Renewable occupy center stage; massive shift seen from coal to renewables
The global power sector is in the cusp of a major transformation, with a massive shift seen from coal to renewable forms of energy even as the demand for fossil fuels is expected to decline in the next 10 years, according to Bloomberg New Energy Finance (BNEF). Countries have woken up to the harsh realities of global warming with the Paris conference in December 2015 seeing 196 nations agree to limit global warming to below 2oC and to rein in further the possibly irreversible climate changes. BNEF indicates that, despite the global move towards renewables, power sector emissions will not peak for another 11 years. Read more about the power sector dynamics for the next 25 years.
Falling costs of wind and solar power
With the abundance of cheap natural gas ravaging the coal industry, the costs of wind and solar power are falling as well. Consequently, analysts have reduced their long-term forecasts for coal and natural gas prices by one-third in 2016. Given the declining costs of wind and solar power, analysts foresee a rapid global transition towards renewable energy over the next few years. The world is on the brink of reaching peak fossil fuel levels, with 2025 being the turning point for renewables to dominate the power sector.
Renewables bag big money
The demand for electricity is still strong, and investments in fossil fuels are expected to add up to $2.1 trillion through 2040, according to the BNEF report. That being said, renewable are anticipated to garner a bigger share of the investments at $7.8 trillion, including $3.4 trillion for solar, $3.1 trillion for wind, and $911 billion for hydro power through 2040. In many regions, the lifetime cost of wind and solar is lesser than the cost of building new fossil fuel plants, and that trend is expected to continue. However, analysts have predicted that by 2027, building new wind farms and solar fields would become cheaper than running the existing coal and gas generators. Moreover, over the next 25 years, 68% of the new electricity capacity will be in the form of renewable energy.
Another major forecast is that electric cars are projected to become increasingly popular, causing havoc with fuel prices and ringing in new norms for energy efficiency in vehicles. Electric cars are expected to account for 8% of the total electricity usage by 2040, BNEF found. The scale-up of electric cars is seen to increase the demand for renewable energy and drive down the cost of batteries. As a result, batteries can increasingly be used to store solar power as well, so much so that electricity storage through batteries would come standard with rooftop solar cells by the 2030s.
Solar technology to become more efficient
With solar power gaining increasing acceptance and usage, solar technology has become more efficient and cheaper over time. BNEF predicts that for every doubling in the world’s solar panels, costs fall by 26%, which in turn would drive the energy revolution across the world. It is pertinent to note that since 2008, solar module costs have fallen by 80%.
For every doubling in the world’s wind panels, costs fall by 19%, thus making wind and solar the cheapest renewable energy forms for producing electricity by the 2030s, according to BNEF. What’s more, as technologies continue to improve, the capacity factors of renewable energy projects are increasing, making such projects more financially feasible. BNEF predicts that with natural gas and coal plants being increasingly put on back-up mode in favor of cheaper renewables, their capacity factors would take a big hit, increasing their lifetime costs.
India to emerge as the biggest polluter
China became a global environmental concern over the past few decades as the biggest and fastest-growing polluter. However, China’s economic policies and its massive shift from coal to renewables is good news for climate change experts and the global energy outlook. On the other hand, India is emerging as the biggest threat to global efforts being made to curb climate changes. India’s electricity demand is expected to increase fourfold by 2040, and the country will need to invest in a variety of energy sources to meet this new demand. Much of this new electricity demand is expected to be met by cheap coal, making India the fastest growing polluter in the world in the years to come.
Lastly, BNEF predicts that while the shift to renewables is happening fast, it is not fast enough to contain the levels of global warming. Also, analysts have forecast that global investments in clean energy will fall short by $5.3 trillion. If governments across the world do not act fast, global carbon dioxide emissions from the power sector will peak in the 2020s and remain relatively flat for the foreseeable future. This in turn may heat up the Earth’s surface by more than 2oC, leading to irreversible climate changes.