International. Renewables should receive nearly three-quarters of the $10.2 trillion the world will invest in new forms of generation technology through 2040. This is what the 2017 edition of the New Energy Outlook (NEO) report, produced annually by Bloomberg New Energy Finance (BNEF), foresees.
Despite the high figures, the study estimates that much more would have to be invested in green technologies to reduce greenhouse gas emissions in the atmosphere and avoid dangerous climate changes on the planet. An additional $5.3 trillion investment in emissions reduction actions would be needed to keep the planet on a safe trajectory.
However, many trends promise to shake up the global energy board in the coming years, according to the BNEF study:
1. Solar and wind dominate the future of electricity
72% of the US$10.2 trillion spent on new power generation globally through 2040 will be invested in new photovoltaic and solar plants.
2. The challenge of solar energy to coal expands
Solar is already at least as cheap as coal in Germany, Australia, the United States, Spain and Italy. The levelized cost of electricity from solar will be set to drop another 66% by 2040. By 2021, it will be cheaper than coal in China, India, Mexico, the UK and Brazil as well.
3. Onshore wind costs fall fast
Levelized costs of onshore wind will drop by 47% by 2040, thanks to cheaper, more efficient turbines and advanced OPEX regimes. In the same period, offshore wind costs will drop by a whopping 71%, helped by experience, competition and economies of scale.
4. China and India lead energy investments
They account for 28% and 11% of all investment in power generation through 2040, respectively. Just under a third of Asia-Pacific's energy investment will go to wind, a third to solar, 18% to nuclear and 10% to coal and gas.
5. Batteries and flexibility strengthen the reach of renewables
Industrial-scale batteries are increasingly competing with natural gas to provide flexibility to the system at times of high demand. Combined with small-scale batteries, this will help renewables reach 74% penetration in Germany, 38% in the United States, 55% in China and 49% in India by 2040.
6. Electric vehicles reinforce the use of electricity
In Europe and the United States, electric vehicles will account for 13% and 12% of electricity demand by 2040. Charging them flexibly, when renewables are being generated and wholesale prices are low, will help the system adapt to intermittent solar and wind power.
7. Solar Homeowners' Love Grows
By 2040, rooftop PV will account for up to 24% of electricity in Australia, 20% in Brazil, 15% in Germany, 12% in Japan and 5% in the United States and India. This, combined with the growth of large-scale renewables, reduces the need for existing large-scale coal and gas plants.
8. The point of no return of coal
Slow demand, cheap renewables and coal-gas switching will change coal use by 87% in Europe and 45% in the United States by 2040, while coal generation continues to grow in China but peaks in 2026. A mere 18% of the planned new coal plants will be built. That means 369GW of projects will be cancelled.
9. Gas is a transitional fuel, but not the way most people think
Gasoline power forecasts $804 billion in new investments and 16% more capacity by 2040. But, except for the Americas, where gas is plentiful and cheap, gas plants will function primarily as one of the flexible technologies needed to help reach peaks and provide stability systems.
10. Global energy sector emissions peak in 2026
CO2 emissions from power generation rise by a tenth before peaking in 2026, and then fall faster than previously estimated, aligning with China's coal generation. However, an additional $5.3 trillion investment in 3.9TW of zero-carbon capacity would be required to keep the planet on a 2 degrees Celsius trajectory.
Source: Bloomberg New Energy Finance.
