Each year, Bloomberg New Energy Finance peers far into the future to predict the trends that will shape energy markets in the years to come. Its New Energy Outlook 2018 report has just been released, and it sees demand for electricity rising as more electric vehicles come to market, but a sharp decline in coal-fired generating plants, thanks to the continued decline in prices for solar and wind energy. It also finds the market for battery storage both in front of and behind the meter has surged over the past year and will continue to grow faster than previously expected. The full report is only available to Bloomberg subscribers, but a public version is available online.
Battery Storage To Increase Dramatically
The growth of battery storage is the headline of the NEO 2018 report. “Wind and solar are set to surge to almost ’50 by 50′ – 50% of world generation by 2050 – on the back of precipitous reductions in cost, and the advent of cheaper and cheaper batteries that will enable electricity to be stored and discharged to meet shifts in demand and supply,” Bloomberg New Energy Finance claims.
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. “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,” writes Seb Henbest, head of Europe, Middle East and Africa for BNEF and lead author of this year’s report.
“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.”
$11.5 Trillion Investment In New Generating Capacity
In total, BNEF predicts $11.5 trillion will be invested globally in new power generation capacity between now and 2050. The majority of that — $8.4 trillion — will be in wind and solar with a further $1.5 trillion going to other zero-carbon technologies such as hydro and nuclear. That investment will produce a 17-fold increase in solar photovoltaic capacity worldwide, and a 6-fold increase in wind power capacity. The levelized cost of electricity from new PV plants is predicted to fall another 71% by 2050, while that from onshore wind will drop by a further 58%. 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.
Investments in gas-fired generating plants will continue, but their role in the energy mix will change in the years ahead, BNEF says. They will be used to provide back-up for renewables rather than to produce baseload electricity. Globally, electricity from gas-fired facilities will decrease from 21% of the total today to 15% by 2050. $1.3 trillion will be invested in new gas-fired capacity between now and 2050 — half of it in peaker plants rather than combined-cycle turbines.
A Cautionary Note
“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,” the report says. “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.
The report points out that if its scenario is correct, the electricity sector will fail to meet the guidelines established by the Paris climate accords. Matthias Kimmel, energy economics analyst at BNEF, has this comment. “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.”
The study projects that renewables will account for 87% of Europe’s electricity supply in 2050. The US will derive 55% of its electricity from renewables by then, while China will be at 62% and India at 75%. Distributed power from solar and battery storage will have the biggest effect on Australia, where those two components will provide over 40% of that nation’s electrical needs by mid-century.
The Impact Of Electrified Transportation
When it comes to electric cars, trucks, and buses, BNEF projects the world will need 3,461 TWh of electricity — about 9% of total demand — to power all the electric vehicles that will be on the road in coming years. About half of that usage is expected to occur during hours when energy from renewables will be most abundant. That forecast is based on the BNEF 2018 Electric Vehicle Outlook published last month, which predicts EVs will 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.
More and cheaper battery storage is the highlight of this year’s New Energy Outlook. The difference between last year and this year when it comes to storage is dramatic. Older readers may remember when the cost of digital memory went down, down, down in the 90s. Today, the cost of memory is a tiny fraction of what it was in 1995. If Bloomberg is correct, we could be witnessing a similar phenomenon with battery storage as utilities begin to experience for themselves how much money they can save by storing electricity rather than generating more of it.
