Renewables to Grab $7 Trillion of Global Power Investment, Says BNEF

Renewables will account for almost three quarters of global investment in power generation between now and 2040, according to a new report from Bloomberg New Energy Finance.

In its New Energy Outlook 2017, Bloomberg estimates that $10.2 trillion will be spent on power generation technology in the next 22 years, with clean energy grabbing $7.4 trillion.

“This year’s report suggests that the greening of the world’s electricity system is unstoppable, thanks to rapidly falling costs for solar and wind power, and a growing role for batteries, including those in electric vehicles, in balancing supply and demand,” said Seb Henbest, lead author of the report.

Of the $7.4 trillion Bloomberg expects to be invested in new renewable energy plants by 2040, solar will account for $2.8 trillion, which will provide a 14-fold jump in capacity, while wind gets $3.3 trillion and sees a fourfold increase in capacity.

“As a result, wind and solar will make up 48 percent of the world’s installed capacity and 34 percent of electricity generation by 2040, compared with just 12 and 5 percent now,” said Henbest.

The report states that the levelized cost of electricity from solar PV, which is now almost a quarter of what it was in 2009, is set to drop another 66 percent 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,” said Henbest. “By 2021, it will be cheaper than coal in China, India, Mexico, the U.K. and Brazil as well.”

Meanwhile the report forecasts that offshore wind levelized costs will “slide a whopping 71 percent by 2040, helped by development experience, competition and reduced risk, and economies of scale resulting from larger projects and bigger turbines.” It predicts the cost of onshore wind will fall 47 percent in the same period, on top of the 30 percent drop of the past eight years, thanks to cheaper, more efficient turbines and streamlined operating and maintenance procedures.

In terms of countries leading the way in investment, China and India dominate, accounting for what Bloomberg calls “a $4 trillion opportunity for the energy sector.” The report states China will account for 28 percent and India 11 percent of all investment in power generation by 2040. Indeed, the Asia Pacific region 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 percent to nuclear and 10 percent to coal and gas.

The report finds that the reach of renewables will be boosted by the rise of battery technology. “We expect the lithium-ion battery market for energy storage to be worth at least $239 billion between now and 2040,” said Henbest. “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 percent of storage worldwide by 2040. We anticipate renewable energy reaching 74 percent penetration in Germany by 2040, 38 percent in the U.S., 55 percent in China and 49 percent in India.”

Electric vehicles are also predicted to play a role in bolstering electricity use and balancing the grid. In Europe and the U.S., Bloomberg estimates that EVs will account for 13 and 12 percent, 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 percent by 2030,” explained Henbest.

The sharp rise in renewables investment is of course predicted to impact on fossil fuel generation. “Coal-fired power collapses in Europe and the U.S.,” says the report. “Sluggish demand, cheap renewables and coal-to-gas fuel switching will slash coal use by 87 percent in Europe by 2040. In the US, coal use in power drops 45 percent 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 369 GW 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 percent over 2016-40.”

And Bloomberg stresses that gas will be a transition fuel, “but not in the way most people think.”

The report states that gas-fired power will see $804 billion in new investment and 16 percent 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,” said Henbest. “In the Americas, however, where gas is plentiful and cheap, it plays a more central role, especially in the near term.”

Despite a pro-coal stance taken by U.S. President Donald Trump, the report indicates that “the economic realities over the next two decades will not favor U.S. coal-fired power, which is forecast to see a 51 percent reduction in generation by 2040. In its place, gas-fired electricity will rise 22 percent and renewables 169 percent.”

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Kelvin Ross is Editor of Power Engineering International magazine and its associated publications – Middle East Energy and the Global Power Review . Previously, Kelvin was News Editor at UK online news site Energy Live News, Production Editor and Head of Design on daily international shipping newspaper Lloyd’s List, Deputy Editor for a group of weekly London newspapers and has worked as a freelance sub-editor on UK national newspapers.

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