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:
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.
The price of oil closed above US$50 a barrel for the first time in almost a year, pushing oil stocks higher.
The Dow Jones industrial average briefly flirted with the 18,000-point mark but eventually retreated.
Benchmark US crude oil added 67 cents, or 1.3 per cent, to close at US$50.36 a barrel in New York. Oil has not closed at US$50 a barrel or higher since July 21. Brent crude, which is used to price international oils, added 89 cents, or 1.8 per cent, to US$51.44 a barrel in London.
In other energy trading, heating oil added four cents to US$1.54 a gallon and natural gas gained one cent to US$2.47 per 1,000 cubic feet.
The Dow held on to a gain of 18 points to 17,938.28. Earlier, the Dow was up as much as 82 points and appeared to be on track for its highest close since last July.
The price of oil finished with a small loss Monday as traders waited for potentially market-moving news at midweek.
US benchmark crude for August delivery slipped eight cents to US$103.14 a barrel on the New York Mercantile Exchange.
Later this week, the US Energy Department releases its weekly report on supplies of crude oil and petroleum products, the US Federal Reserve releases minutes of its recent policy meeting and OPEC issues its monthly update on the oil market.
A large decline in US supplies, or signs that OPEC decreased output last month could boost prices, analysts say.
Additional insight into the Fed’s thinking on monetary policy should also influence trading.
In other energy futures trading on the Nymex Monday, wholesale gasoline dropped one cent to US$2.88 per gallon; natural gas rose 12 cents to $3.74 per 1,000 cubic feet, and heating oil fell one cent to US$2.98 per gallon.
The price of oil fell to near US$95 a barrel on Monday, as the dollar continued to strengthen against the yen and other major currencies.
Benchmark oil for June delivery fell 87 cents to finish at US$95.17 a barrel on the New York Mercantile Exchange.
The stronger dollar is pushing down oil prices, analysts said. The dollar has risen in recent days against the euro and last week passed the 100-yen mark for the first time in four years.
Since oil is traded in dollars, a stronger dollar makes crude and other commodities less appealing to investors with other currencies.
“This, like the stock market, ends up pulling a lot of money out of commodities and into more reliable risk,” said Carl Larry, president of Oil Outlooks and Opinions, a research analysis firm.
An increase in OPEC’s output, which grew by 280,000 barrels to 30.46 million barrels a day in April compared with March, also helped drag down prices by boosting concerns about excess supply.
And weak refining data from China further undercut crude. Government statistics showed China’s refining output in April was the lowest since last August.
United States drivers saw gasolene prices drift higher over the weekend, up two cents since Friday to a national average of US$3.58 a gallon.
In other energy futures trading on Nymex, wholesale gasolene fell four cents to finish at US$2.82 a gallon, heating oil lost two cents to end at US$2.89 a gallon and natural gas rose two cents to finish at US$3.93 per 1,000 cubic feet.
The benchmark oil contract for June delivery rose 55 cents to close at $96.16 per barrel on the New York Mercantile Exchange. It was the third straight day of gains for oil, and the first close above $96 since April 2.
Prices rose early Monday on news of an Israeli military strike in Syria, raising concern of an expansion in conflict in the oil-rich Middle East. The price fell back below $95 before rising again late in the day.
In other energy futures trading on the Nymex, wholesale gasolene rose 4 cents to $2.87 a gallon, heating oil rose 4 cents to $2.92 a gallon and natural gas fell 3 cents to $4.01 per 1,000 cubic feet.
Oil prices rose Monday as political leaders were trying to finalise a deal to avert the ‘fiscal cliff’ hours before the deadline.
Benchmark US crude rose US$1.02 to finish at US$91.82 per barrel in New York. Oil has wavered in recent weeks along with the ups and downs of the budget negotiations.
The price of oil finished December up about three per cent from the start of the month. It ranged from a low near US$77 a barrel to high around US$110 a barrel during the year.
In other energy futures trading on the New York Mercantile Exchange: natural gas fell 12 cents, or 3.4 percent, to finish at US$3.35 per 1,000 cubic feet; wholesale gasolene rose one cent to US$2.81 a gallon; heating oil was flat at US$3.05 a gallon.
Benchmark oil fell 21 cents Friday to $91.86 per barrel in New York.
On Friday, the International Energy Agency issued a new report predicting slower growth in demand for oil over the next five years.
It cited the sluggish global economy and growing energy efficiency. The agency also forecast that supplies will increase, in part because U.S. production from shale formations is exceeding expectations.
The IEA is an organization of 28 oil-importing countries that collects and analyzes data about global petroleum supply and demand.
Friday’s decline in the price of oil eroded some of the gains from earlier this week, when tensions between Syria and Turkey raised worries about supplies. Still, the price of U.S. benchmark crude climbed 2.2 per cent over the past week.
AAA said gasoline prices at the pump fell less than a penny from Thursday to $3.81 for a gallon of regular. That’s about 41 cents higher than a year ago but down 5 cents from a month ago.
In other energy trading on the New York Mercantile Exchange, heating oil fell 3.32 cents to end at $3.2239 per gallon.
Wholesale gasoline dropped 6.28 cents to end at $2.8928 per gallon and natural gas rose less than a penny to end at $3.611 per 1,000 cubic feet.
Benchmark oil fell $3.43 or 3.7 per cent to $88.46 per barrel in afternoon trading on the New York Mercantile Exchange. Brent crude, which is used to price international varieties of oil, fell $2.59, or 2.3 per cent, to $108.98 a barrel in London.
China‘s services sector slowed in September. Analysts say the index was 53.7 compared with 56.3 in August. It was released just days after a survey indicated that the country’s manufacturing continues to slow.
China is the world’s second largest economy and a huge importer of commodities like oil. Slower growth in that country could cut demand for oil.
And it’s not only China. After years of rapid growth, Asia’s developing economies now face much more modest prospects, the Asian Development Bank said Wednesday in a report that slashes growth forecasts for this year and next.
The ADB said growth in developing Asia, which includes giant emerging economies such as India, China and Indonesia, will slow to 6.1 per cent this year from 7.2 per cent last year and only partly rebound to 6.7 per cent in 2013. It had previously forecast growth of 6.9 per cent for 2012 and 7.3 per cent for 2013.
The disappointing reports were overshadowing signs of improvement in US service companies, which employ nearly 90 per cent of the work force. The Institute for Supply Management says its index rose in September at the fastest pace since March.
Meanwhile, the US government says crude inventories fell slightly last week but remain 8.4 per cent above year-ago levels. Gasoline supplies rose.
In other energy futures trading in New York, natural gas is down 16 cents, or 4.6 per cent, to $3.37 per 1,000 cubic feet, a day after hitting a high for the year.
Heating oil has fallen 5 cents to $3.07 per gallon, and wholesale gasoline has dropped 7 cents, or 2.5 per cent, to $2.80 per gallon.
Oil has now fallen five of the last six trading days. It fell more than six per cent last week.
Benchmark crude fell 96 cents, or one per cent, to finish at US$91.93 a barrel on the New York Mercantile Exchange. Prices for other petroleum products dropped, too.
Germany delivered the latest dose of gloomy economic news, with its index of business confidence falling for the fifth month in a row. Germany is an economic powerhouse, but 43 per cent of its exports go to its euro partners. And growth is stalling across the other 16 countries in the Eurozone.
Slower economies mean less demand for oil, pushing prices down.
Phil Flynn, a senior market analyst for Price Futures Group, said he’s surprised prices haven’t fallen further. He said one reason could be that commodity funds have not been bailing out of oil.
Still, oil prices have been under pressure from worries about Europe. The dollar has been stronger, which makes oil cheaper for holders of other currencies.
“You’re seeing demand destruction around the globe,” he said. “You’ve got Saudi Arabia saying they’re going to pump oil until the cows come home.” All of that drives down oil prices, he said.
Heating oil dropped 2.2 cents to US$3.0987 per gallon, wholesale gasolene decreased 2.49 cents to US$2.9176 per gallon and natural gas ended down 4.8 cents to US$2.837 per 1,000 cubic feet.
Oil plunged suddenly Monday afternoon, dropping more than US$4 per barrel at one point in a dramatic end to an otherwise quiet trading day in New York.
Benchmark crude fell $2.38, or 2.4 per cent, to finish at $96.62 on the New York Mercantile Exchange. That’s the biggest percentage decline since July 23. Oil plunged below $95 per barrel during the sell-off.
Traders were unsure of the cause of Monday’s price drop. Some questioned whether an errant trade or another rumour about a release of oil from the Strategic Petroleum Reserve was to blame.
The White House has been considering tapping the Strategic Petroleum Reserve to stem the rising cost of crude and gasolene. A little over a week ago, Reuters reported the Obama administration was considering a release much larger than the 30 million barrels from last year.