Bloomberg New Energy Finance New Report – 7/6/16

new forecast by Bloomberg New Energy Finance (BNEF) looking at global power markets for the next 25 years has peak fossil fuel use coming sooner than expected, and not because we’re running out of coal and gas. Alternative energy sources, electric cars, and battery storage are far lower on their expected cost curves than anyone predicted and the effects are starting to show. Analysts appear ready to start believing that a shift in power markets is underway that could fundamentally  change the energy industry in as little as a decade.

peak fossil

A price collapse in fossil fuel markets – caused by the glut of cheap natural gas unlocked via fracking – has already destroyed the value of the U.S. coal industry. With the largest coal company in America, Peabody Energy, declaring bankruptcy and the coal industry as a whole losing over 90% of its value in the last few years, it is clear that coal’s heyday is over.

Though natural gas played a significant role in toppling coal, the decline costs of wind and solar have muted expectations for natural gas’s future. The relatively steep and steady declines in the cost of wind and solar power are just much more appealing to investors than gas’s more conventional path. Gas will never reach the same level of global dominance as coal because decision makers are favoring renewables as the best bet when looking at investing in energy assets, which typically have lifetimes measured in decades, according to BNEF. Some evidence of this fact can be seen in the expected $2.1 trillion in fossil fuels investments through 2040 being dwarfed by $3.4 trillion for solar and $3.1 trillion for wind for the same time frame.

With current cost projects, analysts with BNEF expect that building new wind farms and solar fields will be cheaper in some regions than running the existing coal and gas generators by 2027. That’s not to say that people will be tripping over themselves to throw up turbines and panels; however, new capacity will be overwhelmingly renewable energy from now on with fossil fuel burning plants serving as back up generators.

solar to dominate

The marginal cost of the electricity from solar and wind projects is essentially zero compared to coal and gas plants. And when electricity is essentially free per watt from clean power but not from fossil fuels that pay operating costs in fuel, it is clear which source will be idled. The peak use of fossil fuels will come simply because it takes far longer to make back the money it take to construct fossil fuel burning plants when they’re being idled and anyone could tell you that time wasted is money wasted.

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