Climate change: a greater renewable commitment is needed

Investments in renewable generating plants (wind farm, CSP, photovoltaic) will grow significantly in coming years, rising from 67 billion euros in 2009 to 112 billion in 2020 and again to 150 billion in 2030 (1).

This amount will still not be sufficient to bring about a significant greenhouse gas emission reduction, according to new estimates drawn up by Bloomberg News Energy Finance (BNEF).

A new long-term projection model from Bloomberg New Energy Finance, the world’s leading independent expert on renewable energy and carbon markets, shows that annual global expenditure on renewable energy projects will increase from $90 billion (USD) in 2009 to $150 billion in 2020.

The model shows that this will further increase to $200 billion by 2030 given current policy targets. The new findings apply the Bloomberg New Energy Finance Global Energy and Emissions Model GE2M, which is a long-term projection model covering the entire world energy system.

The new model is able to forecast investments levels, technologies and policy options required to meet energy and emissions goals.

The Bloomberg New Energy Finance model projects that by 2020 renewable energy will make up 22% of the world’s installed power generation base, up from 13% today, and that it will constitute 31% of power by 2030.

According to the Bloomberg New Energy Finance model, these figures must increase significantly in order to avert the worst effects of climate change and achieve an average of 2tCO2 (tons of carbon dioxide) per head by 2050. Bloomberg New Energy Finance finds that expenditure on renewable energy assets needs to increase to $230 billion by 2020 and $500 billion by 2030 to meet this goal.

This will mean that renewable energy expands to cover just over 40% of installed power generation capacity and contributes 45% to the additional 19Gt (gross tons) of emission reductions needed by 2030.

The Bloomberg New Energy Finance model predicts that the increase in annual global expenditure on renewable energy capacity will come largely from onshore wind power. According to the model, significant expansion will also occur in solar PV and offshore wind turbines.

Important emission reductions will also come from forestry and agriculture and improved industrial energy efficiency. Energy efficiency in buildings will play a critical role, says Bloomberg New Energy Finance, but these are expected to occur as a matter of course because in many cases the measures are already cost effective.

Guy Turner, director of Carbon Market Research at Bloomberg New Energy Finance, said, “These findings confirm that in spite of the ongoing economic malaise, investment in renewable energy should continue to grow, driven heavily by existing government targets. And if governments take the threat of climate seriously, there will be an increasing role for renewable energy up to 2030.”

Joel Lindop, head of GE2M Modeling at Bloomberg New Energy Finance, commented “With more than two years of development and several more years’ data collection, GE2M provides a unique ability to see how different aspects of the world energy system interact and what this means for both policy and investment.”

To curb the emissions to an average of 2 tonnes of CO2 per capita in 2050, an intermediate step will be necessary, so that in 2030, 40% of the world’s electricity demand should be met by renewables (compared to present 13% and 31 % currently expected in 2030).

To this end, investments in new green generation must rise to 172 billion euros in 2020 and 375 billion in 2030.

In order to achieve these targets BNEF suggests a mechanism that includes an up to 75 euros per tonne in 2030 price increase for CO2 emission permits.

As regards the various technologies, BNEF estimates that the capacity growth will particularly concern onshore wind power, with photovoltaics and offshore wind energy also making a significant contribution.

The role of biomass will be relevant, but practically limited to the transport sector, while hydroelectric development will be less significant.

(1) These figures only regard energy generation, not all investments made on the renewable market, which in 2009 amounted to approximately 121 billion euros