As part of the recently launched BP Energy Outlook 2018 examining the ‘most likely’ path for global energy markets through to 2040, BP’s chief economist Mr. Spencer Dale explores the acceleration of renewables, highlighting that renewables in power are the fastest-growing energy source (7.5% p.a.), accounting for over 50% of the increase in power generation.
As explained, the strong growth in renewable energy is enabled by the increasing competitiveness of wind and solar power. In the ET scenario, subsidies are gradually phased out by the mid-2020s, with renewable energy increasingly able to compete against other sources of energy, aided by a gradual rise in carbon prices and continued regulation supporting a shift to lower carbon energy.
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The expansion in renewable energy is broad-based, BP notes, with China and increasingly other parts of the developing world taking over from the EU as the main engine of growth. China is the largest source of growth, adding more renewable energy than the entire OECD combined; India becomes the second largest source of growth by 2030.
The pace at which renewables gain share in power generation over the Outlook is faster than any other energy source over a similar period. The closest parallel is the rapid build-up of nuclear power in the 1970s and 1980s.
The outlook for renewable energy has increased substantially in the past three Energy Outlooks, particularly the prospects for solar power.
In the ET scenario, global solar power in 2035 is more than 150% higher than in the base case of the 2015 Energy Outlook. This reflects solar costs falling faster than anticipated, with solar energy now projected to be widely competitive by the mid-2020s – 10 years earlier than previously expected.
The more rapid decline is due partly to faster technological gains, but also reflects stronger policy support, which enables solar energy to move more quickly down its ‘learning curve’.
The largest increases in solar energy are in China and India, where renewable energy receives significant levels of support over the medium term.
In the ET scenario, solar costs continue to follow the learning curve, with module costs falling by around 24% with every doubling of cumulative capacity. The rate of decline of $/MWh costs slows over the Outlook, as it takes longer to double the cumulative capacity and as module costs fall as a proportion of total costs.
Some projects enjoying the best solar conditions and continued policy support will offer far lower prices than implied by this learning curve.
Explore more by reading the full Outlook here.
