Coal and gas to remain cheap but renewable costs to fall by 2040

Coal and gas prices are likely to remain low but will fail to stop the low carbon transformation of the global electricity system.

That’s because the cost of renewables will keep falling by 2040, according to Bloomberg New Energy Finance (BNEF) which forecasts an investment of $11.4 trillion (£7.7tn) in global power generation capacity during the same period.

Its New Energy Outlook 2016 (NEO2016) report predicts coal and gas prices to fall by 33% and 30% respectively.

It also expects the cost of generation for onshore wind to fall by 41% and solar projects by 60% – making them the cheapest technologies for power production in many countries.

According to NEO2016, fossil fuels will attract $2.1 trillion (£1.4tn) as investment will continue in emerging economies but funding for renewable projects will total $7.8 trillion (£5.3tn) in the next 25 years.

However the 2⁰C scenario agreed at COP21 would require much more money, it adds, suggesting the world would need to invest an additional $5.3 trillion (£3.6tn) in clean power by 2040.

Renewables are expected to dominate in Europe and overtake gas in the US during the same period.

Other low carbon technologies will also grow significantly during the same period. Electric Vehicles will add 8% of global electricity demand and represent 35% of worldwide new light-duty vehicle sales.

The small-scale battery storage market will reach $250 billion (£170bn), with EVs driving down the cost of lithium-ion batteries, making them increasingly deployed alongside residential and commercial solar systems.