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Cheaper Coal & Gas Will Not “Derail” Renewable Energy Transformation, Says BNEF

Ever-decreasing coal and gas prices will not halt the overall global transition to renewable energy, according to Bloomberg New Energy Finance’s annual long-term forecast.

Bloomberg New Energy Finance’s (BNEF) Long-term projections of the global energy sector, or NEO 2016, was released this week, providing a forecast for the future of the energy industry between 2016 to 2040. Based off of a combination of individual country project pipelines, current policies, and modeled paths for future electricity demand, power system dynamics, and technology costs, the NEO 2016 report provides a singular look at what the world’s energy system will look like over the coming decades. Specifically, BNEF predicts that even though low prices for coal and gas are likely to persist through the forecast period, the global transition to a low-carbon energy system based on renewables such as wind and solar will not be halted.

“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,” said Jon Moore, chief executive of Bloomberg New Energy Finance.

Elena Giannakopoulou, senior energy economist on the NEO 2016 project, added: “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.”


“Cheaper coal and cheaper gas will not derail the transformation and decarbonization of the world’s power systems,” the authors of the report wrote. “By 2040, zero-emission energy sources will make up 60% of installed capacity.” Specifically, BNEF predicts that wind and solar will account for 64% of the 8.6 TW of new power generating capacity added globally over the next 25 years, and account for almost 60% of the estimated $11.4 trillion invested into the energy sector during the same time.


A number of stimuli have affected BNEF’s latest NEO predictions. “Weaker coal and gas prices have reduced the cost of electricity from new fossil fuel power stations,” the authors of the report concluded, with BNEF reducing its long-term forecasts for the coal and gas industry prices by 33% and 30% respectively. Fossil fuel will still attract a significant amount of investment over the next few decades — approximately $2.1 trillion according to BNEF — with $1.2 trillion expected to go to new coal-burning capacity, and $892 billion into new gas-fired plants, with both focused primarily in emerging economies where new fossil fuel generating capacity is still in the cards.

Nevertheless, despite continued global interest in fossil fuels and declining prices, wind and solar costs will also fall “sharply,” according to BNEF, with the levelized costs of generation per MWh for onshore wind falling by 41% by 2040, and for solar PV by 60%. By that time, it will make these two technologies the cheapest means of producing electricity in many countries through the 2020s, and in most of the world by the 2030s. This should be of no surprise, considering that wind and solar are already cost competitive with gas and coal in some countries, but the technologies’ continuing cost decline will only spread this benefit to more countries over the next two and a half decades.

Specifically, however, it will be solar that will come out as the lowest-cost generation technology in most countries by 2030, accounting for 3.7 TW, or 43% of all new generating capacity added between 2016 to 2040, and accounting for $3 trillion in new investment.

Unsurprisingly, the bulk of all new electricity generating capacity will be seen in non-OECD countries, with China and India leading the way. A lack of carbon policies will allow coal to remain an important factor, but renewable energy will nevertheless make up 61% of all deployment across non-OECD countries. China is set to add a mind-blowing 190 GW of coal plants over the next 5 years, however, a moratorium on new coal plants in China post-2020 will scale back its involvement and leave India, South East Asia, and the Middle East as the leading contributors of new capacity.

The report covers a great deal more ground, with further information available from its micro-site.


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