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Review on the Grow About the Worldwide Energy Market

Review on the Grow About the Worldwide Energy Market

About 10 years ago, renewable energy sources and electric vehicles were very distant, but now they are in the center of attention.

Once called “alternative”, these technologies encompass an increasing share of energy sector investments and an even greater part of the strategic direction of some of the world’s largest energy companies. In 2005, the global new capital invested in clean energy technologies reached $ 60.5 billion. It went up to $ 235 billion five years later and to $ 501 billion in 2020. Since BloombergNEF began monitoring this industry 16 years ago, a total of more than $ 4 trillion has been invested in clean energy technologies.

Most of the new electricity generation capacity in the world comes from renewable energy sources.

Global View

Mass distribution came with further investment. Global solar generation capacity, which was 5.5 GW in 2005, reached 651 GW at the beginning of 2020. During the same period, wind capacity jumped from 58 GW to 643 GW. EVs that were virtually nonexistent ten years ago approached 10 million by the end of 2020, and EV sales increased by an estimated 33 percent globally in 2020 compared to the previous year, even during an unprecedented economic crisis. Each of these technologies occupy a relatively small share of the total power sector and vehicle distribution, but they all grew rapidly and showed no signs of decline.

As of year-end 2019, China accounted for just over a third of the total installed capacity for wind and solar, with a fifth installed in the United States. Another 45 percent was spread across Germany, Spain, Italy, France, and the United Kingdom. India and Japan are the other large markets outside Europe. Solar and wind power account for the vast majority of all renewable capacity built in the past two decades.

Figure 1: Cumulative Worldwide Installed Wind and Solar Power Generation Capacity

Source: BloombergNEF

China has been the largest electric vehicle market since 2015, with more than half of total annual sales in both 2018 and 2019 in the Asia Pacific region (Figure 5). During the first three quarters of 2020, 711,000 APAC accounting and 1.75 million EVs were sold. Sales in Europe, the Middle East and Africa regions increased as higher emission standards were introduced in the European Union.

Figure 2: Passenger Electric Vehicle Sales

Note: Commercial and low-speed electric vehicles not included.

Source: BloombergNEF, Marklines, vehicle registration agencies

Each of these three technologies has evolved at its own pace and has been influenced by different factors. But generally speaking, all three have gone through two stages of development: cost competitive and cost competitive.

In the pre-cost competitive stage, using technology is more expensive than established solutions. Governments then respond through subsidies or other support to help the new technology reach scale and reduce its cost per unit to the point where it is cost competitive with embedded technologies. At this point, market forces take over and technology proliferates without significant additional government intervention.

Solar and Wind power in many parts of the world have reached a highly cost competitive situation – these may be the first additional megawatts of capacity added to an electricity grid, regardless of the availability of government support. This largely explains its recent explosive growth. EVs have not yet reached subsidized cost parity in most places. However, this threshold is now in sight, thanks to the 90 percent drop in the prices of lithium-ion (li-ion) batteries over the past decade.

Review on the Grow About the Worldwide Energy Market

BloombergNEF projects EVs will begin to reduce the price of conventional internal combustion engine (ICE) vehicles in 2023 on a “tag price” basis in many countries, including the USA. So, after comparing preliminary prices for an EV and an ICE. A consumer will be able to choose the EV for its lower cost, without considering any subsidies. At this point, we can expect consumer adoption to increase at a faster rate.

USA View

It is inevitable that the use of these technologies will increase over time. Even in the absence of additional policy support, BloombergNEF expects US $ 1.7 trillion to be invested in US electricity generation and energy storage assets in the United States by 2050, and an additional US $ 2.4 trillion is required for grid infrastructure. In transport, Bloomberg NEF estimates that EVs will account for 42 percent of U.S. vehicles by 2040 and represent 60 percent of new annual sales. The electric vehicle market more than doubled from $ 8 billion in 2016 to $ 16.5 billion in 2019. Between 2020 and 2030, approximately $ 67 billion worth of passenger EV batteries will be sold in the United States.

Currently, both subsidized and non-subsidized renewable energy can lower the cost of new gas-powered energy on a $ / MWh basis in most of the United States. In recent years, wind and solar power plants have signed low fixed-price electricity purchasing agreements of $ 13 / MWh and $ 23 / MWh, with an average drop in wind PPA prices of 51 percent and solar power 57 percent in the last five years alone.

While these contracts are backed by existing US tax credit subsidies, wind and solar power can also compete with fossil rivals on a newly built, non-subsidized basis.

Towards the end of the 2020s, BloombergNEF projects should be able to outperform existing gas facilities as well, as solar, wind and battery costs continue to decline, with newly built renewable energy sources. The timing of this “tipping point” varies regionally – in places like California with excellent renewable resources and higher gas prices, and then earlier where renewables are weak and gas is cheaper. Mid-Atlantic and Midwest states.

As renewables get cheaper and gas prices slowly rise, utility-scale solar and land wind will dominate new construction, accounting for 39 percent and 19 percent of capacity additions respectively in the United States by 2050. 323 GW of wind and 1,006 GW of PV account for 13 percent and 43 percent of installed capacity.

BloombergNEF estimates that between today and 2050, investment in solar and wind generating assets will total $ 1.1 trillion. The batteries need to attract another 106 billion dollars. Meanwhile, at least 2.9 million miles of new transmission and distribution will be required. Globally, roughly one-third will likely work underground.

Figure 3: Cumulative Installed Capacity in the United States

Note: This is based on the New Energy Outlook Energy Transitions Scenario.

Source: BloombergNEF

EVs are unaffordable for many consumers today, especially when existing vehicle purchase subsidies are taken out of the equation. Still, electric vehicle sales have accelerated in the past five years, rising from 0.7 percent of total U.S. car sales in 2015 to 1.9 percent in 2019.

However, this is expected to change soon. Thanks to rapidly declining battery costs, EVs will be fully cost-effective on a tag price basis by around 2025 with conventional internal combustion engine vehicles, according to BloombergNEF’s long-term Electric Vehicle Outlook estimates. Once this important transition point arrives, electric vehicle sales will begin to accelerate rapidly. By 2040, pure battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs) will make up the majority of new cars sold and 42 percent of cars on US roads (Figure 4 and Figure 5).

Similarly, BloombergNEF expects electric US short-haul distribution vehicles and bus sales to increase in the coming years as battery prices drop. Already large delivery companies such as Amazon and UPS are moving to transform their fleets, while municipalities are trying to add electric school buses.

The power and transportation sectors of the US economy have begun to undergo a radical transformation thanks to technological developments and economies of scale. The change will not only continue in the years to come, it will accelerate significantly – in the meantime, it will create trillions of dollars in economic opportunity. What is less clear is which companies will seize these opportunities and what efforts US policymakers can take to get US companies to supply a US market.