Bloomberg New Energy Finance (BNEF) has published the latest annual long-term forecast for global power, the New Energy Outlook 2015 (NEO 2015). According to the report, the cost of solar power will become lower than today, and distributed generation systems including rooftop arrays will drive an investment of up to US$2.2 trillion, while the total investment in the solar segment will reach US$3.7 trillion.

The report indicates that the large-scale, centralized generating facilities will be replaced by small-scale, distributed systems. End users like households and commercial customers will adopt solar PV systems and energy storage systems, leading the changes in the future energy deployment. However, coal and fossil fuel will note be completely replaced, and the greenhouse gas emission will raise in the next decades.

Five major shifts that will take place between now and 2040, says NEO 2015:

1. Solar, solar everywhere. The further decline in the cost of photovoltaic technology will drive a $3.7 trillion surge in investment in solar, both large-scale and small-scale.
2. Power to the people. Some $2.2 trillion of this will go on rooftop and other local PV systems, handing consumers and businesses the ability to generate their own electricity, to store it using batteries and – in parts of the developing world – to access power for the first time.
3. Demand undershoots.The march of energy-efficient technologies in areas such as lighting and air conditioning will help to limit growth in global power demand to 1.8% per year, down from 3% per year in 1990-2012. In OECD countries, power demand will be lower in 2040 than in 2014.
4. Gas flares only briefly. Natural gas will not be the "transition fuel" to wean the world off coal. North American shale will change the gas market, but coal-to-gas switching will be mainly a US story. Many developing nations will opt for a twin-track of coal and renewables.
5. Climate peril.Despite investment of $8 trillion in renewables, there will be enough legacy fossil-fuel plants and enough investment in new coal-fired capacity in developing countries to ensure global CO2 emissions rise all the way to 2029, and will still be 13% above 2014 levels in 2040.

Small-scale PV systems will dominate

Jon Moore, chief executive of Bloomberg New Energy Finance, commented: "This year's report pushes our thinking further, with updated analysis on the slowing levels of demand we are already seeing, and on the proliferation of small PV systems."

The small-scale solar boom will see worldwide capacity of rooftop, building-integrated and local PV soar from 104GW in 2014 to nearly 1.8TW in 2040, a 17-fold increase. This will be made possible by a 47% crash in the cost of solar projects per megawatt, as conversion efficiencies improve and the industry moves to new materials and more streamlined production methods.

Jenny Chase, chief solar analyst at Bloomberg New Energy Finance, said: "Up to now, small-scale solar investment has been dominated by wealthy countries such as Germany, the US and Japan. By 2040, developing economies will have spent $1 trillion on small PV systems, in many cases bringing electricity for the first time to remote villages."

Michael Liebreich, chairman of the advisory board at Bloomberg New Energy Finance, commented: "NEO 2015 draws together all of BNEF's best data and information on energy costs, policy, technology and finance. It shows that we will see tremendous progress towards a decarbonised power system. However, it also shows that despite this, coal will continue to play a big part in world power, with emissions continuing to rise for another decade and a half, unless further radical policy action is taken."

Fossil-fuel will generate over 40% of the global energy

NEO 2015 finds that some $12.2 trillion will be invested in global power generation between 2015 and 2040, with only 22% of that taking place in OECD countries against 78% in the power-hungry emerging markets. Renewables will account for two thirds of that total over the next 25 years, with the old staples of coal, gas and nuclear generation attracting respectively $1.6 trillion, $1.2 trillion and $1.3 trillion.

BNEF's forecast sees onshore wind reaching 1.8TW globally by 2040, up five-fold, utility-scale PV 1.9TW, up 24-fold, offshore wind 198GW, up 25-fold, and "flexible capacity" (ways of balancing variable renewable sources on the grid, including batteries, demand response and fast ramp-up gas generation) reaching 858GW, up 17-fold. Nevertheless, even in 2040, fossil fuels will still account for 44% of world generation (down from 67% in 2014).

The result is that, with global electricity generation rising by 56% between 2014 and 2040 as economies develop and populations grow, global power sector emissions will increase from 13.1 gigatons (Gt) to a peak of 15.3Gt in 2029. Greater burning of coal by developing countries will more than offset the substitution of coal-firing by gas and renewables in developed economies. World emissions will then fall back, but only to 14.8Gt in 2040, still 13% above 2014 levels.

Seb Henbest, head of Europe, Middle East and Africa for Bloomberg New Energy Finance and lead author of NEO 2015, said: "The CO2 content of the atmosphere is on course to exceed 450 parts per million by 2035 even if emissions stay constant, so the trend we show of rising emissions to 2029 makes it very unlikely that the world will be able to limit temperature increases to less than two degrees Centigrade.

"The message for international negotiators preparing for the Paris climate change conference in December is that current policy settings – even combined with the vast strides renewables are making on competitiveness – will not be enough. Further policy action on emissions will be needed."

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