BNEF: Coal the ‘big loser’ as batteries boom

Coal is expected to shrink to just 11 per cent of global electricity generation by 2050 as batteries and renewables become cheaper, according to the latest data by Bloomberg New Energy Finance (BNEF).

BNEF published its annual long-term analysis of the future of the global electricity system – New Energy Outlook (NEO) 2018 this week.

The 150-page report draws on detailed research by a team of more than 65 analysts around the world, including sophisticated modeling of power systems country-by-country, and of the evolving cost dynamics of different technologies.

The report found Australia’s power system is on track to become one of the most decentralised in the world, with consumer PV and behind-the-meter batteries making up 44 per cent of all capacity.

“This represents a dramatic turnaround from the largely coal-fired system of today,” the report said.

“Wind, PV and batteries form the backbone of this new system, where coal has all but disappeared.”

This year’s outlook is the first to highlight the huge impact that falling battery costs will have on the electricity mix over the coming decades.

BNEF predicts that lithium-ion battery prices, already down by nearly 80 per cent per megawatt-hour since 2010, will continue to tumble as electric vehicle manufacturing builds up through the 2020s.

“We see $548 billion being invested in battery capacity by 2050, two thirds of that at the grid level and one third installed behind-the-meter by households and businesses,” BNEF head of Europe, Middle East and Africa and lead author of the outlook, Seb Henbest said.

“The arrival of cheap battery storage will mean it becomes increasingly possible to finesse the delivery of electricity from wind and solar, so these technologies can help meet demand even when the wind isn’t blowing and the sun isn’t shining.

“The result will be renewables eating up more and more of the existing market for coal, gas and nuclear.”

NEO 2018 sees $11.5 trillion being invested globally in new power generation capacity between 2018 and 2050, with $8.4 trillion of that going to wind and solar and a further $1.5 trillion to other zero-carbon technologies such as hydro and nuclear.

This investment will produce a 17-fold increase in solar photovoltaic capacity worldwide, and a six-fold increase in wind power capacity.

The levelised cost of electricity (LCOE), from new PV plants is forecast to fall a further 71 per cent by 2050, while that for onshore wind drops by a further 58 per cent.

These two technologies have already seen LCOE reductions of 77 per cent and 41 per cent respectively between 2009 and 2018.

BNEF head of energy economics Elena Giannakopoulou said coal emerges as “the biggest loser” in the long run.

“Beaten on cost by wind and PV for bulk electricity generation, and batteries and gas for flexibility, the future electricity system will reorganise around cheap renewables – coal gets squeezed out,” she said.

The role of gas in the generation mix will evolve, with gas-fired power stations increasingly built and used to provide back-up for renewables rather than to produce so-called baseload, or round-the-clock, electricity.

BNEF predicts $1.3 trillion will be invested in new capacity to 2050, nearly half of it in ‘gas peaker’ plants rather than combined-cycle turbines.

Gas-fired generation is seen rising 15 per cent between 2017 and 2050, although its share of global electricity declines from 21 per cent to 15 per cent.

Fuel burn trends globally are forecast to be dire in the long run for the coal industry, but moderately encouraging for the gas extraction sector.

NEO 2018 sees coal burn in power stations falling 56 per cent between 2017 and 2050, while that for gas rises 14 per cent.

The bearish outlook for coal means that NEO 2018 offers a more upbeat projection for carbon emissions than the equivalent report a year ago.

BNEF now sees global electricity sector emissions rising 2 per cent from 2017 to a peak in 2027, and then falling 38 per cent to 2050.

“Even if we decommissioned all the world’s coal plants by 2035, the power sector would still be tracking above a climate-safe trajectory, burning too much unabated gas,” BNEF energy economics analyst Matthias Kimmel said.

“Getting to two degrees requires a zero-carbon solution to the seasonal extremes, one that doesn’t involve unabated gas.”