By Michael Liebrich (Bloomberg),
In my BNEF Summit keynote in London last September, I talked about how far clean energy and transport had come over the last fifteen years. Where renewable energy used to be dismissed as “alternative”, I talked about the “new orthodoxy” of what I called the Three-Third World: by 2040 one third of global electricity will be generated from wind and solar; one third of vehicles on the road will be electric; and the world’s economy will produce one third more GDP from every unit of energy.
The fact that we are on track for the Three-Third World is quite extraordinary. It certainly outstrips my expectations when I founded New Energy Finance in 2004. And it is probably unstoppable: wind, solar and battery costs will continue to fall faster than any mainstream energy forecasters expect, and there is nothing that makes me think President Donald Trump will succeed in his attempts to revive coal.
That’s the good news. The bad news is that even though we are on track to achieve the Three-Third World by 2040, it will not be enough to reach the goals of the Paris Agreement. Electricity currently meets only just over 20% of the world’s final energy needs; and even if you add in the proportion of oil going into passenger cars and light trucks and you are still only addressing about a third of final energy consumption.
As I pointed out at the end of my Summit keynote, there is no emerging new orthodoxy on how to decarbonize the rest of the economy – industry, chemicals, aviation, shipping and, in particular, heat.
As I sat down at the beginning of March to write this piece, the “Beast from the East” brought a prolonged blast of cold air from Siberia to the U.K., blanketing the country in snow, with temperatures well below freezing. This doesn’t happen very often, perhaps once or twice every decade, but it’s a real challenge for anyone thinking about the future of energy. Any solution for deep decarbonization of the U.K. economy has to be able to take the Beast from the East in its stride.
Even in a normal year, the U.K.’s winter heating load – which is practically zero in summer months – reaches peaks six times as high as the country’s electricity load, and it can cycle up and down by a factor of three in just a few days. If your plan for zero-carbon heating relies on electrifying it all, you need to take into account, not just the massive cost of swapping all those domestic boilers and commercial HVAC systems with electric heaters and heat pumps, but also the required investment in generating capacity, grid infrastructure and power storage. In 2016, the Policy Exchange estimated the cost at a staggering 300 billion pounds ($420 billion at current exchange rates).