Seventy-two percent of future investment in generating capacity will be spent on wind and solar, adding up to about $7.5 trillion between now and 2040, says a new report, leading to the withering away of coal and other dramatic shifts in the global energy sector.
Among the shifts will be a dramatic fall in the cost of renewable energy, with solar already as cheap as coal in advanced economies such as Germany. This will also be true of China and Mexico in the next five years, says the report by Bloomberg New Energy Finance.
Overall, the report predicts that the price of solar will decline by 66% by 2040, onshore wind will fall by 47% and offshore wind by 71% as a result of better technology, digitalisation, experience, competition and economies of scale.
The report also predicts the rise of China and India as dominant investment markets for renewables. By 2040 they will account for 39% of all capital spending on power generation, with China at 28% and India at 11%. The total investment in both countries over the next 32 years is expected to top $4 trillion.
The main losers in the shift of investment is likely to be the fossil fuel industries.
The report envisages a withering away of coal in Europe by 2040, a halving of its use in America and a more gradual decline in China after 2026.
The use of gas-fired power stations as an on-call resource to add flexibility to national grids will face increased competition from utility-scale battery arrays.
Meanwhile, demand for petrol will be reduced by the growth of electric vehicles, which are expected to account for 13% of Europe’s power use by 2040.
Altogether, the report predicts that coal and gas plants will account for 10% of investment by 2040 with a further 18% earmarked for nuclear.
Homeowners are expected, collectively, to become an important source of electrical power in the future. By 2040, rooftop panels could supply a quarter of Australia’s average requirements. Cooler countries will naturally produce less, but even in Germany the domestic sector may contribute as much as 15% of the country’s installed capacity.
The impact of this shift on climate change will not be immediate, but the global output of carbon dioxide is expected to peak in 2026 and decline thereafter as Chinese industry becomes steadily greener. The report estimates that this will not be enough to keep mean temperatures below the 2°C threshold, however, without a further $5.2 trillion investment in zero-carbon power generation.
Image: Rooftop panels set to supply a quarter of Australia’s energy needs (Sun-Tec Solar Energy)