Renewable energy is on the rise, but fossil fuels will still play a key role in providing the world’s base-load energy needs over the next 20 years.
Research from Credit Suisse analyst Jens Zimmermann shows how the shift looks set to play out, based on estimates from the International Energy Agency (IEA).
Coal’s share of the fuel mix is forecast to decline from 41% in 2013 to 30% in 2040. Those declines are expected to be fully offset by renewable energy sources, which are set to rise from a 6% to 18% over the same period.
“Nevertheless, more than half (54%) of the electricity will still be produced in thermal power plants using hydrocarbons (primarily coal and gas) in 2040, based on IEA estimates,” Zimmerman said.
Elsewhere, “the share of electricity generated from oil and gas (24%-26%), nuclear energy (11%-12%) and hydro (16%) is seen as remaining fairly stable between 2013 and 2040,” Zimmermann said.
Accounting for coal along with oil and gas, the total contribution from fossil fuels in global electricity production is forecast to fall from 67% in 2013 to 54% in 2040.
The forecast decline is reflective of efforts by policy makers in developed economies to boost production inputs adhering to stricter environmental standards.
A report from the US Solar Energy Industries Association showed that the US added more solar power than any other type of electricity in the first quarter of 2018.
And Australian power provider AGL recently reaffirmed plans to close down its coal power station in Liddell, NSW in 2022.
However, continued use of fossil fuels in the energy mix will be required to meet the sharp increases in demand through 2040 — mainly from India and China.
The expected increase in demand means projected capacity for global electricity generation will have to rise by around 80%, from 5,884 gigawatts (GW) to about 10,500 GW.
“Installed capacity will have to more than double in non-OECD countries, led by China and India,” Zimmermann said.
And in order to meet those targets, we can expect those countries to approve some serious investments in the years to come.
“The IEA estimates that the global power industry has to invest about $A19.7 trillion until 2040,” Zimmerman said.
Of that total, $A11.3 trillion will be allocated to the construction of new power plants that will provide 6,700 GW of extra capacity.
The other $A8.4 trillion will go towards building the distribution infrastructure to deliver the electricity.