Of the $11.4 trillion the world will spend on power generation over the next two and a half decades, $7.8 trillion will be on renewables, bringing about a fundamental transformation of the world’s electricity system. A new report from Bloomberg New Energy Finance (BNEF) projects that despite cheaper coal and gas, the world will move toward decarbonised energy. By 2040, the report says, zero-emission energy sources will account for 60 per cent of installed capacity worldwide.
Even with such massive investment in solar and wind energy, it will take time to overtake the conventional sources. So, it will not be until 2027 that renewables overtake gas as a source of power generation, and another ten years after that till coal is overtaken. By that year, it becomes cheaper to build new wind and solar capacity than to run existing coal and gas generators.
Coal’s projected decline is the result of several factors, including falling prices since 2011, China’s economic slowdown, cheap gas, and India’s plan to develop domestic resources, according to Bloomberg.
Meanwhile, wind and solar “keep getting cheaper,” with the cost of onshore wind projected to fall by 41 per cent by 2040. The cost of utility-scale solar, meanwhile, is forecast to drop 60 per cent, from a range of $72–$220 per MWh today to just $40 by 2040. That “precipitous” decline in the cost of solar will make it the most economical power generation technology in most countries by the year 2030. Between 2016 and 2040, 3.7TW of new solar power generating capacity will be added, representing an investment of $3 trillion.
At the same time as power generation is shifting to renewables, electric vehicles will make enormous new demands. Bloomberg projects demand to reach 8 per cent of world power consumption, representing 2.7TW of additional electricity. In that time, small battery storage will grow to be a $250 billion market, and the rise of the EV—forecast to be 35 per cent of light vehicle sales worldwide in 2040—will drive down the cost of lithium-ion batteries.
The future of natural gas in this transitioning energy world is not particularly bright. The cost of gas-fired power has already fallen due to oversupply in the LNG market, making it cheaper than renewables at present. However, Bloomberg projects that gas will account for just 16 per cent of global power generation in 2040, with only a handful of countries taking up gas as a “transition” fuel. After an increase of 10 per cent in demand in certain European countries and in North America until 2026, gas generation will begin a slow decline, the report says. Only India will remain a major gas power market in 2040.
The Asia-Pacific region will see “colossal” growth in new power generation capacity over the next twenty-five years, with electricity generation doubling in that time. Two-thirds of it will be from renewables. China and India will also continue to invest in coal-powered generation, though at a lower rate than previously forecast. Bloomberg forecasts the investment in coal to total $1.2 trillion between now and 2040.