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Solar and wind power projected to overtake fossil fuels by mid century

New outlook says lower cost of solar and wind projects driving change

September 2015

Troubleshooting wind turbines at an installation in Goldendale, Washington.

Troubleshooting wind turbines at an installation in Goldendale, Washington.

How the world generates power will evolve by the year 2040 from two-thirds reliance on fossil fuels to about 60% from zero-emissions energy sources, according to a new global forecast on the future of electrical systems.

"Renewables will command just under 60% of the 9,786GW of new generating capacity installed over the next 25 years, and two-thirds of the $12.2 trillion in investment," states the 2015 outlook from the Bloomberg New Energy Finance (BNEF) organization.

According to the outlook, the big drivers of this transformation are economics, not policy. The cost for solar energy projects by 2040 will come down by an average of 48% and wind projects by an average of 32%, the outlook projects.

Wind is already the cheapest form of new power generation capacity in Europe, Australia and Brazil, BNEF says, and by 2026 it will be the least-cost option "almost universally."

Bloomberg's New Energy Outlook 2015 finds that some $12.2 trillion will be invested in global power generation between 2015 and 2040, with only 22% of that taking place in countries in the Organization for Economic Cooperation and Development, generally more advanced economies, against 78% in the power-hungry emerging markets.

Small-scale solar boom

The Bloomberg outlook specifically highlights small-scale solar projects in the developing world as a large driver of the change because growing economies is where the demand exists for more energy capacity. "The real solar revolution will be on rooftops," the outlook states.

"Up to now, small-scale solar investment has been dominated by wealthy countries such as Germany, the US and Japan," Jenny Chase, chief solar analyst at Bloomberg New Energy Finance, said. "By 2040, developing economies will have spent $1 trillion on small PV systems, in many cases bringing electricity for the first time to remote villages."

BNEF isn’t alone in spotting the move toward solar. The International Energy Agency released provisional data that found in 2014 solar photovoltaic overtook solid biofuels to become the second largest source of non-hydro renewable electricity in OECD Europe, with a share of 17.3%. Since 1990, solar photovoltaic has an average growth rate of 44.6% a year and wind at 27.1% per year.

And Google on August 18 introduced a tool allowing homeowners in the San Francisco Bay Area and Fresno, California, as well as the Greater Boston Area to calculate the costs and benefits of installing rooftop solar panels. Using the same technology as its mapping service, Google's new Project Sunroof website provides user to a bird's-eye neighborhood view, with roofs color-coded in a range from sunny yellow to shady purple. The tool calculates how much money a resident would save with a solar rooftop, then directs the user to companies that can install the panels. (Fluke test and measurement tools can be used to troubleshoot photovoltaic systems as well as wind turbine systems.)

The Bloomberg New Energy Outlook 2015 calls on the expertise of more than 65 in-house country and technology level specialists in 11 countries to provide the perspective on how the global energy market will evolve. In addition, BNEF taps a vast database of projects – where the money is flowing – in order to come up with the projections.

"In the near term, our market projections are based on policy targets and Bloomberg New Energy Finance’s proprietary project database that provides a detailed understanding of planned new builds, retrofits and retirements by country and sector," states the executive summary for the study.

Bloomberg New Energy Outlook 2015 projections:

  • Developing countries will account for 80% of investment in power capacity worldwide a year and will build nearly three times as much new capacity as developed nations.
  • Solar will boom worldwide accounting for 35% of capacity additions and nearly a third of global investment ($3.7 trillion) – becoming the number on sector for new additions over the 25 years. New solar power generation swill be split evenly between small and utility-scale installation.
  • Fossil fuels will maintain a 44% share of generation in 2040.
  • CO2 emissions from the power sector will rise by 13% from 2014-2040.
  • Asia Pacific will account for more than half of new generating capacity. China along will attract $3.3 trillion in new investment – nearly double the total for the Americas.
  • Europe will see an increase in small-scale solar capacity from 6 % in 2014 to 22% in 2040.
  • In the United States, 90% of new builds will be gas powered plants because of low wholesale prices and coal retirements. From 2020 small-scale solar will dominate.
  • Latin America will invest just under $500bn in wind and solar as it tries to diversity away from an over-reliance on drought-prone hydro.
  • In the Middle East and Africa, some 38% of new capacity will be fossil fueled as countries seek to exploit their substantial reserves.
BNEF New Energy Outlook 2015

BNEF New Energy Outlook 2015