by households and businesses alongside PV systems will account for 57% of storage worldwide by 2040. We anticipate renewable energy reaching 74% penetration in Germany by 2040, 38% in the U.S., 55% in China and 49% in India.

Electric vehicles bolster electricity use and help balance the grid. In Europe and the U.S., EVs account for 13% and 12% respectively of electricity generation by 2040. Charging EVs flexibly, when renewables are generating and wholesale prices are low, will help the system adapt to intermittent solar and wind. The growth of EVs pushes the cost of lithium-ion batteries down 73% by 2030.

Homeowners’ love of solar grows. By 2040, rooftop PV will account for as much as 24% of electricity in Australia, 20% in Brazil, 15% in Germany, 12% in Japan, and 5% in the U.S. and India. This, combined with the growth of utility-scale renewables, reduces the need for existing large-scale coal and gas plants, the owners of which will face continued pressure on revenue despite some demand growth from EVs.

Coal-fired power collapses in Europe and the U.S., continues to grow in China, but peaks globally by 2026. Sluggish demand, cheap renewables and coal-to-gas fuel switching will slash coal use by 87% in Europe by 2040. In the U.S., coal use in power drops 45% as old plants are not replaced and others start burning cheaper gas. Coal generation in China grows by a fifth over the next decade but reaches a peak in 2026. Globally, we expect 369GW of planned new coal plants to be cancelled, a third of which are in India, and for global demand for thermal coal in power to decline by 15% over 2016-40.

Gas is a transition fuel, but not in the way most people think. Gas-fired power sees $804 billion in new investment and 16% more capacity by 2040. Gas plants will increasingly act as one of the flexible technologies needed to help meet peaks and provide system stability in an age of rising renewable generation, rather than as a replacement for ‘baseload’ coal. In the Americas, however, where gas is plentiful and cheap, it plays a more central role, especially in the near term.

Global power sector emissions peak in just over ten years, then decline. CO2 emissions from power generation increase by a tenth before peaking in hit a high in 2026. Emissions then fall faster than we previously estimated, lining-up with China’s peak coal generation. We expect India’s emissions will be 44% lower than in our NEO 2016 analysis as it embraces solar and invests $405 billion to construct 660GW of new PV. Globally, emissions will have dropped to 4% below 2016 levels by 2040, not nearly enough to keep the global average temperature from rising more than 2 degrees Celsius. A further $5.3 trillion investment in 3.9TW of zero-carbon capacity would be consistent with keeping the planet on a 2-degrees-C trajectory.

In the U.S., the Trump administration has voiced support for the coal sector. However, NEO 2017 indicates that the economic realities over the next two decades will not favour U.S. coal-fired power, which is forecast to see a 51% reduction in generation by 2040. In its place, gas-fired electricity will rise 22%, and renewables 169%.

One of the big questions for the future of electricity systems is how large amounts of variable wind and solar generation can be accommodated, and yet keep the lights on at all times. Sceptics worry about ultra-cheap renewables depressing power prices and squeezing out base-load coal, gas and nuclear plants. Elena Giannakopoulou, the lead analyst on the NEO 2017 project, said: “This year’s forecast shows EV smart charging, small-scale battery systems in business and households, plus utility-scale storage on the grid, playing a big part in smoothing out the peaks and troughs in supply caused by variable wind and solar generation.”

Jon Moore, chief executive of BNEF, said: “NEO reflects the understanding our team has built up over more than a decade of how technology costs and system dynamics have evolved, and are evolving. This year’s NEO shows an even more dramatic low-carbon transition than we have projected in previous years, with steeper drops in wind and solar costs and faster growth for storage.”

Note: Levelized cost of electricity covers all lifetime expenses of generation from a new plant. These costs include site development, permitting, equipment and civil works, finance, operations and maintenance and feedstock (if any).

An executive summary of NEO 2017 and related materials can be downloaded from the micro-site on this link.

Figure 1: Global electricity generation mix to 2040

Source: Bloomberg New Energy Finance, New Energy Outlook 2017

Bloomberg New Energy Finance (BNEF) is an industry research firm focused on helping energy professionals generate opportunities. With a team of 200 experts spread across six continents, BNEF provides independent analysis and insight, enabling decision-makers to navigate change in an evolving energy economy. Leveraging the most sophisticated new energy data sets in the world, BNEF synthesises proprietary data into astute narratives that frame the financial, economic and policy implications of emerging energy technologies. Bloomberg New Energy Finance is powered by Bloomberg’s global network of 19,000 employees in 192 locations, reporting 5,000 news stories a day.

August 9th 2017
35% Of German Electricity Consumption Now From Renewables: Grid Challenges Ahead

The Centre for Solar Energy and Hydrogen Research in Baden-Württemberg (ZSW) and the German Association of Energy and Water Industries (BDEW) have stated in an initial assessment that electricity generated from clean energy accounted for 35% of Germany’s consumption in 1H 2017. It’s the first time that this mark has been reached. The total share of electricity generated from renewables was up 2% from last year. The growth from onshore wind was 13.6%; offshore wind saw the steepest growth at 47.5%; growth from biomass increased by 2.2%, whilst the growth from PV systems was 13.5%, compared with the 1H 2016.

August 14th 2017
Offshore Wind Drives 6.1 GW Of European Wind Installations In First Half Of 2017

6.1 GW of extra wind energy capacity was installed in Europe in the first half of 2017, according to figures released by WindEurope. The figure puts Europe on course for a bumper year for installations, although hides some worrying trends. WindEurope Chief Policy Officer, Pierre Tardieu, said: “We are on track for a good year in wind capacity installations but growth is driven by a handful of markets. At least ten EU countries have yet to install a single MW so far this year. Although this won’t translate into lower installations for another few years, the industry needs clarity on volumes for the post-2020 period to maintain the current cost reduction trend”.

August 9th 2017
IDFC Alternatives Fund Acquires Solar Projects Totaling 190MW From First Solar

India Infrastructure Fund II (IIF II), represented by its investment manager, IDFC Alternatives Limited, one of India’s largest alternatives fund managers, is to acquire seven operating solar projects owned and operated by the First Solar Group in the Indian states of Andhra Pradesh and Telangana aggregating to a capacity of 190 MW. All the projects utilise First Solar’s advanced CdTe (Cadmium Telluride) based thin film modules, one of the most environmentally friendly PV technologies, and sell the power generated to state utilities, under long term power purchase agreements. Aditya Aggarwal, Partner, IDFC Alternatives stated that “consistent with its stated strategy of aggregating operating renewable assets, IIF II is well on its way to achieving an installed base of 400-450 MW of operating renewable assets by the end of the current financial year.”

August 4th 2017
Enel Awarded 339 MW Of Solar Capacity In Spanish Renewables Tender

Enel S.p.A., acting through its Spanish subsidiary Endesa’s renewable company Enel Green Power España (EGPE), has been awarded 339 MW of solar capacity in Spain. The award followed the tender aiming at collecting 3 GW from renewable energies, launched by the Spanish Government to help the country achieve its target to cover 20% of energy consumption from renewables by 2020. The solar capacity adds to the 540 MW of wind power capacity that EGPE was already awarded last May. “This new milestone confirms our commitment to green energy in Spain, a country which continues to offer growth opportunities for our renewable projects,” said Antonio Cammisecra, Enel’s Head of Global Renewable Energies.

August 17th 2017
Siemens Gamesa Installs Asia’s Tallest Turbines, Whilst Stepping Up Integration

Siemens Gamesa has set a new record in Asia by installing this year the tallest wind turbines on the continent. The turbines are equipped with 153-metre tall towers, and with the 56-metre blades, they reach a total height of 210 metres. Presently, a major focus for the company is the integration of the entities of Siemens and Gamesa. This has the objective of realising the new company’s substantial potential, thanks to its bigger scale and global reach: a presence in more than 90 countries, an installed base of 75 GW, and an order book of €21bn.