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.
JAMAICA SAW a reduction in its greenhouse gas (GHG) emissions between 2008 and 2012, signalling a step in the right direction for the island’s efforts to stave off negative climate change impacts.
“We have seen a reduction from about 27,000 gigagrams (CO2 equivalent) in 2008 to just about 20,000 in 2012,” revealed Clifford Mahlung, project administrator for the Third National Communication and Biennial Update Report to the United Nations Framework Convention on Climate Change (UNFCCC).
Mahlung was referencing findings from the Biennial Update Report that is to be submitted to Cabinet in another two or so weeks for their approval before submission to the UNFCCC.
“The main reason for this is the reduction in fuel consumption in the mining/bauxite sector. It was in 2008 that we had a downturn in the demand for bauxite,” he noted.
However, a former seasoned climate change negotiator for Jamaica, Mahlung cautioned that the island would need to continue its efforts to reduce emissions – and for a variety of reasons.
“With the upturn in bauxite since 2012, you could see the levels going up,” he noted.
And even with the move towards renewables ‘that are now somewhere about 20 per cent of the energy mix’, Mahlung said, emissions from the transport sector was trending up.
“What we have found is that emissions from the transport sector have increased significantly. It is now about 28 per cent of the total emissions and second only to the energy sector, which is 31 per cent,” he noted.
“It means that there should see some focus on how we can reduce the emissions coming out of the transport sector,” he added.
For this, Mahlung has lauded the efforts of actors such as the JPS.
“We support the report that we have heard from the JPS, for example, about the introduction of electric cars. And definitely we should also still be actively pursuing an improved mass transit system, such as rail,? he added.
JPS announced earlier this month that it was seeking a deal with American electric car maker Tesla – to fuel the appetite for electric cars, which are seen as one answer to current high levels of petrol consumption.
Global climate change is fuelled by emissions of GHGs, including carbon dioxide and methane, with significant negative implications for, in particular, small-island developing states, including Jamaica.
Among the negative impacts of the changing climate is increased global temperatures and extreme weather events, such as droughts, the burden of which Jamaicans have had to bear in recent times.
The Jamaica Public Service Company (JPS) says it is unable to definitively state how the use of both automotive diesel oil and liquefied natural gas (LNG) at the Bogue power plant in St James will impact the price of electricity to consumers.
It said the power plant currently burns on automotive diesel oil “and we are doing a conversion that adds the capability to also burn natural gas. So we will end up with the ability to burn both fuels at no extra cost”.
Responding to Wednesday Business queries about the rationale for the dual-fuel facility, the JPS said natural gas will be the primary fuel on which the plant operates and automotive diesel oil will be a back-up fuel “in case we have any problems with receiving natural gas”.
It added that under normal conditions, the plant will effectively be a gas-fired power plant.
As to how it will impact the price of electricity the JPS said in emailed responses that “we cannot speak to the likely impact on electricity prices given the uncertainty of prices in the future (for oil vs LNG)”.
However, it said that the impact is expected to be negligible given that Bogue only represents approximately 10 per cent of the company’s total costs.
“What we can say with fairly good certainty is that the cost of electricity today is 30 per cent lower than it was one year ago, and we expect that trend to continue throughout 2016, given that 80 per cent of our net generation (production) will still be based on oil, 10 per cent will be from natural gas, and we expect renewables to make up 10 per cent of our net generation once the three renewable energy projects currently under construction (for circa 80 megwatts) are completed before the end of 2016.”
The JPS, an integrated electric utility company and the sole distributor of electricity in Jamaica, added that “that means we continue doing a good job as a country of increasing the penetration of renewable, while also diversifying our fuel mix and reducing our overexposure to oil”.
It said that it is hoping to continue doing more of that through the 37 megawatts of renewables currently being pursued by the Office of Utilities Regulation through a request for proposal, as well as its 190 megawatt gas-fired power plant that will be commissioned in mid-2018.
Reducing the cost of electricity is critical to improve competitiveness, according to the International Monetary Fund’s latest updated memorandum of economic and financial policies.
It said that the action plan prepared by the Electricity Sector Enterprise Team foresees replacing current oil-fired generation capacity with gas, coal and ethane-fired plants to achieve significant cost savings.
Next steps will include the conversion of the Bogue power station from oil to gas, a process which the JPS is currently undertaking.
In addition, said the memorandum, the Government has approved the construction of Jamaica’s first natural gas-fired power plant, a 190-megawatt facility to be built and operated by JPS, and to be completed by 2018. Several renewable energy projects are also under way.
The Government said it will prepare a plan to ensure that all public entities – central government, local government and public bodies – meet their financial obligations in a timely manner.
In the memorandum, the Government also pointed out that urgent actions will be taken to reduce the time needed for entrepreneurs to get an electricity connection. Plans foresee the automation of the work processes within the government electrical regulator and the acquisition of an Application Management and Data Automation (AMANDA) software to streamline procedures for scheduling, inspecting, approving and certifying electrical installations.
An action plan for implementation of the reforms and adoption of the AMANDA system are expected to be completed in fiscal year 2016/17, with support from the Inter-American Development Bank.
The new global climate deal, reached after two weeks of intense negotiations, is a signal to the private sector, local and international, of the need to reassess current investment flows.
Jamaican negotiator Dr Orville Grey said the private sector will be critical, given the stated goal of the new deal of “holding the increase in the global average temperature to well below 28C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.58C above pre-industrial levels, recognising that this would significantly reduce the risks and impacts of climate change”.
“The private sector will at some point have to take the lead because the technologies that are likely to take us to carbon neutrality will likely come from the private sector and not the public sector, at least as it relates to technology,” Grey, coordinator for adaptation for the Alliance of Small Island States during the negotiations, told The Gleaner.
If the world is to meet the ‘well-below-two’ target, it will require a significant shift in the current high levels of consumption of fossil fuels, including coal and oil, towards renewables such as solar and wind.
Colonel Oral Khan, chief technical director in the Ministry of Water, Land, Environment, and Climate Change and himself a member of the Jamaica delegation to the talks, was in full agreement.
“The private sector is encouraged under this agreement to support the mobilisation of finance to support adaptation and mitigation,” he said.
On Jamaica’s private sector, Khan said: “The State has submitted its intended nationally determined contribution commitment to [reducing greenhouse gas emissions] to the UNFCCC (United Nations Framework Convention on Climate Change) Secretariat. Our commitment is consistent with the goal of our National Energy Policy. I would say to the private sector, look at investing in renewable energy and energy efficiency. In time, I hope that we will see more entities entering into public-private partnerships.”
Neither Grey nor Khan is alone in their thinking; international leaders in business have echoed their sentiments.
“The business case for eliminating greenhouse gases by 2050 is irrefutable. Indeed, solving climate change presents the greatest economic and social development opportunity of our time,” said Sir Richard Branson, founder of the Virgin Group, in a release to the media on Saturday.
“The new climate agreement is a historic turning point. Now business can and must innovate to lead the transition to a clean economy. Together, it is our duty as human beings, responsible citizens and business leaders to protect the environment. A transition to a clean and green economy will lift millions out of poverty, and ensure the planet’s health for generations to come,” he added.
Arianna Huffington, president and editor-in-chief of the Huffington Post, mirrored his comments.
“This is truly a turning point in human history. We now have the chance to advance the well-being of people everywhere, while creating millions of new jobs and ending our reliance on fossil fuels,” she said in the same release.
“This will help us build a safer, more peaceful world for all. This is exactly what business needs in order to thrive in the long run,” added Huffington.