Wind and solar power are now the cheapest way to add new power in two thirds of countries around the world and they will make up almost half of the electricity system by 2050, a new report claims.
BloombergNEF’s New Energy Outlook (NEO) 2019 says that renewable energy deployment is happening so quickly that it will put the world on track to limit global temperature rises to 2C by 2030. Staying on that path to 2050 will be much more difficult, though.
The report says that as the global economy becomes increasingly electrified, not just in the power sector but across transportation, heating and cooling as well, electricity demand will rise by 62%, leading to almost a tripling of capacity by 2050 and more than $13 trillion of investment, of which wind will take $5.3 trillion and solar $4.2 trillion. In addition to the spending on new generating plants, $840 billion will go to batteries and $11.4 trillion to grid expansion.
The Outlook suggests that new wind and solar farms, often with battery storage, will be able to produce power more cheaply – without subsidies – than already-built coal and gas plants almost everywhere in the world by 2030. As a result, the role of coal in the global power mix will fall from 37% today to just 12% by 2050 while oil as a power-generating source will be virtually eliminated, as wind and solar grow from 7% of generation today to 48% by 2050. The contributions of hydro, natural gas, and nuclear remain roughly level on a percentage basis.
Matthias Kimmel, NEO 2019 lead analyst, said: “Our power system analysis reinforces a key message from previous New Energy Outlooks – that solar photovoltaic modules, wind turbines and lithium-ion batteries are set to continue on aggressive cost reduction curves, of 28%, 14% and 18% respectively for every doubling in global installed capacity. By 2030, the energy generated or stored and dispatched by these three technologies will undercut electricity generated by existing coal and gas plants almost everywhere .”
The projected growth of renewables through 2030 indicates that many nations can follow a path for the next decade and a half that is compatible with keeping the increase in world temperatures to 2 degrees or less, BNEF analysts say. And they can do this without introducing additional direct subsidies for existing technologies such as solar and wind.
“The days when direct supports such as feed-in tariffs are needed are coming to an end,” said Elena Giannakopoulou, head of energy economics at BNEF. “Still, to achieve this level of transition and decarbonization, other policy changes will be required – namely, the reforming of power markets to ensure wind, solar, and batteries are remunerated properly for their contributions to the grid. NEO is fundamentally policy-agnostic, but it does assume that markets operate rationally and fairly to allow lowest-cost providers to win.”
Europe will lead the way in decarbonizing its power system, with 92% of its electricity supplied by renewables in 2050. Major Western European economies, in particular, are already on a trajectory to a clean power system, thanks to the European Union’s Emissions Trading System of carbon pricing and strong policy support. The US, with its abundance of low-priced natural gas, and China, with its modern fleet of coal-fired plants, follow at a slower pace. But even so,
China sees its power sector emissions peaking in 2026, and then falling by more than half in the next 20 years. Asia’s electricity demand will more than double to 2050, the report says. “At $5.8 trillion, the whole Asia Pacific region will account for almost half of all new capital spent globally to meet that rising demand. China and India together are a $4.3 trillion investment opportunity.”
The outlook for global emissions and keeping temperature increases to 2C or less is mixed, according to this year’s NEO. “On the one hand, the build-out of solar, wind and batteries will put the world on a path that is compatible with these objectives at least until 2030. On the other hand, a lot more will need to be done beyond that date to keep the world on that 2-degree path,” the report says.
One reason for that, it says, is that while wind and solar can reach 80% of the electricity generation mix in a number of countries by mid-century, with the help of batteries, going any further than that will be problematic and other technologies, such as carbon capture and storage, green hydrogen-to-power, biogas-to-power and nuclear, will also have to play a role.
BNEF’s NEO director, Seb Henbest commented: “Our analysis suggests that governments need to do two separate things – one is to ensure their markets are friendly to the expansion of low-cost wind, solar and batteries; and the other is to back research and early deployment of these other technologies so that they can be harnessed at scale from the 2030s onwards.”
In a nod to the increasing importance of decarbonizing sectors other than electricity, in NEO 2019, BNEF for the first time considers the prospect of the 100% electrification of road transport and the heating of residential buildings, leading to a significant expansion of power generation’s role.
If that happened, overall electricity demand would grow by a quarter compared to a future in which road transport and residential heat only electrify as far as assumed in the main NEO scenario. Total generation capacity in 2050 would have to be three times the size of what is installed today. Overall, electrifying heat and transport would lower economy-wide emissions, saving 126GtCO2 between 2018 and 2050.