Global power generation will experience five dominant trends over the next 25 years, putting unprecedented pressure on energy companies, utilities and policymakers, according to Bloomberg New Energy Finance.
BNEF’s annual New Energy Outlook is published today and it identifies five major shifts that will take place between now and 2040. It predicts:
· The further decline in the cost of photovoltaic technology will drive a $3.7 trillion surge in investment in solar, both large-scale and small-scale;
· Some $2.2 trillion of this will go on rooftop and other local PV systems, “handing consumers and businesses the ability to generate their own electricity, to store it using batteries and – in parts of the developing world – to access power for the first time”;
· The march of energy-efficient technologies in areas such as lighting and air conditioning will help to limit growth in global power demand to 1.8 per cent per year, down from 3 per cent per year in 1990-2012. In OECD countries, power demand will be lower in 2040 than in 2014;
· Natural gas will not be the ‘transition fuel’ to wean the world off coal. BNEF states that North American shale gas will “change the gas market, but coal-to-gas switching will be mainly a US story. Many developing nations will opt for a twin-track of coal and renewables”.
· And the report states that despite investment of $8 trillion in renewables, “there will be enough legacy fossil-fuel plants and enough investment in new coal-fired capacity in developing countries to ensure global CO2 emissions rise all the way to 2029, and will still be 13 per cent above 2014 levels in 2040.
Michael Liebreich, chairman of the advisory board at Bloomberg New Energy Finance, said that the New Energy Outlook “shows that coal will continue to play a big part in world power, with emissions continuing to rise for another decade and a half, unless further radical policy action is taken”.
Jon Moore, chief executive of Bloomberg New Energy Finance, said: "Last year's forecast from BNEF identified the big share that renewables would have in power investment – that raised eyebrows at the time, but other energy forecasters have since piped a similar tune.
“This year's report pushes our thinking further, with updated analysis on the slowing levels of demand we are already seeing, and on the proliferation of small PV systems."
The small-scale solar boom will see worldwide capacity of rooftop, building-integrated and local PV soar from 104 GW last year to nearly 1.8 TW in 2040, a 17-fold increase. BNEF says this will be made possible by a 47 per cent crash in the cost of solar projects per megawatt, as conversion efficiencies improve and the industry moves to new materials and more streamlined production methods.
Jenny Chase, BNEF’s chief solar analyst, said: "Up to now, small-scale solar investment has been dominated by wealthy countries such as Germany, the US and Japan. By 2040, developing economies will have spent $1 trillion on small PV systems, in many cases bringing electricity for the first time to remote villages."
The BNEF analysis opens up the prospect of a clear move from a utility-scale, centralised system to one that is increasingly distributed and focused on the consumer, with household and business decisions on solar PV and storage driving many of the changes in the power system.
The report finds that around $12.2 trillion will be invested in global power generation between 2015 and 2040, with only 22 per cent of that taking place in OECD countries against 78 per cent in power-hungry emerging markets.
BNEF's forecast sees onshore wind reaching 1.8 TW globally by 2040, up five-fold, utility-scale PV 1.9 TW, up 24-fold, offshore wind 198 GW, up 25-fold, and ‘flexible capacity’ – ways of balancing variable renewable sources on the grid, including batteries, demand response and fast ramp-up gas generation – reaching 858 GW, up 17-fold.
Nevertheless, BNEF stresses that even in 2040, fossil fuels will still account for 44 per cent of world generation – down from 67 per cent in 2014.
“The result is that, with global electricity generation rising by 56 per cent between 2014 and 2040 as economies develop and populations grow, global power sector emissions will increase from 13.1 gigatonnes to a peak of 15.3Gt in 2029.
“Greater burning of coal by developing countries will more than offset the substitution of coal-firing by gas and renewables in developed economies. World emissions will then fall back, but only to 14.8 Gt in 2040, still 13 per cent above 2014 levels.”