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Bloomberg’s Energy Outlook

June 15, 2016

By Paul Homewood

 

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http://about.bnef.com/press-releases/coal-and-gas-to-stay-cheap-but-renewables-still-win-race-on-costs/

 

Bloomberg New Energy Finance (BNEF) has just published its latest annual New Energy Outlook, the  long term forecast for global energy markets.

BNEF is set up to provide unique analysis, tools and data for decision makers driving change in the energy system. It works on a subscription basis, so will naturally tend to bias towards renewable energy.

 

This is their press release:

 

This year’s edition of BNEF’s long-term forecast sees $11.4 trillion investment in global power generation capacity over 25 years, with electric vehicles boosting electricity demand by 8% in 2040.

 

London and New York, 13 June 2016 – Low prices for coal and gas are likely to persist, but will fail to prevent a fundamental transformation of the world electricity system over coming decades towards renewable sources such as wind and solar, and towards balancing options such as batteries.

The latest long-term forecast from Bloomberg New Energy Finance, entitled New Energy Outlook 2016, charts a significantly lower track for global coal, gas and oil prices than did the equivalent projection a year ago. Crucially, however, it also shows a steeper decline for wind and solar costs.

The forecast, covering the 2016-40 period, has mixed news on carbon emissions. Weaker GDP growth in China and a rebalancing of its economy will mean emissions there peak as early as 2025. However, rising coal-fired generation in India and other Asian emerging markets indicate that the global emissions figure in 2040 will still be some 700 megatonnes, or 5%, above 2015 levels.

Seb Henbest, head of Europe, Middle East and Africa for BNEF, and lead author of NEO 2016, commented: “Some $7.8 trillion will be invested globally in renewables between 2016 and 2040, two thirds of the investment in all power generating capacity, but it would require trillions more to bring world emissions onto a track compatible with the United Nations 2°C climate target.”

Here are 10 of the eye-catching findings from NEO 2016:

  • Coal and gas prices to stay low. Bloomberg New Energy Finance has reduced its long-term forecasts for coal and gas prices by 33% and 30% respectively, reflecting a projected supply glut for both commodities. This cuts the cost of generating power by burning coal or gas.
  • Wind and solar costs fall sharply. The levelised costs of generation per MWh for onshore wind will fall 41% by 2040, and solar photovoltaics by 60%, making these two technologies the cheapest ways of producing electricity in many countries during the 2020s and in most of the world in the 2030s.
  • Fossil fuel power attracts $2.1 trillion. Investment in coal and gas generation will continue, predominantly in emerging economies. Some $1.2 trillion will go into new coal-burning capacity, and $892 billion into new gas-fired plants.
  • But renewables take lion’s share. Some $7.8 trillion will be invested in green power, with onshore and offshore wind attracting $3.1 trillion, utility-scale, rooftop and other small-scale solar $3.4 trillion, and hydro-electric $911 billion.
  • The 2⁰C scenario would require much more money. On top of the $7.8 trillion, the world would need to invest another $5.3 trillion in zero-carbon power by 2040 to prevent CO2 in the atmosphere rising above the Intergovernmental Panel on Climate Change’s ‘safe’ limit of 450 parts per million.
  • Electric car boom supports electricity demand. EVs will add 2,701TWh, or 8%, to global electricity demand in 2040 – reflecting BNEF’s forecast that they will represent 35% of worldwide new light-duty vehicle sales in that year, equivalent to 41m cars, some 90 times the 2015 figure.
  • Small-scale battery storage, a $250bn market. The rise of EVs will drive down the cost of lithium-ion batteries, making them increasingly attractive to be deployed alongside residential and commercial solar systems. We expect total behind-the-meter energy storage to rise dramatically from around 400MWh in today to nearly 760GWh in 2040. We expect total behind-the-meter energy storage to rise dramatically from around 400MWh in today to nearly 760GWh in 2040.
  • China coal-fired generation will follow weaker trend than previously projected. Changes in the Chinese economy, and a move to renewables, mean that coal-fired generation there in 10 years’ time will be 1,000TWh, or 21% below, the figure predicted in BNEF in last year’s NEO.
  • That makes India the key to the future global emissions trend. Its electricity demand is forecast to grow 3.8 times between 2016 and 2040. Despite investing $611bn in renewables in the next 24 years, and $115 billion in nuclear, it will continue to rely heavily on coal power stations to meet rising demand. This is forecast to result in a trebling of its annual power sector emissions by 2040.
  • Renewables to dominate in Europe, to overtake gas in the US. Wind, solar, hydro and other renewable energy plants will generate 70% of Europe’s power in 2040, up from 32% in 2015. In the US, their share will jump from 14% in 2015 to 44% in 2040, as that from gas slips from 33% to 31%.
  •  

Jon Moore, chief executive of Bloomberg New Energy Finance, said: “The New Energy Outlook incorporates a significantly lower trajectory for coal and gas prices than the 2015 edition did a year ago but, strikingly, still shows rapid transition towards clean power over the next 25 years.”

Elena Giannakopoulou, senior energy economist on the NEO 2016 project, added: “One conclusion that may surprise is that our forecast shows no golden age for gas, except in North America. As a global generation source, gas will be overtaken by renewables in 2027. It will be 2037 before renewables overtake coal.”

 

Annual electricity output by the major generating technologies, 2016-40, thousand TWh

NEO 2016 PR chart

Source: Bloomberg New Energy Finance NEO 2016

 

The outlook for coal is crucial for international ambitions on climate. The Paris conference last December saw 196 nations agree limit global warming to “well below” two degrees Centigrade, and to aim to reach “global peaking of emissions as soon as possible”. NEO 2016 indicates that, despite the global move towards renewables, power sector emissions will not peak for another 11 years.

NEO 2016 is based on a combination of the project pipeline in each country, current policies, plus modelled paths for future electricity demand, power system dynamics and technology costs. It does not assume any further policy measures post-2020, to speed up decarbonisation. Some 65 specialist analysts worked on the forecast.

http://about.bnef.com/press-releases/coal-and-gas-to-stay-cheap-but-renewables-still-win-race-on-costs/

 

Ignoring much of the pap, the most significant part is that graph. Even allowing for the rapid growth of renewables, which is based on some extremely optimistic and highly questionable assumptions, note that coal and gas still continue to run above today’s levels, even up to 2040.

The Executive Summary glosses over this fact, and only show the graph below:

 

image

 

 

This, of course, uses the usual ploy of looking at capacity, and not generation.

At first sight, coal and gas contribute much less by 2040. But bearing in mind that total capacity more than doubles, we are actually still looking at an increase in actual capacity for fossil fuels, thus:

 

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These are some of the other highlights from the Executive Summary:

 

1) Coal prices will continue to remain low, due to reduced demand from the US and Europe. This will encourage coal demand in Asia, where coal is still expected to be the biggest source of electricity through 2040.

2) The cost of onshore wind is expected to drop by 41% by 2040.

Note that current onshore wind costs about £85/MWh in the UK, so this would bring the cost down to £50/MWh. This is still much higher than new build CCGT. (For more, see here.)

3) It is also claimed that solar costs will plummet. There is no evidence given for this , other than an assumption that recent reductions in cost, largely due to dumping of panels from China because of overcapacity, will continue into the future.

4) In the next five years, China will add 190 GW of coal plants. This is an increase of approximately 16% on latest capacity figures for 2012. It hardly needs stating that China will not be shutting these new plants after just a handful of years.

5) They make this comment:

By around 2027, new wind and solar gets cheaper than running existing coal and gas generators, particularly where carbon pricing is in place.

Note that, even with the optimistic assumptions above, wind and solar can only really become competitive with carbon pricing.

6) Despite retirements, coal generation remains almost flat to 2040. While demand for coal declines in the west, and electricity demand growth slows in China due to slow economic growth, the slack is picked up in India and other Asian countries.

7) Europe sees significant decarbonisation up to 2040, but in the Asian-Pacific region, power sector emissions do not peak, rising by 32% between now and 2015.

8) Although they reckon that global power sector emissions could peak in 2027, they will still be 5% higher than now in 2040.

9) They say:

To bridge the gap to a two-degree emissions trajectory, we would need another $5.3 trillion, or $212bn per year, over the next 25 years.

Heaven knows where they get this from, and they don’t explain. The reality is that the Paris Treaty will actually increase emissions.

There is no plan for how emissions can be significantly reduced, or indeed any quantification. To blindly assume that a few more windmills and solar panels will do the trick ignores the reality that, no matter how many you build, they cannot replace fossil fuels.

 

 

Total Energy Consumption

You may have spotted that so far Bloomberg only talk about electricity, as it is the focus of these annual reports. But electricity only accounts for about 15% of global primary energy consumption.

All of the windmills and solar panels in the world won’t alter the fact that we still need energy that is not electricity based.

The report talks of “25% of the global car fleet being electric by 2040”. But given the likely mass expansion of the number of vehicles on the road, this seems likely to mean that the number of conventional cars will increase even more.

No doubt energy efficiencies will occur, just as they have for many decades in the past. And maybe the use of biofuels will increase further, albeit at a great cost to humanity.

But the bottom line is that the world will be just as reliant on fossil fuels in 2040 as it is now. Indeed, probably more so.

 

 

References

The Executive Summary is available here:

694813008_BNEF_NEO2016_ExecutiveSummary-1

 

 

 

10 Comments leave one →
  1. June 15, 2016 9:58 pm

    Bloomberg …a trusted propaganda source.

  2. catweazle666 permalink
    June 15, 2016 10:39 pm

    I don’t understand the preoccupation with lithium batteries, they are relatively short-lived devices and not remotely environmentally justifiable.

    Whatever happened to the old NiFe cells, far more amenable devices? Robust, very low rate of deterioration, hold charge for long periods and many other pleasant attributes, including being made of cheap, easily obtainable materials.

    http://www.nickel-iron-battery.com/

  3. kuhnkat permalink
    June 15, 2016 11:44 pm

    Like so many other projections, this one is based on rainbows and unicorns. There is no suitable technology currently available to fulfill their dreams of renewables. Betting there will be is just that, a bet. A bet that can be lost at considerable cost.

  4. Graeme No.3 permalink
    June 16, 2016 4:54 am

    By a coincidence $7.8 trillion was the amount I calculated for the cost of lithium batteries to make renewables workable (not fool proof nor good for 4 days or more of foul weather) in Australia, approx. 0.41% of the world’s electricity production.
    Lithium batteries are going to be “much cheaper real soon”, say the usual suspects. They rely on the old comparison (1987): “If automotive technology had progressed as fast as semiconductor technology has in the past 20 years, a Rolls Royce would now cost less than $3, get 3 million miles to the gallon, deliver enough power to drive an ocean liner; and six of them would fit on the head of a pin”. Needless to say, a Rolls Royce still doesn’t cost $3.

  5. Joe Public permalink
    June 16, 2016 7:36 am

    #1 “of the eye-catching findings from NEO 2016:

    Coal and gas prices to stay low. Bloomberg New Energy Finance has reduced its long-term forecasts for coal and gas prices by 33% and 30% respectively, reflecting a projected supply glut for both commodities.”

    Does that imply that just 1 year into it’s previous year’s projections, it already admits it was wrong by a substantial amount?

  6. Ben Vorlich permalink
    June 16, 2016 10:51 am

    #3 The assumption that the Chinese will be willing and able to sell the West Solar PV panels at less than cost for a couple of decades seems more than just optimistic.

  7. John F. Hultquist permalink
    June 16, 2016 3:57 pm

    The rise of EVs will drive down the cost of lithium-ion batteries, …

    Scale and research can drive cost down. Competition with EVs for lithium works the other way.
    An internal combustion (FF) engine vehicle has a number of advantages so despite many EVs being sold there will be minor replacement of miles traveled for all purposes.
    And no effect on global temperature.

  8. Mark Hodgson permalink
    June 17, 2016 7:22 am

    Only slightly off-topic, see today’s BBC article: “National Grid ‘should be broken up'” at:

    http://www.bbc.co.uk/news/business-36557065

    Compare and contrast this statement from the article: “””The UK needs clean, renewable power, but it won’t be built if it’s too costly or difficult for generators to connect to the electricity grid,” said committee chairman Angus MacNeil.” with this from the Scientific Alliance website:

    “Our modern society depends on affordable, reliable supplies of energy, both distributed for industrial and in-home use, and for transport.”

    Clean (by which they don’t mean clean, but hopefully, though not practically emitting low amounts of CO2) and renewable -v- affordable and reliable. I know which camp I’m in. Unfortunately we’re run by dangerous lunatics.

  9. June 17, 2016 11:20 am

    It would be interesting to look at an old Bloomberg report, say 10 years ago, to see how well their crystal balls work….. if they are to normal standards, they will be the usual load of old crystals.

  10. June 17, 2016 1:43 pm

    Apparently, Bloomberg has managed to avoid learning about the Google engineering team who, a few yrs ago commissioned to find ways of making “green” energy competitive with fossil power and concluded that it cannot be done. Guess Bloomberg , like the rest of the “media”, didn’t get the memo.

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