How the World Is Saving Itself From Coal Even Without a UN Prod

Bloomberg, 5 Nov 2015

Snapshot

  • Bloomberg New Energy Finance sees coal demand declining.
  • Renewables now account for about half of all new investment in generating capacity. It’s a sector that absorbs about $300 billion every year. That’s going to replace fossil fuel capacity.
  • China will start scrapping coal capacity in the 2020s.
  • We can get a divergence between economic growth and energy growth, and particularly divergence from fossil energy growth.

 

The energy industry is easing away from coal and will keep moving in that direction regardless of what happens at the United Nations climate talks in Paris next month.

That’s the view of Michael Liebreich, the founder of Bloomberg New Energy Finance. At a conference in Shanghai this week, he identified several trends that show why Paris isn’t the “be all and end all” for shaping energy. He said:

1. China will start ratcheting down its power generation capacity fueled by coal early in the next decade. The reductions in coal burning will accelerate as the 2020s progress.

2. Voluntary pledges for the climate talks from both industrial and developing nations suggest coal demand will fall, and BNEF’s outlook is that it could fall much sharper than the relatively conservative International Energy Agency has estimated.

3. The increase in the flow of money into clean energy is extraordinary, with renewables now accounting for about half of all new investment in generating capacity. That’s going to replace fossil fuel capacity.

China net coal capacity additions

China net coal capacity additions

The above chart highlights the Bloomberg New Energy Finance forecasts that China will see “net closure” of coal capacity starting around 2020.

“It is the reduction in the costs of renewable energy that will be able to meet your incremental power demand,” Liebreich said to his audience in China, especially because “we know the economy won’t be growing at 10 percent but nearer to six or seven percent.”

While coal loses, renewables gain quickly …

New installations of clean energy from 2004-2014.
New installations of clean energy from 2004-2014.

“Around the world, we’ve reach a point now where renewable energy is a substantial proportion of the electricity on the grid in a lot of countries,” Liebreich said. “We’re now talking about a sector that absorbs about $300 billion every year.”

This means economic growth won’t depend on fossil fuels.

“The economy can develop, and energy can go in a different direction,” he said. “You can get divergence between economic growth and energy growth, and particularly divergence from fossil energy growth.”

Coal demand scenarios

The above chart shows various scenarios for coal. The Bloomberg New Energy Finance outlook combines weaker demand with more renewables. Coal is the sector “most in the firing line,” as Liebreich puts it.

What are the implications for Paris?

“Paris is going to be a success,” Liebreich said. “It’s going to be an imperfect success.”

“One potential way for countries to achieve their (commitments) when you add it all together implies a pretty dramatic decline in global demand for coal,” he said. “Not an increase but a decline.”

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