Global power generation will experience five dominant trends over the next 25 years, putting unprecedented pressure on energy companies, utilities and policy-makers, according to Bloomberg New Energy Finance’s New Energy Outlook (NEO) 2015, published yesterday.
The research identifies major shifts that will take place between now and 2040, including a continued reliance on fossil fuels in developing countries and the rise of consumers investing in residential and business PV solutions as battery storage technology advances.
NEO 2015 estimates that $12.2 trillion (ZAR148.9 trillion) will be invested in global power generation between 2015 and 2040, with only 22% of that taking place in OECD countries – against 78% in the emerging markets. Renewables will account for two thirds of that total over the next 25 years, with coal, gas and nuclear generation attracting respectively $1.6 trillion (ZAR19.5 trillion), $1.2 trillion (ZAR14.6 trillion) and $1.3 trillion (ZAR15.8 trillion).
Coal predictions over 25 years
Despite investment of $8 trillion (ZAR97.6 trillion) in renewable energy sources, there will be enough legacy fossil-fuel plants and continued investment in new coal-fired capacity in developing countries to ensure global CO2 emissions will still be 13% above 2014 levels in 2040, according to the NEO.
Michael Liebreich, chairman of the advisory board at Bloomberg New Energy Finance, commented: “It [the NEO] shows that we will see tremendous progress towards a decarbonised power system. However, it also shows that despite this, 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.”
Solar taking over the world
The small-scale solar boom will see worldwide capacity of rooftop, building-integrated and local PV soar from 104GW in 2014 to nearly 1.8TW in 2040, a 17-fold increase. This will be made possible by a 47% 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, predicts the report.
Jenny Chase, chief solar analyst at Bloomberg New Energy Finance, 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 (ZAR12.2 trillion) on small PV systems, in many cases bringing electricity for the first time to remote villages.”
The offshoot of this 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.
Renewables won’t dampen coal
BNEF’s forecast sees onshore wind reaching 1.8TW globally by 2040, up five-fold; utility-scale PV 1.9TW, up 24-fold, offshore wind 198GW, 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 858GW, up 17-fold.
Nevertheless, even in 2040, fossil fuels will still account for 44% of world generation (down from 67% in 2014).
The result is that, with global electricity generation rising by 56% between 2014 and 2040 as economies develop and populations grow, global power sector emissions will increase from 13.1Gt 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 14.8Gt in 2040, still 13% above 2014 levels.
Climate change concerns
Seb Henbest, head of Europe, Middle East and Africa for Bloomberg New Energy Finance and lead author of NEO 2015, said: “The CO2 content of the atmosphere is on course to exceed 450 parts per million by 2035 even if emissions stay constant, so the trend we show of rising emissions to 2029 makes it very unlikely that the world will be able to limit temperature increases to less than two degrees centigrade.”
“The message for international negotiators preparing for the Paris climate change conference in December is that current policy settings – even combined with the vast strides renewables are making on competitiveness – will not be enough. Further policy action on emissions will be needed”, he concluded.