There will be no golden age of gas

Since 2008, the single most important force in US power markets has been the abundance of cheap natural gas brought about by fracking. Cheap gas has ravaged the US coal industry and inspired talk of a “bridge fuel” that moves the world from coal to renewable energy. It doesn’t look like that’s going to happen.

The cost of wind and solar power are falling too quickly for gas ever to dominate on a global scale, according to BNEF. The analysts reduced their long-term forecasts for coal and natural gas prices by a third for this year’s report, but even rock-bottompriceswon’tbeenoughtoderail a rapid global transition toward renewable energy.

“You can’t fight the future,” said Seb Henbest, the report’s lead author. “The

Humanity’s demand for electricity is still rising, and investments in fossil fuels will add up to $2.1 trillion through 2040. But that will be dwarfed by $7.8 trillion invested in renewables, including $3.4 trillion for solar, $3.1 trillion for wind, and $911 billion for hydro power.

Already in many regions the lifetime cost of wind and solar is less than the cost of building new fossil fuel plants, and that trend will continue. But by 2027, something remarkable happens. At that point, building new wind farms and solar fields will often be cheaper than running the existing coal and gas generators.

Renewables attract $7.8 trillion

In this discussion of peak fossil fuels, the focus is on electricity generation, not transportation fuels. For cars, peak oil demand will take a bit more time. But the sudden rise of electric cars is on the verge of disrupting oil markets as well, and that has profound implications for electricity markets as more cars plug in.

In fact, electric cars couldn’t come at a better time for developed economies. Take Germany, for example, where increases in efficiency mean that without electric cars, demand for electricity would be headed toward a prolonged and destabilising decline. Electric vehicles will reverse that trend, according to BNEF. The adoption of electric cars will vary by country and continent, but overall they'll add 8% to humanity’s total electricity use by 2040, BNEF found.

Electric cars rescue power markets

Renewable energy and electric cars create a virtuous cycle of demand growth. Unlike fossil fuels — where a surge of demand leads to higher prices — with new energy technologies more demand begets more scale, and that drives prices lower.

The scale-up of electric cars increases demand for renewable energy and drives down the cost of batteries. And as those costs fall, batteries can increasingly be used to store solar power.

Batteries join the grid Solar and wind prices plummet

For every doubling in the world’s solar panels, costs fall by 26%, a number known as solar’s ‘lear ning rate’. Solar is a technology, not a fuel, and as such it gets cheaper and more efficient over time. This is the formula that’s driving the energy revolution.

Capacity factors go wild

One of the fast-moving stories in renewable energy is the shift in what’s known as the capacity factor. That’s the percentage of a power plant’s maximum potential that's actually achieved over time. Consider a wind farm. Even at high altitudes, the wind isn’t consistent and varies in strength with the time of day, weather, and the seasons. So a project that can crank out 100 megawatt hours of electricity during the windiest times might produce just 30% of that when averaged out over a year. That gives it a 30% capacity factor.

As technologies continue to improve and as project designers get smarter evolving economy and its massive shift from coal to renewables mean it will have the greatest reduction in carbon emissions of any country in the next 25 years, according to BNEF. That’s good news for the climate and is a significant change for the global energy outlook.

But that leaves India, which is emerging as the biggest threat to efforts to curb climate change. India’s power demand is expected to rise fourfold by 2040, and the the surface of the Earth from heating more than 2 degrees Celsius, according to BNEF.

BNEF’s report focuses on fundamental economics: Price, demand, supply. It includes climate-related policies that have already been set into action, but doesn’t make any guesses for new policies beyond those. It also doesn't include any jumps in technology that aren’t clearly already under way. Bloomberg