Investment in renewable energy projects globally will rise from $195 billion in 2010 to $460 billion in 2030, according to a recent report from Bloomberg New Energy Finance. This will require almost $7 trillion in new capital over the next 20 years. (See the executive summary of “Bloomberg New Energy Finance Global Renewable Energy Market Outlook,” Nov. 17, 2011.)

But that’s not nearly enough, says the International Energy Agency (IEA). A report from the agency asserts that the world will need to invest $38 trillion in energy projects (both conventional and renewable) through 2035 to meet growing demand, but then another $15.2 trillion to keep greenhouse gas (GHG) emissions to target levels. (See the IEA’s “World Energy Outlook” reports here.)

“Clean Electricity”: 34 Percent of Generation by 2030

The Bloomberg report predicts that energy production from renewable sources, including hydro, will increase from 12.6 percent of global energy production in 2010 to 15.7 percent in 2030. The greatest growth will take place in the solar and wind industries. Those two sources will grow from about $200 billion in installed capacity per year to about $350 billion during that period. (Photo: Offshore wind farm, Denmark. Credit: Kim Hansen, CC BY-SA 2.0.)

Bloomberg expects Europe to remain the largest regional market for renewables between now and 2014, with 25 percent of the world’s investment, followed by some contraction at that point because of the region’s sovereign debt problems. China is expected to become the largest single market by 2014 at about 21 percent, investing about $50 billion per year. U.S. and Canada are expected to continue their growth trend. The report says,

By far the most rapid growth will be seen in the rapidly developing economies of India, the Middle East and North Africa, Africa, and Latin America, which are projected to experience growth rates of 10-18 percent per year between 2010 and 2020. By 2020 the markets outside of the EU, U.S., Canada, and China will account for 50 percent of world demand.

Bloomberg projects that solar energy will benefit most from cost reductions over the next 20 years, with unit costs dropping by 60 percent.

The base case for the report estimates that “clean electricity,” including renewables, hydro, and fossil-fuel generation with carbon capture and sequestration (CCS), will go from 23 percent in 2010 to 29 percent in 2020 to 34 percent in 2030. By then, total global net power production should reach 34,000 Twh (terawatt hours) per year.

Another $14 Trillion Needed to Limit Greenhouse Gases?

The International Energy Agency’s Energy Outlook report lays out three alternative scenarios for future global energy trends:

Scenario	Explanation	Global mean temperature increase over pre-industrial levels
Current Policies Scenario	Business as usual	+6 degrees C
New Policies Scenario	Assumes cautious implementation of policies governments have recently committed to.	+3.5 degrees C
450 Scenario	Assumes that governments take firm measures to limit concentration of GHGs in the atmosphere to 450 parts per million (ppm) in CO2 equivalent.	+2 degrees C

Under the moderate New Policies Scenario, global energy demand rises by one-third between 2010 and 2035. Energy-related CO2 emissions rise by 20 percent, resulting in the likely 3.5-degree increase in average temperature.

The report warns that:

Four-fifths of the total energy-related CO2 emissions permissible by 2035 in the 450 Scenario are already “locked-in” by our existing capital stock (power plants, buildings, factories, etc.). If stringent new action is not forthcoming by 2017, the energy-related infrastructure then in place will generate all the CO2 emissions allowed in the 450 Scenario up to 2035, leaving no room for additional power plants, factories and other infrastructure unless they are zero-carbon, which would be extremely costly. Delaying action is a false economy: for every $1 of investment avoided in the power sector before 2020 an additional $4.3 would need to be spent after 2020 to compensate for the increased emissions.

The 450 Scenario calls for half of emissions reductions to come from energy efficiency. The report’s authors assert that “the most important contribution to reaching energy security and climate goals comes from the energy that we do not consume.”

The 450 Scenario calls for a much different energy mix from the New Policies version:

The share of fossil fuels in the global energy mix falls from 81% in 2009 to 62% in 2035. Global demand for both coal and oil peak before 2020, and then decline by 30% and 8% respectively by 2035, relative to their 2009 levels. By contrast, natural gas demand grows by 26%, though it plateaus by around 2030. The 450 Scenario involves additional cumulative investment in and consumer spending on energy-related equipment on the demand and supply sides, totaling $15.2 trillion relative to the New Policies Scenario, but delivers lower fossil-fuel import bills, reduced pollution and improved health benefits.

IEA projects that from 2011 to 2035 the world will need to invest $38 trillion in energy supply infrastructure to meet demand in the New Policies Scenario — about $20 trillion of that for oil and gas, and most of the $18 trillion that remains for electric power, especially transmission and distribution networks.

From the IEA chart “Share of new power generation and investment, 2011-2035,” I calculate that investment in renewables (hydro, wind, and solar) will come to about 49 percent of total investment under the New Policies Scenario, or about $8-9 trillion. This is not far off from Bloomberg’s projection of about $7 trillion between now and 2030. The discrepancy between the Bloomberg and IEA projections really enters in when you consider the additional $15.2 trillion IEA says will be needed for the 450 Scenario.

The Outlook predicts that non-hydro renewables for electricity will rise from 3 percent in 2009 to 15 percent in 2035. Natural gas does well in all three scenarios in the Outlook. The study shows nuclear generation growing by 70 percent, with the greatest increase in China, Korea, and India.

Coal looms as the 800-pound gorilla in the energy jungle. Under the Current Policies Scenario, coal use would rise 65 percent between now and 2035. Under New Policies, it would rise through 2020, but then level off. However, IEA warns, “Realization of the 450 Scenario requires coal consumption to peak well before 2020 and then decline.” CCS in coal generation will be very important, especially in the 450 and New Policies scenarios.

Emerging economies are expected to account for 90 percent of the growth in energy demand over the coming 25 years. Thirty percent of new demand will come from China, which will become the world’s top energy consumer, consuming almost 70 percent more than the U.S.

GHG Emissions Higher Than Expected in 2010

The IEA’s message is underlined by recent news from the World Meteorological Organization (WMO) that greenhouse gases increased significantly in 2010 (see “WMO Greenhouse Gas Bulletin,” Nov. 21, 2011):

…the globally averaged mixing ratios of carbon dioxide (CO2), methane (CH4) and nitrous oxide (N2O) reached new highs in 2010, with CO2 at 389.0 ppm, CH4 at 1808 ppb and N2O at 323.2 ppb. These values are greater than those in pre-industrial times (before 1750) by 39%, 158% and 20%, respectively.

Discussing carbon dioxide, WMO says:

Carbon dioxide is the single most important anthropogenic greenhouse gas in the atmosphere, contributing ~64% to radiative forcing by LLGHGs. It is responsible for 85% of the increase in radiative forcing over the past decade and 81% over the last five years. For about 10,000 years before the industrial revolution, the atmospheric abundance of CO2 was nearly constant at ~280 ppm. This level represented a balance among the atmosphere, the oceans and the biosphere. Since 1750, atmospheric CO2 has increased by 39%, primarily because of emissions from combustion of fossil fuels …, deforestation and land-use change.

 

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