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Nick Cunningham

Nick Cunningham

Nick Cunningham is a freelance writer on oil and gas, renewable energy, climate change, energy policy and geopolitics. He is based in Pittsburgh, PA.

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2018: A Breakout Year For Clean Energy

The bullish momentum for global clean energy investment, which rose 3 percent to $333.5 billion in 2017, will continue this year.

There was significant progress in the transition to cleaner energy in 2017, and 2018 should see more of the same. New solar installations will top 100 GW this year, with China likely to make up about half of that total, according to a new report from Bloomberg New Energy Finance (BNEF), which lays out some key predictions for 2018.

However, beginning this year, BNEF says that new countries will become relevant in the race for clean energy, including sizable solar installations slated for Latin America, Southeast Asia, the Middle East and Africa.

Falling costs and proliferating installations of wind and solar are underpinning the sector’s growth. At the same time, cheaper inputs mean that developers can get more gigawatts of clean energy per dollar invested, which explains why the headline investment figure appears to not be growing by all that much.

There were some eye-popping figures and notable progress for new renewable energy projects in 2017. For instance, the tariffs for some onshore wind projects in Mexico dropped to a whopping $18.60 per MWh, a price that “would have been unthinkable only two or three years ago,” Angus McCrone, Chief Editor at Bloomberg New Energy Finance, wrote in the report. Related: Cheap Energy Draws Bitcoin Miners To Canada

Meanwhile, the cost of lithium-ion batteries plunged by an additional 24 percent last year, which raises the odds that by the mid-to-late 2020s, EVs could beat out conventional gasoline and diesel-powered vehicles not just on the life time cost, but even on upfront cost.

Battery costs will continue to decline this year, but at a slower rate than in the past. Soaring prices for cobalt and lithium carbonate will offset some of the declines in cost, to be sure, but BNEF still sees the average cost of battery packs falling by an additional 10 to 15 percent. Economies of scale, larger average battery pack size, and an additional 5 to 7 percent improvement in energy density will continue to boost the economics of batteries, BNEF argues.

EV sales will hit 1.5 million units in 2018, and again, China will lead the way with more than half of that total.

The recent rally in oil prices (and somewhat for gas) will aid in the transition to cleaner energy, making wind, solar and EVs more competitive.

It isn’t all clear skies for clean energy, however, as there are some pitfalls on the horizon. Geopolitical surprises could run headlong into the aggressive bull rally in global stock markets, leading to a selloff. BNEF says that a war in the Middle East, or on the Korean peninsula, or even political turmoil in the U.S., could upset financial markets, which would spell trouble for clean energy.

On top of that, the ongoing withdrawal of monetary stimulus from the U.S., Europe and Japan could raise interest rates, raising the cost of capital and hurting the economics for clean energy, which is an industry characterized by low operating costs, but high capital costs. Related: OPEC Under Pressure As Oil Rally Continues

In the U.S., the Trump administration could decide to slap tariffs on imported solar panels, a decision that is expected as soon as this week. If onerous, the solar tariffs could “boost local prices for PV modules and render a meaningful portion of the U.S. solar project pipeline economically unviable,” BNEF wrote.

Still, the Trump administration will be unable to arrest the decline of coal, regardless of what it says. Cold weather has led to a slight uptick in natural gas prices and may have temporarily boosted coal-fired generation a bit, but the sector is in structural decline. Natural gas production is expected to break new records this year, and BNEF forecasts Nymex prices to average about $3/MMBtu. Ultimately, 2018 is shaping up to be the second largest year for coal plant retirements, with an estimated 13 GW of capacity expected to be shut down.

With coal on the way out in the U.S., coal will make its “last stand” in India. Coal producers around the world have pinned their long-term hopes on India, but from 2019 onward, BNEF predicts, renewable energy will surpass fossil fuels in terms of new electricity generation. “This will be a major milestone for a country that most see as a key battleground for the fight to stabilize global greenhouse emissions growth,” BNEF says.

Overall, while the usual caveats about uncertainty regarding policy, regulation and the performance of financial markets apply, 2018 is shaping up to be another great one for renewable energy.

By Nick Cunningham of Oilprice.com

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  • Lee James on January 16 2018 said:
    Good-o for growth of renewable energy.


    Petroleum -- let's face it -- has not only powered our world; it is funding enemy-exporters and contributing big-time to world instability. We have aircraft carriers guarding sea lanes and oil tankers colliding and exploding. I do not see people tilting over wind turbines and fields of solar collectors.

    Grow energy at home where it is one's own and not nearly so coveted and manipulated by bad-actor states. Also, cut off the oil revenue stream fueling Russia and Iran. Cheeeze ... thoseof bad-actor states by not buying their oil and gas.
  • Lee James on January 16 2018 said:
    Previous comment was inadvertently sent ... Concluding sentence:

    Cheeeze ... other countries are now emulating the misadventures abroad of our own country.
  • Steve on January 17 2018 said:
    I think there's something extremely disingenuous about the term 'clean' or 'cleaner' energy. No energy source is 'clean' and as for being 'cleaner' than other sources, there seems to be little long-term evidence that any are significantly 'cleaner' than the others when all inputs and outputs are considered. Solar and wind-generated power, for example, rely on significant fossil-fuel inputs from the mineral extraction processes to the component production, not to mention the after-use disposal of toxic substances and its impact on the environment. Nuclear power creates perhaps the most toxic byproduct of all our energy sources and it sticks around for millennia.
    Don't get me wrong, I'm no apologist for the oil and gas industry. It is a 'dirty' source that contributes to a number of natural pollution sinks being overwhelmed, with seemingly obvious negative long-term consequences. But we need to acknowledge that all our sources are 'dirty' and perhaps the best approach to mitigating some of the negative consequences of our insatiable appetite for energy is to curtail and even reverse the ever-increasing use of it. Championing one or two sources over the others as some type of panacea to address the negative repercussions of our industrial civilization ignores the costs of this burgeoning dilemma and serves merely to reduce our cognitive dissonance by suggesting we can maintain our unsustainable lifestyles with just a simple transition to some 'cleaner' form of energy. The reality may be quite different.
  • Jhm on January 17 2018 said:
    I think the biggest energy story over the next 5 years will be batteries. We've become accustomed to solar and wind price coming down each year. Seeing PPAs below $20/MWh seems like no big deal. But pair that with big, cheap batteries and the energy world will be turned upside down. BNEF, imho, has been overly conservative in predicting that $100/kWh battery packs will come by 2025. It will come much sooner, around 2021. This will change everything much faster. The story will be how nobody saw how cheap batteries could come so quickly. This will play out in the next five years.

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