BNEF: Renewables To Win The ‘Race On Costs’ Against Cheap Coal And Gas

Posted by Joseph Bebon on June 13, 2016 No Comments
Categories : Featured, New & Noteworthy

Low prices for coal and natural gas are likely to persist, but they will fail to prevent a fundamental transformation of the world electricity system over coming decades toward renewable sources such as wind and solar, as well as toward balancing options such as batteries, says a new report from Bloomberg New Energy Finance (BNEF).

The latest long-term forecast from BNEF, entitled New Energy Outlook 2016, covers the 2016-2040 period and charts a significantly lower track for global coal, gas and oil prices than did the equivalent projection a year ago. Crucially, however, it also shows a steeper decline for wind and solar costs.

According to the report, BNEF has reduced its long-term forecasts for coal and gas prices by 33% and 30%, respectively, reflecting a projected supply glut for both commodities. This cuts the cost of generating power by burning coal or gas.

Meanwhile, BNEF expects wind and solar costs to fall sharply. The report says the levelized costs of generation per megawatt-hour for solar photovoltaics will fall by 60% by 2040 and for onshore wind by 41% – making these two technologies the cheapest ways of producing electricity in many countries during the 2020s and in most of the world in the 2030s.

The report says $11.4 trillion will be invested in global power generation capacity over the next 25 years, with renewables taking the lion’s share. Some $7.8 trillion will be invested in green power, with onshore and offshore wind attracting $3.1 trillion, utility-scale, rooftop and other small-scale solar $3.4 trillion, and hydroelectric $911 billion.

Jon Moore, chief executive of BNEF, says, “The New Energy Outlook incorporates a significantly lower trajectory for coal and gas prices than the 2015 edition did a year ago but, strikingly, still shows rapid transition towards clean power over the next 25 years.”

Furthermore, renewables are expected to dominate in Europe and overtake natural gas in the U.S. The report says wind, solar, hydro and other renewable energy plants will generate 70% of Europe’s power in 2040, up from 32% in 2015. In the U.S., their share will jump from 14% in 2015 to 44% in 2040, as that from gas slips from 33% to 31%.

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Source: Bloomberg New Energy Finance NEO 2016

Elena Giannakopoulou, senior energy economist on the NEO 2016 project, says, “One conclusion that may surprise is that our forecast shows no golden age for gas, except in North America. As a global generation source, gas will be overtaken by renewables in 2027. It will be 2037 before renewables overtake coal.”

The report also says that the small-scale battery storage market is slated for significant growth, with total behind-the-meter energy storage expected to rise dramatically from around 400 MWh today to nearly 760 GWh in 2040.

Despite all of this good news, the report also claims that achieving the main goal of last year’s COP21 in Paris – keeping a rise in global warming below 2°C – would require much more money.

“Some $7.8 trillion will be invested globally in renewables between 2016 and 2040, two-thirds of the investment in all power generating capacity, but it would require trillions more to bring world emissions onto a track compatible with the United Nations 2°C climate target,” explains Seb Henbest, head of Europe, Middle East and Africa for BNEF and lead author of NEO 2016.

Specifically, BNEF says the world would need to invest another $5.3 trillion in zero-carbon power by 2040 to prevent CO2 in the atmosphere rising above the Intergovernmental Panel on Climate Change’s “safe” limit of 450 parts per million.

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