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 2014 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 accounts 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 per cent of the world’s installed capacity and 34 per cent of electricity generation by 2040, compared with just 12 and 5per cent now,” said Henbest.

Solar and wind boom

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 per cent 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 US, Spain and Italy,” said Henbest. “By 2021, it will be cheaper than coal in China, India, Mexico, the UK and Brazil as well.”

Meanwhile the report forecasts that offshore wind levelized costs will “slide a whopping 71 per cent 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 per cent in the same period, on top of the 30 per cent 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 per cent and India 11 per cent 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 per cent to nuclear and 10 per cent to coal and gas.

Storage and EVs

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 per cent of storage worldwide by 2040. We anticipate renewable energy reaching 74 per cent penetration in Germany by 2040, 38 per cent in the US, 55 per cent in China and 49 per cent in India.

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

The sharp rise in renewables investment is of course predicted to impact on fossil fuel genberation. “Coal-fired power collapses in Europe and the US,” says the report. “Sluggish demand, cheap renewables and coal-to-gas fuel switching will slash coal use by 87 per cent in Europe by 2040. In the US, coal use in power drops 45 per cent 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 per cent 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 per cent 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,” says 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 US President Donald Trump, the report indicates that “the economic realities over the next two decades will not favour US coal-fired power, which is forecast to see a 51 per cent reduction in generation by 2040. In its place, gas-fired electricity will rise 22 per cent and renewables 169 per cent.”

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