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Global energy forecast, part 2 of 5: Wind and solar power

Introduction

Wind and solar power have performed very well over the past decade and this trend is set to continue. However, there are vast differences in opinion regarding the future of these variable renewable generators.

On the one hand, we have the more traditional bodies like oil companies and the IEA who continually underestimate wind and (particularly) solar energy growth. The trend in revisions of recent IEA World Energy Outlooks is illustrated below. The two diamond symbols in the figure show that I expect this trend of upwards revisions to continue for several more years, particularly for solar.

On the other hand, there are many who advocate for complete renewable energy dominance within relatively short timeframes. This linked study is a recent example. In this case, 2040 generation from wind and solar PV are projected to amount to about 25000 and 50000 TWh of annual generation respectively, i.e. about 4x and 7x greater than my forecast.

As an illustration of the difficulty in maintaining the continued exponential growth envisioned by such renewable-dominant scenarios, historical wind and solar growth is plotted below as an example, using data from the BP Statistical Review. Although I only did this after my forecast was made, simple extrapolation of these trends to 2040 (with accounting for retirements) end up in the same ballpark, at about 8000 TWh of wind and 6300 TWh of solar.

Only time will tell where we will end up on this very wide range of possible future outcomes. For reasons to be outlined further below, I believe that wind and solar growth will follow a more traditional energy expansion profile.

But first, let's look at a couple of graphs from the forecast.

Wind power

As shown below, my forecast for wind capacity and generation falls roughly in between the New Policies Scenario (NPS) and the Sustainable Development Scenario (SDS) of the IEA. From 2030 onwards, my generation forecast gets a bit of a boost relative to the IEA forecasts by assuming higher wind capacity factors as large numbers of old turbines start to retire and more offshore wind is installed.

Expressed as a fraction of electricity, my forecast is closer to the New Policies Scenario due to my more optimistic assumptions about electricity demand growth. When considering primary energy, I end up between the NPS and SDS scenarios due to my expectation of slow primary energy demand growth, particularly for oil.

Solar power

I'm more optimistic about solar. As shown below, my forecast is higher than all the IEA scenarios, both in terms of capacity and generation. I expect solar PV cost reductions to continue outpacing the IEA assumptions. Additional tailwinds will come from the gradual shift of global growth to sunnier regions.

In terms of electricity and primary energy shares, my forecast ends up slightly below the IEA SDS. The SDS is very optimistic with respect to energy efficiency, leading to relatively low electricity and primary energy growth. Although I am optimistic about energy efficiency and reduced energy consumption via intelligent lifestyle design, I do expect that the developing world will continue to demand robust energy and (particularly) electricity growth.

Wind and solar performance in a cost-optimal mix

To better understand the dynamics of wind and solar, we'll look at some results form a simple power system model that optimizes investment and hourly dispatch of 12 different technologies. Details about this model can be found in this working paper. However, I have reduced the wind, solar, battery and electrolysis costs to €1200/kW, €500/kW, €170/kWh and €400/kW, respectively. These wind and solar costs are about 15% and 21% lower than the IEA 2040 cost projections for Europe used in the article linked earlier. Battery and electrolysis costs are 7% and 13% lower, respectively.

The model is loosely based on Germany and uses wind and solar performance representative of Europe in 2040, with capacity factors of 30% and 13% respectively. It has the simple objective of deploying the available technologies in such a way that total system costs (capital, operating costs, fuel costs and emissions taxes) are minimized.

Six different simulations were completed:

  1. All in: This case includes all available technologies: nuclear (€5000/kW capital cost), coal, gas combined cycle (NGCC), gas open cycle (OCGT), onshore wind, solar PV, coal and gas with conventional post-combustion CO2 capture and storage, hydrogen-fired combined and open cycle plants, battery storage, and PEM electrolysis.
  2. No nuclear: A case where nuclear is eliminated as an option.
  3. No CCS: A case where nuclear and CCS are eliminated as options.
  4. No batteries: A case where nuclear, CCS and batteries are eliminated as options.
  5. No electrolysis: A case where nuclear, CCS, batteries and electrolysis are eliminated as options.
  6. Added grid costs: the All in case with €10/MWh of grid-related costs added to wind and solar.

Optimal capacity and generation mixes of these six cases are shown below with a CO2 tax of €100/ton and a discount rate of 7%. In addition, the black lines on the two plots show the levelized system cost in the capacity graph and the system CO2 emissions intensity in the generation graph.

LCOE = Levelized cost of electricity; OCGT = Open cycle gas turbine; NGCC = Natural gas combined cycle; CCS = CO2 capture and storage; PEM = Proton exchange membrane electrolysis. 

The first three cases in the above figure clearly show that the elimination of nuclear and CCS as options substantially increases the optimal wind and solar market share. However, this comes at a moderate increase in cost and a large increase in emissions. The emissions come from the need for sizable unabated NGCC power generation to back up wind and solar power in the No CCS case.

The No batteries case shows that batteries can play a significant role in increasing the optimal solar share, whereas wind share is unaffected. This is understandable since batteries are best suited for short-term energy storage following the daily generation pattern of solar. A similar small, but significant effect is shown in the No electrolysis case. It is therefore clear that these energy storage technologies can significantly enhance wind and solar performance.

However, as shown in the final case, when the added grid-related costs of wind and solar are accounted for, the optimal mix consists almost exclusively of nuclear power. These added costs arise from the spatial variability of wind and solar power, requiring large grid expansions to bring the produced electricity to demand centers and capitalize on the seasonal complementarity of wind from the north and solar from the south.

As Germany is currently illustrating, in addition to being quite costly, this grid buildout faces other problems as well. Much like nuclear power, grid expansion faces strong public resistance that causes large cost escalations and multi-year delays. This is a major problem when a rapid transition is targeted.

If one recognizes these practical challenges with integrating high shares of wind and solar and entertains the possibility of true technology-neutrality by the end of the 2020's (as assumed in this forecast), it is easy to envision scenarios with relatively slow wind and solar growth. However, the momentum behind wind and solar is strong and their impressive cost reductions continue. Therefore, I have opted for middle-of-the-road numbers in this forecast.

So, what do you think? Am I too pessimistic? Too optimistic? Do you agree that solar will overtake wind around 2030? Let me know in the comments section below.

Schalk Cloete's picture

Thank Schalk for the Post!

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Discussions

Matt Chester's picture
Matt Chester on Oct 30, 2019 9:21 pm GMT

Thanks for sharing your forecasts, Schalk. Have you done any post mortem of IEA forecasts, your forecasts, and other forecasts after the actual data has come out to see where you can identify areas of weakness in each respective model and apply that in the forward-looking analysis?

Schalk Cloete's picture
Schalk Cloete on Oct 31, 2019 6:57 pm GMT

Hi Matt. I wrote this article about five years ago on the historical performance of the IEA scenarios, finding that the IEA substantially overpredicted oil and underpredicted coal and renewables at that time. 

In general, anything that seriously departs from prior trends is very hard to capture. In recent times, that trend has been China. The Chinese coal explosion following the turn of the century was badly missed by the IEA. The recent Chinese solar PV explosion (although about 10 times smaller than the coal explosion from decade earlier) was also missed.

My forecast just has one such inflection point: the onset of technology neutral climate policies around 2030. This policy shift does not have much of an effect on wind and solar covered in this article, but it does benefit other clean energy technologies as will be discussed later in part 4.  

Matt Chester's picture
Matt Chester on Oct 31, 2019 9:06 pm GMT

Interesting-- looking forward to part 4! Why is 2030 the inflection point for climate policies that you're looking at?

Schalk Cloete's picture
Schalk Cloete on Nov 1, 2019 5:24 pm GMT

It's based on the speculation that the combination of the official exhaustion of the 1.5 degrees carbon budget and potentially the next big El Nino event will tip the global political landscape over the edge due to a massive public outcry. I describe it in a bit more detail in my first article about this forecast. 

Nathan Wilson's picture
Nathan Wilson on Nov 13, 2019 5:16 am GMT

Very interesting to see the predicted impact of various technologies (especially the low impact of batteries and electrolysis) on future grid mixes. 

It is disappointed to see the high costs implied by our current strategy of focusing primarily on solar and wind.

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