Renewable energy sources like wind and solar are expected to see their costs plummet even further over the coming decades, while increased progress towards decarbonization of the world’s power system is likely to see global emissions peak in 2026, before falling 4% on 2016 levels by 2040.
These are among the key highlights from the latest report from Bloomberg New Energy Finance (BNEF), its New Energy Outlook 2017 report published this week. Specifically, BNEF, in its latest long-term forecast report, predicts that the wind and solar sectors are likely to account for almost three-quarters of the $10.2 trillion that is expected to be invested in new power generation through to 2040. Further, of that $10.2 trillion, BNEF expects 28% and 11% of all investment to be funneled into China and India, respectively.
Global electricity generation mix to 2040
“This year’s report suggests that the greening of the world’s electricity system is unstoppable, thanks to rapidly falling costs for solar and wind power, and a growing role for batteries, including those in electric vehicles, in balancing supply and demand,” said Seb Henbest, lead author of NEO 2017 at BNEF.
New renewable energy power plants are expected to account for $7.4 trillion, or 72% of the total investment expected for new power plants through to 2040, with solar accounting for $2.8 trillion and wind $3.3 trillion. This investment is expected to help solar see a whopping 14-fold increase in capacity, while wind will increase fourfold, and by 2040 both will account for 48% of the world’s installed electricity capacity, and 34% of electricity generation, compared with 12% and 5% now.
The increased capacity of both solar and wind is important, but maybe the most important takeaway from the BNEF report is the plummeting costs of both technologies, and the subsequent impact this will have on coal energy. The levelized cost of electricity from solar PV is already a quarter of what it was in 2009, and BNEF expects it to fall another 66% by 2040, by which point a single dollar will buy 2.3 times more solar energy than it does today. Bloomberg points out that solar energy is already as cheap as coal in countries like Germany, Australia, the United States, Spain, and Italy, but by 2021 solar is expected to be as cheap as coal in countries like China, India, Mexico, the UK, and Brazil. This is incredibly huge news, especially for countries previously considered to be long-time polluters like China, India, and Brazil, which will be able to save huge figures by installing solar over coal, and increase their contributions to global emissions reductions. China and India are already rapidly reducing their reliance on coal, but with solar cost reductions such as these, coal may quickly become irrelevant.
Similarly, costs for onshore and offshore wind are also expected to fall over the next few years. Bloomberg predicts that onshore wind energy costs will fall fast, dropping 47% by 2040, on top of the existing 30% price decrease onshore wind has seen over the past eight years. However, the bigger story is that offshore wind costs will absolutely plummet, dropping 71% by 2040, on top of existing price decreases we have already seen in places like Germany and the UK. This will help to make offshore wind energy a viable option all over the world — not just in the United States, where the industry is in its nascent early days, but in countries like China and India, where a versatile energy mix is vital.
Unsurprisingly, therefore, all of this means that coal-fired power is likely to collapse across the world, first in regions like Europe and North America, but eventually in places like China. Specifically, BNEF predicts that coal use in Europe will be slashed by 87% by 2040 thanks to sluggish demand and a wholesale transition to renewable energy technologies, as well as a natural transition to natural gas. China, which will continue to see its coal use grow through to 2026, will nevertheless begin to see a decline thereafter. All in all, globally, Bloomberg predicts a whopping 369 GW of planned new coal plants will be cancelled, a third of which are in India.
In the US, coal use will slump by 45% as old coal plants are retired and not replaced. Despite promises by the Trump Administration to revitalize the coal industry, Bloomberg predicts the “economic realities over the next two decades will not favor US coal-fired power” and the industry will see a 51% reduction in generation by 2040, giving way to natural gas and renewable energy generation, which will increase by 22% and 169% respectively.