WindEconomics: Reports put wind share at 7-30% by 2035-40

WORLDWIDE: In its New Energy Outlook 2017, published in June, Bloomberg New Energy Finance (BNEF) suggested $3,300 billion would be spent on investments in wind energy between now and 2040.

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Investments in 2016 were estimated at $107 billion, so the annual amount coming in is expected to rise.

BNEF expects investment in wind to grow faster than for solar. By 2040, these two renewable technologies together may account for 34% of global electricity generation.

The BNEF report is one of several that have been published recently. The projections vary, as the chart below illustrates.

A more cautious view comes from consultants Wood Mackenzie, which expects wind to account for 8% of global power supply by the slightly earlier date of 2035.

Wood Mackenzie's figure for wind generation in that year is around 2,500TWh, which in turn, is higher than the US Energy Information Administration (EIA) figure of 2,192TWh. That report was published in 2016. By 2040, the EIA expects wind to account for 7% of global electricity.

Wood Mackenzie also has a "carbon-constrained" scenario that assumes more rapid renewables growth, to around 8,500TWh by 2035. This does not include a breakdown by technology, however.

The highest projections for worldwide wind generation in 2040 come from the Global Wind Energy Council's Global Wind Energy Outlook 2016 in the "advanced" scenario. This suggests wind energy will be generating just under 10,000TWh a year by that time.

Projections for total electricity generation by 2040 are mostly in the 33-37,000TWh a year range, so wind would be responsible for around 30% of all generation.

GWEC's advanced scenario, as its name implies, is ambitious but "well within the capacity of the industry as it is today and is likely to grow in the future".

It is not necessarily unrealistic as projections for wind development are frequently too cautious. The International Energy Agency's Medium-Term Renewable Energy Market Report for 2013, for example, suggested total wind-power capacity at the end of 2016 would be 459GW, while it actually reached 487GW.

GWEC's moderate scenario is slightly higher than the IEA's "450 scenario", which projects 6,127TWh for wind in 2040, slightly higher than Shell's "Oceans" scenario.

The 450 Scenario is defined by the IEA as setting out "an energy pathway consistent with the goal of limiting the global increase in temperature to 2 degsC by limiting concentration of greenhouse gases in the atmosphere to around 450 parts per million of CO2".

Shell's Oceans scenario is the more optimistic of the oil firm's scenarios, envisaging that: "Power is devolved, competing interests are accommodated and compromise is king. Economic productivity surges on a huge wave of reforms".

The IEA "new policies" scenario (3,880TWH by 2040) "broadly serves as the IEA baseline scenario. It takes account of policy commitments and plans that have been announced, including national pledges to reduce greenhouse-gas emissions... even if the measures to implement these commitments have yet to be identified or announced".

Several studies of future renewables development include estimates of generation costs. BP suggests that, from 2025 onwards in North America and China, the mid-range cost for wind is cheaper than solar, coal or gas.

BNEF believes that both PV and wind will undercut gas by 2023. The reports disagree on the relative deployment of solar and wind.

The IEA's World Energy Outlook suggests there will be more wind than solar by 2040 (by about 20%) and the US EIA puts wind ahead of solar by a factor of about 2.5. Shell, however, puts solar ahead of wind by a substantial margin in each of its scenarios.

UK watchdog slams Hinkley Point C economics

The UK government's spending watchdog, the National Audit Office (NAO), has published a critical report on the contract for the Hinkley Point C nuclear power station, concluding that the economics are "marginal".

The contract gives EDF Energy a price of £92.50/MWh (2012 prices - now €105/MWh) for the electricity produced that is index-linked for 35 years.

The NAO argues that the economic case for the project has weakened since the main commercial terms were agreed in 2013, as electricity wholesale prices have fallen and the costs of other technologies, including offshore wind, have fallen.

The report shows how the levelised cost of nuclear has risen in the past ten years, while the cost of offshore wind is now around 2% lower than the cost of nuclear.

In 2008 the estimated cost of nuclear was £46/MWh, but by the time the contract terms were agreed, the price had more than doubled. Offshore wind prices fell from just under £120/MWh in 2010 to £97/MWh in 2017. They are likely to fall further in the light of recent prices achieved in Denmark, the Netherlands and Germany.

The comparison of prices in the figure is not, strictly speaking, fair, as wind prices are only paid for 15 years, whereas the nuclear electricity price will be paid for 35 years.

Shortly after the NAO report was published, press reports in England and France suggested EDF was reviewing the project and likely to conclude that the capital costs will rise from £18 billion to £20 billion, with the completion date slipping from 2025 to 2027. This was confirmed on 4 July, and EDF suggested the rate of return on the project would drop from 9% to 8.2%.

AT A GLANCE - THIS MONTH'S REPORTS

Could renewables be the majors next best thing? Wood Mackenzie, 2017

New Energy Outlook 2017, Bloomberg New Energy Finance, 2017

2017 Energy Outlook, BP, 2017.

Outlook for Energy: a View to 2040 Exxon Mobil, 2017.

Global Wind 2016 Report (near-term projections)/Global Wind Energy Outlook 2016 (longer-term projections), Global Wind Energy Council, 2017

World Energy Outlook 2016, International Energy Agency, 2016

New Lens Scenarios, Shell, 2013

Hinkley Point C, National Audit Office (UK), 2017

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