BNEF: Cheaper Battery Storage Means Bright Future For Solar And Wind

Increasingly cheaper battery storage could help wind and solar rise to 50% of the world’s electricity generation by 2050, according to new predictions from Bloomberg New Energy Finance (BNEF).

BNEF says wind and solar power are set to surge to nearly “50 by 50” on the back of their own precipitous reductions in cost, along with the advent of cheaper and cheaper batteries that will enable electricity to be stored and discharged to meet shifts in demand and supply.

The newly published findings come from BNEF’s annual long-term analysis of the future of the global electricity system, New Energy Outlook (NEO) 2018. The 150-page report draws on detailed research by a team of more than 65 analysts around the world. It includes modeling of power systems country-by-country and of the evolving cost dynamics of different technologies.

This year’s outlook is the first to highlight the huge impact that falling battery costs will have on the electricity mix over the coming decades, says BNEF, which predicts that lithium-ion battery prices, already down by nearly 80% per megawatt-hour since 2010, will continue to tumble as electric vehicle manufacturing builds up through the 2020s.

“We see $548 billion being invested in battery capacity by 2050 – two-thirds of that at the grid level and one-third installed behind-the-meter by households and businesses,” predicts Seb Henbest, head of Europe, the Middle East and Africa for BNEF and lead author of NEO 2018. “The arrival of cheap battery storage will mean that it becomes increasingly possible to finesse the delivery of electricity from wind and solar so that these technologies can help meet demand even when the wind isn’t blowing and the sun isn’t shining. The result will be renewables eating up more and more of the existing market for coal, gas and nuclear.”

NEO 2018 sees $11.5 trillion being invested globally in new power generation capacity between 2018 and 2050. Of that, BNEF says $8.4 trillion will go to wind and solar and a further $1.5 trillion to other zero-carbon technologies, such as hydro and nuclear.

This investment will produce a 17-fold increase in solar photovoltaic capacity worldwide and a sixfold increase in wind power capacity, according to the report. The levelized cost of electricity (LCOE) from new PV plants is forecast to fall a further 71% by 2050, while that for onshore wind will drop by a further 58%. These two technologies have already seen LCOE reductions of 77% and 41%, respectively, between 2009 and 2018, the report notes.

Elena Giannakopoulou, head of energy economics at BNEF, says, “Coal emerges as the biggest loser in the long run. Beaten on cost by wind and PV for bulk electricity generation and batteries and gas for flexibility, the future electricity system will reorganize around cheap renewables; coal gets squeezed out.”

According to the report, the role of gas in the generation mix will also evolve, with gas-fired power stations increasingly built and used to provide backup for renewables rather than to produce so-called baseload, or round-the-clock, electricity. BNEF sees $1.3 trillion being invested in new capacity to 2050 – with nearly half of it in “gas peaker” plants rather than combined-cycle turbines. BNEF also predicts gas-fired generation will rise 15% between 2017 and 2050, although its share of global electricity will decline from 21% to 15%.

Fuel burn trends globally are forecast to be dire in the long run for the coal industry but moderately encouraging for the gas extraction sector, the report says. NEO 2018 sees coal burn in power stations falling 56% between 2017 and 2050, with that for gas rising 14%.

The bearish outlook for coal means that NEO 2018 offers a more upbeat projection for carbon emissions than the equivalent report a year ago. BNEF now sees global electricity sector emissions rising 2% from 2017 to a peak in 2027 and then falling 38% to 2050.

However, this could still mean electricity would fail to fulfill its part of the effort to keep global CO2 levels below 450 parts per million – the level considered by the Intergovernmental Panel on Climate Change to be consistent with limiting the rise in temperatures to less than 2 degrees Celsius, according to BNEF.

Matthias Kimmel, energy economics analyst at BNEF, adds, “Even if we decommissioned all the world’s coal plants by 2035, the power sector would still be tracking above a climate-safe trajectory, burning too much unabated gas. Getting to 2 degrees requires a zero-carbon solution to the seasonal extremes – one that doesn’t involve unabated gas.”

BNEF’s NEO is underpinned by the evolving economics of different power technologies and on projections for electricity demand fundamentals, such as population and GDP. It assumes that existing energy policy settings around the world remain in place until their scheduled expiry and that there are no additional government measures.

Among the other highlights of NEO 2018 are high penetration rates for renewables in many markets: 87% of total electricity supply in Europe by 2050, 55% for the U.S., 62% for China and 75% for India. It also highlights a shift to more decentralization in some countries such as Australia, where by mid-century, consumer PV and batteries will account for 43% of all capacity.

More information on BNEF’s NEO 2018 can be found here.

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