Tag: coal and gas

Bloomberg New Energy Finance’s outlook shows renewables will be cheaper almost everywhere in just a few years.

Solar power, once so costly it only made economic sense in spaceships, is becoming cheap enough that it will push coal and even natural-gas plants out of business faster than previously forecast.

That’s the conclusion of a Bloomberg New Energy Finance outlook for how fuel and electricity markets will evolve by 2040. The research group estimated solar already rivals the cost of new coal power plants in Germany and the U.S. and by 2021 will do so in quick-growing markets such as China and India.

The scenario suggests green energy is taking root more quickly than most experts anticipate. It would mean that global carbon dioxide pollution from fossil fuels may decline after 2026, a contrast with the International Energy Agency’s central forecast, which sees emissions rising steadily for decades to come.

“Costs of new energy technologies are falling in a way that it’s more a matter of when than if,” said Seb Henbest, a researcher at BNEF in London and lead author of the report.

The report also found that through 2040:

  • China and India represent the biggest markets for new power generation, drawing $4 trillion, or about 39 percent all investment in the industry.
  • The cost of offshore wind farms, until recently the most expensive mainstream renewable technology, will slide 71 percent, making turbines based at sea another competitive form of generation.
  • At least $239 billion will be invested in lithium-ion batteries, making energy storage devices a practical way to keep homes and power grids supplied efficiently and spreading the use of electric cars.
  • Natural gas will reap $804 billion, bringing 16 percent more generation capacity and making the fuel central to balancing a grid that’s increasingly dependent on power flowing from intermittent sources, like wind and solar.

BNEF’s conclusions about renewables and their impact on fossil fuels are most dramatic. Electricity from photovoltaic panels costs almost a quarter of what it did in 2009 and is likely to fall another 66 percent by 2040. Onshore wind, which has dropped 30 percent in price in the past eight years, will fall another 47 percent by the end of BNEF’s forecast horizon.

That means even in places like China and India, which are rapidly installing coal plants, solar will start providing cheaper electricity as soon as the early 2020s.

“These tipping points are all happening earlier and we just can’t deny that this technology is getting cheaper than we previously thought,” said Henbest.

Coal will be the biggest victim, with 369 gigawatts of projects standing to be cancelled, according to BNEF. That’s about the entire generation capacity of Germany and Brazil combined.

Capacity of coal will plunge even in the U.S., where President Donald Trump is seeking to stimulate fossil fuels. BNEF expects the nation’s coal-power capacity in 2040 will be about half of what it is now after older plants come offline and are replaced by cheaper and less-polluting sources such as gas and renewables.

In Europe, capacity will fall by 87 percent as environmental laws boost the cost of burning fossil fuels. BNEF expects the world’s hunger for coal to abate starting around 2026 as governments work to reduce emissions in step with promises under the Paris Agreement on climate change.

“Beyond the term of a president, Donald Trump can’t change the structure of the global energy sector single-handedly,” said Henbest.

All told, the growth of zero-emission energy technologies means the industry will tackle pollution faster than generally accepted. While that will slow the pace of global warming, another $5.3 trillion of investment would be needed to bring enough generation capacity to keep temperature increases by the end of the century to a manageable 2 degrees Celsius (3.6 degrees Fahrenheit), the report said.

The data suggest wind and solar are quickly becoming major sources of electricity, brushing aside perceptions that they’re too expensive to rival traditional fuels.

By 2040, wind and solar will make up almost half of the world’s installed generation capacity, up from just 12 percent now, and account for 34 percent of all the power generated, compared with 5 percent at the moment, BNEF concluded.

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What will Donald Trump actually do?

It’s a question many Americans are asking themselves now that the U.S. has wrapped up one of its least policy-specific elections ever. The president-elect has offered only the loosest of legislative prescriptions, including whatever plans he may have for the energy industry.

The mystery hangs over turbine manufacturers like Vestas Wind Systems, which fell 12 percent since the election, and coal companies such as Peabody Energy Corp., which soared 73 percent. In his only major energy speech, Trump, 70, said he would rescind “job-destroying” environmental regulations within 100 days of taking office and revive U.S. coal. It’s terrible news for efforts to slow the pace of climate change, but the impact on the renewable energy revolution may be limited. Here’s what it could mean for America’s clean-energy darling, Tesla Motors Inc.:

1. Solar and wind subsidies are probably safe

Tesla is, first and foremost, an electric car company. But on Nov. 17 shareholders will vote on final approval of CEO Elon Musk’s $2.2 billion deal to buy SolarCity Corp. The acquisition would make Tesla the biggest U.S. rooftop solar installer and the first major manufacturer to integrate solar panels with battery backup to extend power into the night.

The swift spread of rooftop solar in the U.S. has been made possible by two government policies. First, most utilities are required to credit homeowners for the excess power they send back to the grid. Those requirements are state-level and shouldn’t be affected by Trump. Second is the 30 percent federal tax credit to offset the cost of installations. The credits were first signed into law under Republican President George W. Bush in 2005 and extended by a Republican Congress late last year. Given their broad support, the subsidies are unlikely to be repealed.

2. Even without incentives, renewables will get cheaper

Solar panel prices have dropped, on average, more than 15 percent a year since 2013. On a utility scale, solar power is already cheaper than coal-fired grid electricity across most of the U.S., after subsidies. Even if the incentives were suddenly removed next year—an improbable and economically destructive scenario—the industry would eventually recover as prices continue to fall.

Incentives are designed to make superior new technologies initially affordable, but once those technologies take off, economies of scale take over.

Source: Bloomberg New Energy Finance

A loss of the federal tax credit could slow the rollout of Tesla’s unusual new rooftop solar shingles. Traditional rooftop panels, however, are almost ready to stand on their own. The payback period currently ranges from about 5 to 10 years, after subsidies and state rebates. If Tesla can achieve the cost savings it hopes for with the merger, it won’t be long before that’s the payback timeline without subsidies.

3. Gasoline fuel-efficiency targets could be dismantled

One of President Barack Obama’s most significant climate achievements was to push through ambitious fuel-economy regulations for U.S. vehicles. The Environmental Protection Agency is scheduled next year to re-asses rules intended to double the average efficiency of cars and trucks to almost 55 miles per gallon by 2025. Those goals could be delayed or dismantled under Trump, accelerating America’s shift to trucks and SUVs. Stocks of Detroit carmakers have predictably surged, while Tesla shares fell 4.9 percent in the two days after the election.

This is obviously bad news for human health and the environment, but it’s impact on Tesla won’t be catastrophic. The price of batteries is dropping rapidly, and by the early 2020s electric cars should be cheaper and better performing than their gasoline-powered equivalents across the board. Lowering efficiency standards will make gasoline cars a bit cheaper to manufacture, but it will also make them more costly to drive over the life of the vehicle.

4. Electric vehicle incentives will expire on their own

The U.S. push for electric cars was set in motion by a $7,500 federal tax break. The Trump administration could eliminate the subsidy, but the impact would be short-lived for electric pioneers including Nissan Motor Co., General Motors Co., and Tesla. That’s because the electric-vehicle subsidies were already designed to phase out after each automaker reaches its 200,000th domestic EV sale. Tesla may be first to cross that finish line, probably in the first half of 2018.

The incentives were intended to overcome steep startup costs and slow initial demand for new electric vehicles. Removing the tax break now would effectively pull the ladder up behind Tesla and make it more expensive for other automakers to transition to battery power, a result that wouldn’t be in anyone’s best interest.

5. States wield the power of their own incentives

Some of the biggest incentives in renewable energy are offered by states, not the federal government. Each state has authority over its own solar and wind rebates, credits for power sold back to the grid, renewable-mix requirements for utilities, and electric-car subsidies. These policies cross ideological borders into deeply Republican states. For example, Louisiana residents can get an additional tax credit of almost $10,000 for buying a long-range electric car. In Colorado, it’s an extra $5,000.

Under Trump, the role of cities and states in regulating pollution and expanding clean energy will increase. So will the disparity between states that prioritize the issue and those that don’t. But again, don’t expect the energy revolution to follow rigid red-state, blue-state definitions. The states producing the most wind power in the U.S. include Texas, Kansas, and Oklahoma. For solar, Arizona, North Carolina, and Nevada are among the top ten. Of those, Hillary Clinton won only Nevada.

6. Keystone’s resurrection won’t make gasoline cheaper

This election was great news for oil companies. Reviving the Keystone XL pipeline, which was rejected under Obama, is on Trump’s list of priorities for his first 100 days. He is also likely to support the beleaguered Dakota Access Pipeline. The company building it, Energy Transfer Partners LP, says business is “only going to get better” under Trump.

These pipelines are hugely symbolic for climate activists who say we can’t keep building infrastructure for oil we can’t afford to burn. But the impact of the pipelines themselves is open to debate. They increase profitability for oil companies, but as oil trades on a global market, the impact on U.S. gasoline prices and by extension demand for electric cars is negligible.

7. Trade barriers with Mexico would hurt Tesla’s rivals

Trump wants to scrap or renegotiate the North American Free Trade Agreement (NAFTA). That could be a dicey proposition for the car industry. Since 2010, nine automakers, including Ford Motor Co., GM and Fiat Chrysler have announced more than $24 billion in Mexican investments. They rely on Mexican plants to produce millions of vehicles and a high volume of parts.

By contrast, Tesla’s manufacturing and assembly are done almost entirely in California and Nevada. Tesla also plans to begin solar-panel production next year at SolarCity’s massive plant in Buffalo, N.Y. Tariffs on solar panels made outside the U.S. would make Tesla’s American-made products more competitive.

In the end, the confluence of all of these forces, but especially the precipitous decline of coal and increasing affordability of renewable sources of energy, is probably too strong to be reversed by the incoming Republican administration. That’s good news for Tesla, and a lot of other companies working to clean up the energy supply.

Bloomberg