Bloomberg NEF (BNEF) has published its annual long-term analysis of the future of the global electricity system – New Energy Outlook (NEO) 2018. The 150-page report draws on detailed research by a team of more than 65 analysts around the world, including sophisticated modelling of power systems country-by-country, and of the evolving cost dynamics of different technologies.
This year’s outlook is the first to highlight the huge impact that falling battery costs will have on the electricity mix over the coming decades. BNEF predicts that lithium-ion battery prices, already down by nearly 80% per megawatt-hour since 2010, will continue to tumble as electric vehicle manufacturing builds up through the 2020s.
Seb Henbest, head of Europe, Middle East and Africa for BNEF and lead author of NEO 2018, said: “We see $548 billion being invested in battery capacity by 2050, two-thirds of that at the grid level and one third installed behind-the-meter by households and businesses.
“The arrival of cheap battery storage will mean that it becomes increasingly possible to finesse the delivery of electricity from wind and solar so that these technologies can help meet demand even when the wind isn’t blowing and the sun isn’t shining. The result will be renewables eating up more and more of the existing market for coal, gas and nuclear.”
NEO 2018 sees $11.5 trillion being invested globally in new power generation capacity between 2018 and 2050, with $8.4 trillion of that going to wind and solar and a further $1.5 trillion to other zero-carbon technologies such as hydro and nuclear.
This investment will produce a 17-fold increase in solar photovoltaic capacity worldwide and a sixfold increase in wind power capacity. The levelized cost of electricity, or LCOE, from new PV plants, is forecast to fall a further 71% by 2050, while that for onshore wind drops by a further 58%. These two technologies have already seen LCOE reductions of 77% and 41% respectively between 2009 and 2018. (LCOE covers all cost elements of a new generating project, including development and construction expenses, operations and maintenance, fuel and financing costs).
Elena Giannakopoulou, head of energy economics at BNEF, said: “Coal emerges as the biggest loser in the long run. Beaten on cost by wind and PV for bulk electricity generation, and batteries and gas for flexibility, the future electricity system will reorganize around cheap renewables – coal gets squeezed out.”
The role of gas in the generation mix will evolve, with gas-fired power stations increasingly built and used to provide back-up for renewables rather than to produce so-called base-load, or round-the-clock, electricity. BNEF sees $1.3 trillion being invested in new capacity to 2050, nearly half of it in ‘gas peaker’ plants rather than combined-cycle turbines. Gas-fired generation is seen rising 15% between 2017 and 2050, although its share of global electricity declines from 21% to 15%.
Fuel burn trends globally are forecast to be dire in the long run for the coal industry, but moderately encouraging for the gas extraction sector. NEO 2018 sees coal burn in power stations falling 56% between 2017 and 2050, while that for gas rises 14%.
The bearish outlook for coal means that NEO 2018 offers a more upbeat projection for carbon emissions than the equivalent report a year ago. BNEF now sees global electricity sector emissions rising 2% from 2017 to a peak in 2027, and then falling 38% to 2050.
However, this would still mean electricity failing to fulfil its part of the effort to keep global CO₂ levels below 450 parts per million – the level considered by the Intergovernmental Panel on Climate Change to be consistent with limiting the rise in temperatures to less than two degrees Celsius.
Matthias Kimmel, an energy economics analyst at BNEF, commented: “Even if we decommissioned all the world’s coal plants by 2035, the power sector would still be tracking above a climate-safe trajectory, burning too much unabated gas. Getting to two degrees requires a zero-carbon solution to the seasonal extremes, one that doesn’t involve unabated gas.”
BNEF’s New Energy Outlook is underpinned by the evolving economics of different power technologies and on projections for electricity demand fundamentals such as population and GDP. It assumes that existing energy policy settings around the world remain in place until their scheduled expiry and that there are no additional government measures.
Among the other highlights of NEO 2018 are high penetration rates for renewables in many markets (87% of total electricity supply in Europe by 2050, and 55% for the U.S., 62% for China and 75% for India). It also highlights a shift to more ‘decentralization’ in some countries such as Australia, whereby mid-century consumer PV and batteries account for 43% of all capacity.
NEO 2018 also analyzes the impact of the electrification of transport on electricity consumption. It estimates that electric cars and buses will be using 3,461TWh of electricity globally in 2050, equivalent to 9% of total demand. About half of the necessary charging is forecast to be done on a ‘dynamic’ basis, taking advantage of times when electricity prices are low because of high renewables output.
This analysis draws on BNEF’s latest Electric Vehicle Outlook, published on May 21, which predicted that EVs would account for 28% of global new car sales by 2030, and 55% by 2040. Electric buses are expected to dominate their market even more decisively, reaching 84% global share by 2030.
