Asia will reach peak coal in 2024, with a rapid increase in renewable energy investment set to meet the continent’s growing power needs.
By 2040, there will be US$10.2tn invested in new power generation capacity worldwide, of which US$4.8tn will be in Asia, data from the New Energy Outlook 2017 report from Bloomberg New Energy Finance (BNEF) shows.
In Asia, one-third of this investment will be in wind power, one-third in solar, with 18% going to nuclear and 10% to coal and gas.
The figures outline the huge swing expected to take place in the world’s energy mix over the coming decades, and also the massive opportunities awaiting lenders, investors and developers in Asia Pacific.
Globally, 72% of the investment in power to 2040 will be for renewable energy, or US$7.4tn, the research estimates. Broken down annually, this represents an increase in renewable energy investment of US$400bn per year around the world.
While coal will still provide a large amount of the power generated in Asia in 2040 (30% of the generation mix) this will largely be to legacy facilities. India, for instance, is adding 40GW of coal power to the mix over the next five years. This will push coal consumption there up by 3% per year through the 2020s, with solar beginning to sideline coal from 2030.
In China, meanwhile, coal consumption will peak in 2026, but there will be 20% more coal-fired power online than there is today. China will remain the world’s largest coal consumer and emitter, but coal’s share of the generation mix will be down to 30% in 2040.
China and India have long been fancied as the most promising renewable energy markets, given their enormous populations and real need for additional power capacity. With manufacturing costs for renewable tech falling drastically in recent years, it makes economic sense too.
It’s no surprise, then, to see BNEF describe the US$4tn power opportunity there, but it’s also worth bearing in mind that when it comes to renewables, these two countries have a track record of breaking expectations.
“I spend half my time looking at China and half at India. In March, the price of solar in India dropped by a totally unpredicted 32% year-on-year, down to a record low US$42MW/h. That was down on the previous record low 58MW/h, which was 25% down on the prior year. Over two years you’ve seen billion-dollar solar contracts to supply solar energy in India at a fixed price for 25 years, the price has dropped 55% in 25 months,” Tim Buckley, director of energy finance studies, at the Institute for Energy Economics and Financial Analysis, tells GTR.
“The International Energy Agency (IEA) put out a solar road map four years ago saying it would drop 4% per year for 40 years, but they got the timeframe wrong by a factor of 25 years. The change they expected to happen in 40 years has literally happened in a couple. Nobody got it right, even the most bullish forecast said 10%.”
GTR has reported previously on the potential for renewable energy to take off in Australia, and this is borne out in BNEF’s data as well. “Australia’s electricity system becomes one of the most decentralised in the world, “ the report reads. “By 2040, around 45% of Australia’s power generating capacity is located behind-the-meter. Its fossil fuel dominated grid also transforms into a predominantly renewable system, as wind, PV and batteries replace retiring coal.”
This would be a huge swing away from the dominant coal industry Down Under. Already, the switch to domestic solar usage has led to government concern over who will pay for power transmission infrastructure (if you’re powering your home off-grid, why should you contribute?). One of the sunniest nations on earth is finally embracing solar, and commercial banks are entering the space.
“People are seeing a lot of short-term benefit of coming in and building quickly, particularly for solar. You can put a solar project online in about 12 months. It’s a very short timeframe. The longest part is the negotiation with power purchase agreement off-takers. The barriers to entry are quite low and the resource is quite high compared to other parts of the world. On the revenue side, that is very appealing for investors,” Gloria Chan, head of large-scale solar at the Clean Energy Finance Corporation, an Australian government lender, tells GTR.
Meanwhile, in Europe, half of the energy mix will come from various renewable sources by 2040, Mexico will see 80% renewable energy generation by that same year, and the US is projected to see US$50bn pumped into its renewable sector each year. However, the report makes little mention of the expected defanging of government support for renewable energy under US President Donald Trump.
While these figures, on the face of it, seem encouraging, the report’s authors warn that even these large-scale investments will not be enough to reach the objectives set out in the Paris Agreement.
“Although the world’s power sector emissions reach a peak within a decade, the rate of decline in emissions is not nearly enough for the climate. A further US$5.3tn investment in 3.9TW of zero-carbon capacity will be needed [to] place the power sector on a 2°C trajectory,” it reads.
You can read the full BNEF report here.