The 2017 edition of Bloomberg's 'New Energy Outlook' estimates that through 2040, US$10.2 trillion will be invested in electric power generation, 7.4 trillion of which will go to renewable energy.
While falling costs of solar and wind power will accelerate a global energy transition, an additional US$5.3 trillion is required to put the power sector on a trajectory to limit global warming to 2ºC, according to the report.
The European Bank for Reconstruction and Development, the Asian Development Bank and the World Bank have undertaken renewable energy projects in Turkey, China and Solomon Islands, respectively.
June 2017: Could the wave of news on financing for renewable energy deployment be the beginning of a surge? According to Bloomberg’s ‘New Energy Outlook 2017,’ yearly investments in renewables can be expected to grow 2-3% per year reaching US$400 billion a year in 2040.
Rather than focusing on political commitments, the New Energy Outlook models how the changing costs of renewable and conventional energy may change the future energy landscape and resulting risks and opportunities. The 2017 edition finds that thanks to faster than expected declines in the cost of wind and solar power, renewable energy will account for majority of the expected US$10.2 trillion in energy investments up to 2040. Solar power is expected to take US$2.8 trillion of investments, whereas US$3.3 trillion will go to wind power.
Thanks to faster than expected declines in the cost of wind and solar power, renewable energy will account for majority of the expected US$10.2 trillion in energy investments up to 2040.
According to the study, the cost of wind and solar capacity installation will undercut the cost of conventional energy in most markets by 2023. Furthermore, generating electricity from new renewable installations will be cheaper than generation at existing conventional power plants by 2030. The implication of these tipping points is that emissions from the power sector can be expected to peak in 2026 and then decline by 1% a year until 2040. While this decline is steeper than previously estimated, the report warns that a significant gap remains towards “putting the power sector on a 2ºC trajectory.” Filling this gap will require mobilizing investments for an additional 3.9TW of zero-emissions capacity at a cost of approximately US$5.3 trillion. [Bloomberg New Energy Outlook Webpage] [Op-ed by New Energy Outlook Lead Author Seb Henbest] [Climate Action News Release]
Recent announcements support the New Energy Outlook’s findings that investments for renewable energy generation are expected to surge. Over the month of June 2017 alone, financing commitments for a total of 1.7 GW of solar power generation were announced by international financial institutions and regional development banks including large scale projects in Egypt, India and Mozambique. [SDG Knowledge Hub Story on Sustainable Energy Finance Update]
Solar power is not the only type of renewable energy benefiting from new financing commitments in June. The European Bank for Reconstruction and Development (ERBD) approved a loan of €5 million for the development of a geothermal power plant in Turkey. The loan constitutes the first tranche of financing under an ERBD/Clean Technology Fund Initiative to support the exploration of geothermal energy potential in the region. Named PLUTO, the US$125 million initiative aims to provide finance and advice to private developers of geothermal energy to reduce the risks associated with developing geothermal energy technology. [ERBD Press Release, 5 June 2017] [ERBD Press Release, January 2016 on the PLUTO Launch]
Taking a different route towards reducing emissions from electricity generation, the Asian Development Bank (ADB) approved US$5.5 million for a technical assistance grant to develop a large-scale Carbon Capture and Storage (CCS) demonstration project in China. As the New Energy Outlook notes, coal-fired power generation will continue to provide an important share of electricity in Asia, accounting for 34% of electricity generation in 2040. The ADB press release notes that CCS is the only “near-commercial” technology currently available to reduce emissions of coal-fired generation. The technical assistance aims to address key barriers to commercializing CCS in China, including support to engineering design, a feasibility study and environmental impact assessments. [ADB Press Release, 6 June 2017]
ABD also published the ‘Pacific Energy Update,’ which provides an overview of ADB-supported energy initiatives in the Pacific Region. ABD provides financing of US$355.14 million from 2017 to 2022 to support a portfolio of 17 energy projects in 11 Pacific countries that have attracted US$449 million in co-financing. Supported projects include efforts to: promote energy efficiency and renewable energy; maximize energy access for all, and promote energy sector reform, capacity building and effective governance. [ADB Press Release, 5 June 2017] [2017 Pacific Energy Update]
In related news, the World Bank approved a US$33.6 million grant for a river hydropower project in Solomon Islands. Co-financed by the International Renewable Energy Agency/Abu Dhabi Fund for Development (IRENA/ADFD), the Green Climate Fund (GCF) and the Government of Australia, the Tina River Hydro Project is one of the largest energy projects in the country’s history. Its impact on GHG emissions and electricity costs will be particularly relevant since 70% of electricity in Solomon Islands is currently supplied by diesel generators. [World Bank Press Release]