Investment In Renewable Energy Set To Triple By 2030, Costs Plunging

April 23rd, 2013 by Guest Contributor

This article originally appeared on RenewEconomy.
By Sophie Vorrath

Global annual investment in renewable energy is set to grow by anywhere from two-and-a-half times to more than four-and-a-half times between now and 2030, leading to a future energy mix that would see renewables accounting for between 69–74 per cent of new power capacity added by 2030 worldwide, according to a new report from Bloomberg New Energy Finance.

The research, published today, suggests that the most likely scenario for the renewable energy market outlook – a scenario BNEF is calling the “New Normal” – will see a jump of 230 per cent, to $630 billion per year by 2030, driven by further improvements in the cost-competitiveness of wind and solar technologies, and an increase in the roll-out of non-intermittent clean energy sources like hydro, geothermal and biomass.

The result will be renewable energy projects including wind, solar, hydro and biomass accounting for 70 per cent of new power generation capacity between 2012 and 2030, the report said. By 2030, it finds, renewables will account for half of the generation capacity worldwide, up from 28 percent last year.

“It’s a strong forecast, but it’s believable,” said Guy Turner, BNEF chief economist. “That represents compound annual growth of 6.7 percent, and many industries have grown faster than that at this stage of their development.”

The upbeat findings contrast with the picture of a market weighed down by production gluts that sent the majority of solar and wind manufacturers into unprofitable territory last year, tipping some into bankruptcy and others into record losses.

But BNEF chief executive Michael Liebreich says that, in the battle between overcapacity (as well as competition from cheap shale gas) and the falling costs of renewables and associated clean technologies, “falling costs win.”

“The apocalyptic views about what it will cost to shift the world to renewable energy simply aren’t true,” Liebreich said in an interview. “Three years ago, we thought wind and solar would be cheap as chips, and they’ve even gone below that.” What this suggests, he says, “is that we are beyond the tipping point towards a cleaner energy future.”

The research used BNEF’s global energy and emissions model – which factors in such variables as economic prosperity, growing demand, technology costs, policy developments, and trends in fossil fuel markets – to generate three possible future outcomes for the clean energy market: New Normal, Barrier Busting and Traditional Territory, as outlined in the chart below.

Of the three scenarios, BNEF analysts found that “New Normal” was the most likely; with an investment requirement for new clean energy assets in the year 2030 at $630 billion, more than three times the investment in the renewable energy capacity that was built in 2012.

This 2030 investment figure is 35 per cent higher than that produced in BNEF’s last global forecast a year ago, and the projection for total installed renewable energy capacity by that date is 25 per cent higher than in that previous forecast, at 3,500GW.

In the power sector, BNEF forecasts project that 70 per cent of new power generation capacity added between 2012 and 2030 will be from renewable technologies (including large hydro). Only 25 per cent will be in the form of coal, gas or oil, the remaining being nuclear.

Turner says the main driver for future growth of the renewable sector to 2030 is a shift from policy support to falling costs and natural demand. “Our work also highlights, however, the importance of planning for the integration of intermittent renewables into the grid and into power markets. This will require significant new investment in grid infrastructure, load management and storage technologies.”

The report predicts that wind and solar energy will contribute the largest shares of newly added power capacity, in terms of GW by 2030, accounting for 30 per cent and 24 per cent respectively. In terms of power produced, the share of renewables will increase from 22 per cent in 2012 to 37 per cent in 2030.

As for the other two scenarios painted in the BNEF research, according to the even more optimistic Barrier Busting assumptions, capital requirements for renewable energy could reach $880 billion by 2030 ($9.3 trillion cumulative from 2013); which would require an additional $2 trillion (22% increase) invested in supporting infrastructure, like long distance transmission systems, smart grids, storage and demand response. The Traditional Territory scenario, meanwhile, paints a more pessimistic view, with renewable energy investment requirements projected to be $470 billion by 2030 ($6.1 trillion cumulative).

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Tags: Bloomberg New Energy Finance summit, renewable energy costs, Solar Costs, wind costs

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James Wimberley

The report seems to focus on utility solar, which competes with other forms of centralised generation. Rooftop domestic and commercial solar is assessed by potential investors – households and small businesses – against the retail, not the wholesale rate. So it’s already competitive across large areas of the world, unless utilities manage to block it by unfair regulatory obstacles as in Spain. The normal outcome will be continued and very rapid growth in small-scale solar – enough to create by itself the squeeze pointed out by James H-M. This will differentially erode the viability of coal generators much more than gas, which has low capital costs and ready despatchability.

There’s a political economy implication too. Renewables are getting more politically and culturally influential by the day. Warren Buffett, Citigroup, Deutsche Bank, the World Bank.. The wind PTC survived in the US Congress last December; the German solar FITS have just survived an attempt by Minister Altmeier to roll them back.
- http://zacharyshahan.com/ Zachary Shahan
  
  Good points. What exactly is the situation in Spain? Don’t recall reading about that (but i just lost half a night of sleep, so maybe i’m just having a brain fart).
  - James Wimberley
    
    Briefly, a train wreck wrapped in red tape: utility PV subsidies killed suddenly thanks to the crisis, net metering bottled up in the Ministry by utility lobbying. With so much sun, a few unsubsidised projects are getting started for self-consumption, eg on IKEA’s stores. A good Spanish site to follow is Suelosolar.
    - http://zacharyshahan.com/ Zachary Shahan
      
      Thanks.
    - http://zacharyshahan.com/ Zachary Shahan
      
      Happen to know of a good one in English?
http://www.facebook.com/jhildenminton James Hilden-Minton

I’m not sure the levelized costs of coal and gas make sense. As wind and solar penetrate the market, they will force thermals to the margins and utilization rates will fall. As utilization rates fall, levelized thermal costs will increase. That is, the capital expenditure will be spread out over few hours of profitable power generation. Energy storage will also put a cap on the spot market. Thermals will need to make their profit on fewer hours, but they will be squeezed by stored energy. The economics could flip abruptly, but BNEF seems fixed on the levelized cost of renewables and may underestimate the disruption to thermals.
- Bob_Wallace
  
  Agree. The LCOE is the LCOE, but in reality the selling issue is more complex. Solar, for example has a somewhat higher LCOE but since it produces when demand is higher it’s not really competing against all other generation, but against peaking capacity.
  
  “Always on” generation like (already built and paid for) coal and nuclear plants have low production costs but they must sell at an overall profit. As other technologies such as wind or natural gas take away some of their hours, or force them to sell at a loss, the price that they have to earn during other hours rises. And that can force them to fail. A quarter of existing US reactors are in financial danger.
  
  Natural gas is probably the best protected. NG plants have very low overnight costs and come on line quite rapidly. That means that they don’t have the sort of interest burden that new coal or nuclear would have. Most of their expense is fuel and since they can shut down during those time blocks in which they can’t sell at a profit, they can avoid the hurt that non-dispatchable generation encounters.
  - http://zacharyshahan.com/ Zachary Shahan
    
    Great points. + solar competes with retail prices in some places/sectors.
- http://zacharyshahan.com/ Zachary Shahan
  
  Good point. I’d imagine BNEF takes this approach for simplicity’s sake, but doesn’t seem like BNEF’s approach… wonder why it is so stuck on LCOE.