Why the world's energy system WON'T achieve the 2C climate change target without serious investment
By the year 2040, renewables will finally have won the global energy race. The prices of coal and gas will have dropped significantly, but this will not derail the decarbonisation of our energy systems - with zero-emission energy sources making up 60% of installed capacity.
In fact, the cost of generation per MWh for onshore wind and solar photovoltaics will fall so much so that they will become the cheapest method of producing electricity in many countries during the 2020s and most of the world in the 2030s. Gas will be overtaken by renewables as a global generation source by 2027, with renewables overtaking coal 10 years later.
But is all of this enough to put the world on track to hit the 2C global warming target agreed upon out at the historic Paris climate change conference last December?
No. Despite this anticipated acceleration in the shift away from fossil fuels towards renewables, power sector emissions will not peak for another 11 years – in fact, by 2040, global power sector emissions will be 5% higher than today. Meanwhile, levels of investment in green energy sources are simply not rising fast enough.
These new figures – part of a new long-term forecast from Bloomberg New Energy Finance (BNEF) – reveal that an additional $5.3trn investment in zero-carbon power would be needed by 2040 to prevent CO2 levels surpassing the 'safe' limit of 450 parts per million, as previously set out by the Intergovernmental Panel on Climate Change.
"Some $7.8trn will be invested globally in renewables between 2016 and 2040 - two thirds of the investment in all power generating capacity,” explained Seb Henbest, lead author of BNEF’s 2016 New Energy Outlook. “But it would require trillions more to bring world emissions onto a track compatible with the United Nations 2C climate target."
Compiled by some 65 specialist energy industry analysts, the New Energy Outlook report is based on a combination of the project pipeline in each country; current policies, power system dynamics and technology costs.
Within the report, BNEF has reduced its long-term forecasts for coal and gas prices, by 33% and 30% respectively - reflecting a projected supply glut for both commodities – which will see the cost of generating power by burning coal or gas fall.
But the cost of renewables will plummet even further – onshore wind will fall 41%, and solar will fall by 60%. Wind, solar, hydro and other renewable energy plants will generate 70% of Europe's power in 2040, up from 32% last year. In the US, the share of renewables in the energy mix will jump from 14% in 2015 to 44% in 2040.
Elena Giannakopoulou, senior energy economist on the NEO 2016 project, said: "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."
In China, weaker GDP growth and a rebalancing of its economy will mean its emissions will peak as early as 2025. However, rising coal-fired generation in India and other Asian emerging markets indicate that the global power sector emissions figure in 2040 will still be some 700 megatonnes above 2015 levels – clearly not enough to reach the ambitious goals set in Paris.
Storage + EVs
The report goes on to suggest that global energy system will undergo a shift towards balancing options – namely energy storage. Electric vehicles (EVs) will drive down the cost of lithium-ion batteries, igniting a $250bn market, making them increasingly deployed alongside residential and commercial solar systems, and leading to total behind-the-meter storage rising from 400MWh now to nearly 760GWh in 2040.
Meanwhile, the EV market will, in itself, undergo a radical transformation, according to the researchers. EVs will add 2,701TWh, or 8%, to global electricity demand in 2040 – reflecting BNEF's recent 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.
The BNEF report comes just days after the European Commission presented its plans for the European Union (EU) to ratify the Paris Agreement, calling for a swift process of enshrining the global deal to tackle global warming into European law.
The Paris Agreement, adopted on 12 December 2015, is the world's first universal, legally-binding deal to tackle climate change; setting out a long-term emissions reduction goal of keeping the global temperature increase “well below 2C”, while pursuing efforts to limit the rise to 1.5C. In April of this year, political leaders from 170 countries - including China, the US and the UK – came together at the UN headquarters in New York to officially sign the Paris Agreement on Earth Day.
But this does not mean the deal is in effect - joining the Paris Agreement is a two-step process: countries must first sign the Agreement, and then indicate their consent to join and be legally bound by it. The ratification signatures of at least 55 countries - representing more than 55% of global carbon emissions - are required for the deal to formally apply from 2020. The EU represents around 10% of global emissions.