The energy system is changing at a rate that was almost unthinkable just a few years ago. Onshore wind and solar power are expanding rapidly. The decline in costs for renewable technology and other key technologies, such as batteries and electrolysers, will impact the entire energy sector going forward. This article presents how the global energy system will transition, assuming that the growth trends we have seen in renewable technology in recent years continue over time.
Solar PV is the fastest-growing energy source in the world and production increased sharp reduction in the production costs of solar PV panels, relatively short project development time, and increasing demand for renewable energy mean that solar PV will grow faster than any other energy sources towards 2050 in the Low Emissions Scenario.
Solar is set to become the major source of power generation as early as 2035
The decision to develop renewable energy will become even more attractive as solar and wind production costs gradually become cheaper than new coal and gas power projects in a growing number of locations. In addition to being a green alternative, renewable energy will also be the best option in economic terms. This will also make it easier to raise political climate ambitions, creating positive synergies between the market, technology and politics globally. In the Low Emissions Scenario, the world’s electricity demand more than doubles by 2050, and renewable power generation increases more than six-fold. Growth in solar PV alone will cover two-thirds of all the growth in demand for electricity over the same period. Solar and wind are to become the largest sources of energy and gas the major source of emissions
Coal and oil demand to decline significantly as electricity demand grows
In the Low Emissions Scenario, primary energy grows by an average of 0.3% per year until 2050, as energy efficiency cannot fully compensate for the growth in population and economic growth. This is significantly lower than the historical average growth of 2% per year from 2000 to present. In addition, we are already seeing a shift from fossil to renewable energy. Both coal and oil demand decline significantly. Nevertheless, the energy systems in 2050 continue to have a large share of fossil energy. Electricity grows strongly in all sectors, on average more than eight times faster than primary energy towards 2050.
Renewable power changes the premises for the energy systems
The Low Emissions Scenario sees a renewable share in the power sector globally of over 80% in 2050 where almost 70% of power generation is variable solar PV and wind power. Wind power will meet almost 30% of the demand for power in 2050, while solar PV will be the largest source of power generation from around 2035 and will meet close to 40% of power demand in 2050. By 2050, coal and oil will have been phased out almost entirely from the power sector; power from gas will also gradually decline.
An uncertain but crucial factor going forward will be the pace of technological development. Over the past two years, growth in renewable capacity was significantly slower than what is required to reach the two-degree target, not to mention the 1.5-degree target.
In the Low Emissions Scenario, we are assuming a continued steep drop in the cost per MWh and a high rate of expansion until around 2030. After this, the decline in costs slows down somewhat, first for wind and then for solar energy. The range of possible outcomes is large. If the cost curve levels off earlier, it will take longer for renewable costs to fall and the expansion pace will be slower than the levels stated in the Low Emissions Scenario. Wind power costs have dropped substantially and in large parts of the world it is already cheaper to build new wind farms than new gas or coal power plants. Turbines are larger, more efficient and more robust. They produce more power, require less maintenance and have a longer lifetime. Much of the technological development in recent years has been focused on areas with medium wind resources. An important driver for technological development is auction-based bidding systems where the developer with the lowest subsidy requirements wins the contract. In addition, developers have become more experienced and effective in implementing projects and in achieving better quality at all stages, including infrastructure. The wind technology manufacturers are becoming more globalised and consolidated.
Costs are converging as technology matures and digitalisation advances
We observe that the costs of building wind power plants are converging across geographic areas. Today, the ten largest wind turbine manufacturers cover 85% of the market. In the Low Emissions Scenario, we expect an evolution rather than a revolution in onshore wind power technology, and the learning curve (cost trend as a function of installed capacity) will level off after 2030 as technology matures.
Digitalisation of operation and maintenance also contributes to improvements. A large proportion of wind farms’ operating and maintenance costs is affected by operating time. During hours with low electricity prices, wind power producers can respond to variable costs by adjusting production. This helps stabilise the production profile and may extend the lifetime. If we assume that the lifetime of existing wind turbines is around 25 years, we will see an increasing renewal of old wind power plants towards 2040 and 2050. With the same capacity, the upgraded power plants will produce much more energy (TWh) as a result of technological improvements. In the next 5-10 years, we can therefore assume a tripling of installed capacity for each new turbine that replaces an old one.
With (increasing) emissions-free energy available at low cost in the power sector, electrification in sectors such as buildings, industry and transport become attractive climate solutions. Electrification will lower emissions and transform the entire global energy system.
Read the previous Future Energy Scenarios – Global Energy Trends article here.