New Energy Outlook 2019
Executive Summary
Global results & investment trends
Focused on the electricity system, our New Energy Outlook (NEO) combines the expertise of over 65 market and technology specialists in 12 countries to provide a unique view of how the market will evolve.
Cheap renewable energy and batteries fundamentally reshape the electricity system.
We move from two-thirds fossil fuels in 2018 to two-thirds zero-carbon energy by 2050. For wind and solar that's "50-by-50" – with these technologies supplying almost 50% of world electricity by 2050, ending the era of fossil fuel dominance in the power sector.
Solar sees the most growth, rising from 2% of the world electricity generation today, to 22% in 2050.
We expect around 330kW in every 1MW of that PV to be deployed behind-the-meter by households and business – accounting for 5% of world electricity in 2050. Wind generates 26% of the world’s electricity in 2050, compared with 5% today.
Hydro sees very modest growth, and nuclear stays practically flat.
Hydro is constrained by resource availability and nuclear by a combination of high costs and a lack of flexibility to complement cheap renewables.
Batteries, peakers and dynamic demand help wind and solar reach more than 80% penetration in some markets.
Around 359GW of batteries are added to the power system to help shift excess generation to times when the wind is not blowing and sun is not shining. Demand-side flexibility also helps better integrate variable renewable energy. This includes dynamic EV charging, where vehicles are plugged in when idle, drawing a charge determined by time-of-use tariffs and demand response.
We see $13.3 trillion invested in new power generation assets over the 32 years to 2050.
Of this, 77% goes to renewables. Wind attracts $5.3 trillion and solar $4.2 trillion, and another $843 billion goes to batteries. Investments in new fossil fuel plants doesn’t exceed $2 trillion. This works out to around $416 billion per year.
As demand grows, so too does the grid, with distribution and transmission expansion needing an estimated $11.4 trillion to 2050.
This investment total funds 15,145GW of new power plants between 2019 and 2050, of which 80% is zero carbon.
A further 1,666 GW of non-generating, flexible capacity, such as batteries and demand response, are installed as well. PV sees a fourteen-fold increase and wind a sixfold increase.
Coal
Coal collapses everywhere in the world, except in Asia, and peaks globally in 2026. Growth in China, India and Southeast Asia fails to offset rapid decline in Europe and the U.S. Carbon pricing and mandated phase-out plans in Europe and cheap natural gas in the U.S. force coal out of the mix.
By 2032, there is more wind and solar electricity in the world than coal-fired electricity.
"By 2050, coal-fired generation is down 51%, supplying just 12% of world electricity, from 27% today."
New Energy Outlook, 2019
Gas-fired power grows just 0.6% per year to 2050, supplying system back-up and flexibility rather than bulk electricity in most markets. Gas generating capacity doubles by 2050.
We expect a 37% rise in combined-cycle gas turbines as 506GW are added, and a 350% increase in peaking gas plants, which account for over 1TW of capacity by 2050.
The U.S.
The U.S. electricity system continues to replace aging coal and nuclear with cheaper renewables and gas, which become the country’s premier source of power generation.
Coal and nuclear are pushed out by age and economics, such that by 2050 both technologies have almost disappeared from the electricity mix. We do not anticipate a U.S. nuclear renaissance with current technology.
Utility-scale batteries for peaking purposes grow in significance from around 2035, supporting renewables penetration, which reaches 43% in 2050. In that year, emissions are 54% lower than today.
Mexico
Mexico’s total installed capacity grows sixfold over the next 32 years, driven by extensive demand growth. Expensive, inefficient oil-fired power plants make space for combined-cycle gas turbines, fuelled by competitively priced gas from the U.S., and renewables.
Utility-scale PV increases most, topping 100GW by 2045, followed by onshore wind, which amounts to 57GW by 2050. Higher peak load spurred by air conditioning demand and a growing share of renewables increase the need for flexible capacity.
As a result, 34GW of peaker gas and 23GW of batteries are added to the system. By 2050, 84% of Mexico’s generation is provided by zero-carbon technologies, cutting power-sector emissions by 76% from today’s levels.
Brazil
Brazil's rapid growth of renewables, along with significant existing large hydro capacity, lowers the country’s reliance on thermal generation. While hydro still accounts for 43% of the country’s generation by 2050, Brazil’s excellent solar and wind resources drive strong growth for small-scale PV and onshore wind.
Brazil’s power sector only accounts for 4% of the country’s overall CO2 emissions due to the country’s hydro resources. Nevertheless, emissions fall further – they are 86% lower by 2050.
China
China sees peak coal generation and emissions in 2027, as the world’s biggest electricity system reaches 37% renewables penetration.
"China continues to be the largest market for wind and solar, which together grow from 8% to 48% of total generation by 2050."
New Energy Outlook, 2019
By that time, China has 1.3TW of solar PV and 1.2TW of wind installed – equivalent to 17% of all PV and a third of all wind power installed globally. Nuclear remains important for China and sees fourfold growth to 182GW by 2050.
Japan
Japan’s electricity system remains relatively coal-heavy for much of the next 32 years. New coal plants, nuclear restarts and renewables growth push more expensive oil and gas out of the mix.
By 2050, renewables account for more than three-quarters of electricity generation, with PV and wind supplying 32% each, up from a combined 8% today. While EVs offer some new electricity demand, electricity demand falls by 10% through 2050.
Strong consumer uptake of small-scale PV and batteries make Japan one of the more decentralized power systems in the world, with 30% of installed capacity behind-the-meter.
Europe
Europe transitions furthest and fastest.
"By 2040, renewables make up 90% of the electricity mix in Europe, with wind and solar accounting for 80%."
New Energy Outlook, 2019
Cheap renewables, flexible demand and batteries shift the European power system away from fossil fuels and nuclear to one built around variable renewables and emissions-free energy.
Germany
Germany sees rapid change over the coming decade as it phases out coal and nuclear and renewables top 82% of generation. Gas generation and battery storage play an important role in integrating variable renewables capacity. By 2050, renewables provide 96% of generation
and Germany’s emissions are 97% below what they are today. Decarbonizing the power sector beyond this point becomes very difficult, as the system relies largely on peaking gas plants to help meet demand when wind and solar do not generate.
The U.K.
High carbon prices drive coal-to-gas fuel switching in the U.K. and push coal plants out of the electricity mix three years ahead the official phase out. At the same time, onshore and offshore wind grow fast and account for 64% of U.K.’s electricity generation by 2030, taking market share from gas.
By 2050, the U.K. has added 183GW of wind and solar, as well as 13GW of batteries, and renewables provide 87% of generation. EV demand accounts for 24% of total electricity use in 2050.
India
India’s sustained electricity demand growth drives more than a sixfold increase of the power system.
"India overtakes the U.S. to become the second-largest power system in the world by 2044."
New Energy Outlook, 2019
While it has some of the cheapest new wind and solar anywhere in the world, new coal can still compete with new plants being built close to mines. We expect 170GW of new coal will come online in the period up to 2050.
At the same time, India builds more than 1,500GW of new renewables, with PV making up 70% of this. By 2050, zero-carbon technologies supply 67% of India’s electricity.
Despite dramatic growth of clean energy, India’s power sector emissions rise 69% to a peak in 2038. By 2050, emissions are down 11% from that peak, but are a full 50% higher than 2018.
South Korea
South Korea's generation mix shifts from 64% coal and nuclear in 2018, to 71% gas and renewables in 2050. Offshore wind makes up almost half of renewable generation, leveraging high capacity factors and steep cost reductions in the next decade. Installed capacity more than doubles to 2050 as demand grows.
Renewables account for nearly 70% of additions, with 93GW of new PV and 69GW of wind coming online.
Utility-scale batteries and peaker gas plants become a crucial part of Korea’s future power system, supporting growing offshore wind and PV, as the country’s aging coal and nuclear plants retire.
Korea’s dependence on fossil-fuel generation in the medium term keeps the country’s power sector emissions rising until 2029. By 2050, emissions are 55% lower than they are today.
Australia
Australia’s power system is on track to become the most decentralized in the world, with consumer PV and behind-the-meter batteries making up 38% of all capacity, driven by a hyper-competitive small-scale PV market and comparatively high retail tariffs.
By 2050, nearly all the existing large and emissions-intensive coal generators will have retired, causing emissions to fall by around 83%.
Southeast Asia
Southeast Asia’s rapid GDP and population growth helps push power demand up by a stunning 152% by 2050. A large chunk of this comes from higher air conditioning demand. The power system grows sixfold over the period up to 2050, with PV dominating capacity additions.
While new renewables beat coal on a new-build basis, existing coal is relatively new and cheap to run, keeping it in the mix all the way to 2050.
By 2050, the generation mix has transformed to 58% renewables, from 84% fossil fuels today. Power sector emissions peak in 2037, but remain higher in 2050 than they are today.
Middle East and North Africa
In the Middle East and North Africa, solar and wind eventually undercut cheap domestic gas and oil. Together with new nuclear plants, they push the region's electricity mix to 39% zero-carbon by 2050. Gas is the dominant fuel all through the
outlook and alongside PV sees the most new-build capacity.
Oil, in contrast, plays an increasingly marginal role, declining to just 4% of generation in 2050, from 20% today.
The MENA region doesn’t see a big reduction in total emissions over the next 30 years, due to the continued dominance of gas in the generation mix.
Turkey
Turkey’s shift from fossil fuels to PV and wind ramps up from the mid-2020s. By 2050, wind and PV make up 75% of capacity and two-thirds of generation, fuelled by a 67% increase in electricity demand.
Solar additions outpace other technologies, accounting for nearly 44% of new capacity added between 2019 and 2050. Around 64GW of onshore wind is coming online over the period, with offshore wind additions beginning from the mid-2030s. Hydro remains important, with 11GW added to 2050, pushing its share in the mix to 50%.
By 2050, 90% of generation comes from zero-carbon technologies, reducing Turkey’s power sector emissions by two-thirds from today’s levels.
Electricity demand & costs
Global power demand grows by 62% between now and 2050, or by 1.5% per year.
Growth in power demand, however, increasingly decouples from GDP – we expect the intensity of electricity consumption per unit of GDP to fall by 41% over 2018-50. Electricity requirements in non-OECD countries double by 2050 amid strong consumption growth and increased electrification.
Electric vehicles add about 3,950TWh of new electricity demand globally by 2050, accounting for 9% of the world’s electricity needs.
In some countries, like the U.K., this is considerably higher, with EVs making up as much as 24% of total electricity demand by 2050. This year our analysis includes demand from commercial vehicles, which start to electrify in the 2020s. Time-of-use tariffs and dynamic charging further support renewables integration: they allow vehicle owners to choose to charge during high-supply, low-cost periods, and so help to shift demand to periods when cheap renewables are running.
Air-conditioning almost doubles electricity demand in emerging countries, which climbs 93% between 2018 and 2050.
As a result, we expect the intraday peak demand in countries with high AC penetration to move from the evening to the middle of the afternoon, and this is met increasingly by PV. By 2050, AC demand reaches 5,376TWh, or 12.7% of worldwide demand.
More than two-thirds of the global population today live in countries where solar or wind, if not both, are the cheapest source of new electricity generation.
Just five years ago, coal and gas dominated that picture. By 2030, new wind and solar ultimately get cheaper than running existing coal or gas plants almost everywhere. In China, this second “tipping point” occurs for coal in around 2027.
The levelized cost of storage falls 64% to around $67/MWh by 2040, from $187/MWh today.
By the mid-2020s, batteries are the most cost-competitive source of peaking generation. By 2030, they challenge the duopoly of coal and gas for the provision of dispatchable generation – so producing when the sun does not shine and the wind does not blow.
With more renewables in the system, having to buy fuel to generate becomes a burden, and fossil fuel plants run less often.
By 2030, these plants are called upon only 30% to 65% of the time. This is far from the utilization range they have been designed and deployed for. Lower utilization means generating from new plants becomes a third more expensive out to 2050, and the operation of existing ones becomes up to 15% less competitive.
PV gets incredibly cheap, everywhere.
The levelized cost of an average PV plant falls 63% by 2050, to around $25/MWh. Underpinning this are cost declines in solar technology. Module costs are down 89% since 2010 and we expect another 34% decline from today to 2030 as manufacturers find further efficiencies throughout the production chain.
Wind energy is getting cheaper too – and fast.
Turbine costs are down 40% since 2010 while machine efficiency is up, and the use of sensors and smart data helps optimize operational efficiency and reduce costs. New turbine models are also entering the market, opening up access to sites that developers considered uneconomic not long ago. We expect the cost of wind energy
to drop another 36% by 2030, and 48% by 2050, to around $30/MWh.
Batteries complete the triumvirate of new technologies that will transform the electricity sector over the next 32 years.
Battery prices are already down 84% since 2010. We expect the build-out of battery manufacturing for electric vehicles to continue to drive down the price of batteries for stationary applications. These fall to $62/kWh by 2030, down some 64% from today.
Consumer PV makes up 11% of the total installed generating capacity in 2050.
Most of this is sited at large commercial facilities with ample roof space that adopt this cheap alternative to grid tariffs. Businesses and households invest $1.9 trillion in behind-the-meter PV and batteries over the next 32 years, of which $50 billion per year is on small-scale PV systems.
By 2050, 40% of all battery deployment is behind-the-meter.
From 2025, we start to see more consumers adding battery systems alongside solar, as the value from greater system usage overshadows the additional upfront cost. The payback period of a PV-plus-battery system will halve over the next twenty years, from 13 years today to 6 years by 2040. We expect the market for small-scale batteries to grow fivefold, from $2.1 billion to $10.7 billion in 2050.
Three quarters of behind-the-meter battery capacity will be used to minimize system peaks by 2030, up from 17% in 2020.
PV-plus-battery systems in households will be used as virtual power plants and will increasingly provide flexible capacity to bring balance to the power system. This brings behind-the-meter systems into direct competition with other sources of flexibility, such as gas peakers and utility-scale batteries.
As solar, wind and battery deployment ramps up, demand for concrete, aluminum, steel, copper, lithium and cobalt rises, while demand for polysilicon and silver drops.
Accumulated experience means that industries make a more efficient use of materials. For the same turbine capacity, we expect 42% less concrete and 17% less steel by 2030 than today. By that time, we also anticipate 47% less polysilicon and 64% less silver are used for the same PV module capacity as today. Higher lithium prices in the past years mean that new mining capacity will be sufficient to meet the booming demand in the mid-term.
The declining cost of wind, solar and battery technologies disrupt the commodity cycle all over the world.
Our assessment of cost-competitiveness assumes Henry Hub gas at $3-4.80/MMBTU and seaborne coal around $54-per-metric-ton (real 2018 prices).
We expect global gas prices to converge towards U.S. netback parity and the cost of bringing new LNG liquification capacity online outside of the U.S.
The thermal coal supply curve is relatively flat, meaning coal prices remain stable despite demand declining from the early 2020s.
Slower growth in fuel demand may result in lower fuel prices, but this will only delay the march of
solar and wind. It is a matter of "when and how" not "if" coal and gas will be displaced by renewable energy technologies.
In the future electricity system, having to buy fuel will be a disadvantage.
Coal-fired generation peaks in 2026 as growth in China, India and Southeast Asia fails to offset rapid decline in Europe and the U.S.
Carbon pricing and mandated phase-out plans in Europe, and cheap natural gas in the U.S., force coal out of the mix there. China accounts for the bulk of the increase in coal-fired power globally over the next decade, with generation up 15% before it peaks in 2027. Coal-fired power doesn't peak in India until 2038. By 2032, there is more
wind and solar electricity in the world than coal-fired electricity. And by 2050, coal-fired generation is down 51%, supplying just 12% of world electricity, compared with 37% today.
Gas consumption remains relatively flat to 2035 and then grows at around 1.4% year-on-year.
In 2050, power-sector gas burn is 22% higher than today. China contributes most to growth in power sector gas over the forecast period as the country decommissions over half a terawatt of coal capacity. India, the U.S. and MENA also see gas demand growing, contrary to Europe, where natural gas all but vanishes from the power generation mix by 2050.
Oil no longer plays a major role in the global power system, but crude and oil products are still used to generate power in over 130 countries. Around 5% of global oil consumption goes into power generation, but we expect this to significantly decline over the next decade.
Global power-sector emissions are on track for a 2 degrees pathway until 2030. Zero-carbon technologies provide more than half of the world’s generation needs by 2030, overtaking fossil fuels for the first time. While increased generation from renewables is one part of the story, an upward revision of the IPCC’s carbon budget has bought us some more time as well. Aggressive decarbonization will be needed beyond 2030 – and fast – especially, to keep temperature increases below 1.5°C.
Coal- gas- and oil-fired power plant emissions may have peaked in 2018 at 13,666Mt. We expect the forward trajectory to remain relatively flat over the next eight years. From 2026 onward, emissions fall about 2% per year, to 8,724Mt in 2050 – some 36% lower than today. In Europe, the decline of coal and the high penetration of renewables drive emissions down quickly, cutting them 95% from today’s levels by 2050. The U.S. sees a 54% decline in power sector emissions by 2050. Emissions peak in China in 2027 and in India in 2038. This emissions projection for India is higher and peaks later than in NEO 2018 due to greater electricity demand and a more accurate coal fleet analysis.
Decarbonization scenarios
Getting rid of all coal-fired power would not get us to 2 degrees by 2050. While 116GW of global capacity is covered by phase-out regulation across the world, about a quarter of electricity generation in 2035 will still come from coal. A forced phase-out of all coal-fired electricity would lower emissions a further 49%. It is also good for gas and renewables, boosting the former by more than 35%. The good news is that removing coal would also get us well below a 2-degree trajectory until 2040. The bad news is that simply getting rid of coal is not enough to keep us on track for 2 degrees in the longer term.
Electrification of road transport and residential heat by 2050 would more than double electricity demand from today’s levels. By 2050, demand is 25% higher in this electrification scenario compared with NEO 2019. This increase in electricity demand needs over three times more generating capacity than is currently installed worldwide. By 2050, there is 28% more installed capacity in this electrification scenario compared with NEO 2018. The biggest impact is on the winter load shape, where heating shifts peak demand back to the evening, and could raise peak demand by 50% relative to NEO 2019, or more than twice its level today.
Making heat and transport electric lowers emissions. Electrifying all road transport and residential heat would lower economy-wide emissions, saving 126GtCO2 between 2018 and 2050 as power gets increasingly less carbon intensive relative to direct fuel combustion in vehicles and home boilers.
To fully decarbonize an electrified energy sector, technologies such as CCS, biogas, hydrogen, nuclear and solar thermal will compete for around 13,268TWh of generation in 2050. This is equivalent to half of all electricity generated today. As zero-marginal-cost generation from wind and solar and batteries is abundant, these technologies would operate at the lower end of the capacity factor range, between 5% and 25%. We’ve listed a few candidates, but without significant scale up, innovation, policy support and sufficient generation opportunities, we don’t expect them to rapidly gain market share.
Weaker demand growth and the influx of zero-marginal-cost renewable energy could put a dent in investor confidence. Innovation in wholesale market models, creation of other sources of revenue (including electrification), regulation and enhanced policy schemes could provide the necessary price signals for investors to remain confident in the market and provide returns on their investments in renewables assets. Clarity about coal phase-out timing, investments in utility-scale energy storage, distributed energy resources, demand response and a new wave of deep decarbonization technologies is on its way.
