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Five seismic shifts to shake global electricity over next 25 years

Global power generation will experience five dominant trends over the next 25 years, putting unprecedented pressure on energy companies, utilities and policy-makers, according to the New Energy Outlook 2015.

NEO 2015 is Bloomberg New Energy Finance’s latest annual long-term forecast for global power, based on detailed analysis country-by-country and technology-by-technology of electricity demand, costs of generation and structural changes in the electricity system.

It draws on the expertise of more than 100 analysts and researchers around the world specialising in the energy transition.

It identifies the following five major shifts that will take place between now and 2040:

The further decline in the cost of photovoltaic technology will drive a massive surge in investment in solar, both large-scale and small-scale.

Some of the investment will go on rooftop and other local PV systems, handing consumers and businesses the ability to generate their own electricity, to store it using batteries and – in parts of the developing world – to access power for the first time.

The march of energy-efficient technologies in areas such as lighting and air conditioning will help to limit growth in global power demand to 1.8% per year, down from 3% per year in 1990-2012. In OECD countries, power demand will be lower in 2040 than in 2014.

Natural gas will not be the “transition fuel” to wean the world off coal. North American shale will change the gas market, but coal-to-gas switching will be mainly a US story. Many developing nations will opt for a twin-track of coal and renewables.

Despite the large investment in renewables, there will be enough legacy fossil-fuel plants and enough investment in new coal-fired capacity in developing countries to ensure global CO2 emissions rise all the way to 2029, and will still be 13% above 2014 levels in 2040.

Bloomberg New Energy Finance chairman of the advisory board Michael Liebreich commented: “NEO 2015 draws together all of BNEF’s best data and information on energy costs, policy, technology and finance.

“It shows that we will see tremendous progress towards a decarbonised power system. However, it also shows that despite this, coal will continue to play a big part in world power, with emissions continuing to rise for another decade and a half, unless further radical policy action is taken.”

The small-scale solar boom will see worldwide capacity of rooftop, building-integrated and local PV soar from 104GW in 2014 to nearly 1.8TW in 2040, a 17-fold increase.

This will be made possible by a 47% crash in the cost of solar projects per megawatt, as conversion efficiencies improve and the industry moves to new materials and more streamlined production methods.

BNEF’s forecast sees onshore wind reaching 1.8TW globally by 2040, up five-fold, utility-scale PV 1.9TW, up 24-fold, offshore wind 198GW, up 25-fold, and “flexible capacity” (ways of balancing variable renewable sources on the grid, including batteries, demand response and fast ramp-up gas generation) reaching 858GW, up 17-fold.

Nevertheless, even in 2040, fossil fuels will still account for 44% of world generation (down from 67% in 2014).

The result is that, with global electricity generation rising by 56% between 2014 and 2040 as economies develop and populations grow, global power sector emissions will increase from 13.1 gigatonnes to a peak of 15.3Gt in 2029.

Greater burning of coal by developing countries will more than offset the substitution of coal-firing by gas and renewables in developed economies.

World emissions will then fall back, but only to 14.8Gt in 2040, still 13% above 2014 levels.

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