europe's economic renewables path (and problem) · capacity and generation outlook 0 500 1,000...

Europe's Economic Renewables Path (and Problem)BNEF's 2019 New Energy Outlook And Its Power

Market Implications

Andreas Gandolfo

October 23, 2019

1 3rd Climate Change Policies and Business Conference - October 23, 2019

Contents

Technology

costs

● Wind turbine costs and capacity factors

● Solar module costs and plant CAPEX

● Lithium-ion battery pack costs

Levelized

costs

● Levelized cost of electricity for new generating capacity

● Running cost for existing fossil fuel assets

● Levelized cost of capacity for new peaking capacity

Capacity

and

generation

outlook

● European cumulative capacity outlook to 2050

● Regional European results for wind and solar

● Generation outlook

Market

revenues

● Power price cannibalization explained

● Power price cannibalization as a function of growing renewables

● The revenue gap


Sustainable materials

& circular economy

BNEF area coverage

Solar Wind Storage Decentralized

energy

Frontier power Heat Impact on

power & utilities

IoT technologies

& platforms

Advanced analytics

& automation

Digital business

model evolution

Digitalization of

energy, industry

& supply chains

Mobility

services

Connected &

autonomous

vehicles

Impact on

transport

Impact on

oil & power

Carbon Power markets Oil & products

Gas & LNG Chemicals Metals

3D printing &

green manufacturing

Composites, bioplastics

& new materials

Impact on industrials,

utilities & manufacturing

Policy

Economics

& forecasts

Sustainability

Innovation

& tech

Finance

Electrified

transport


Technology costs

Wind, solar, and batteries


Source: BloombergNEF, Vestas, ExTool study (Neij et al. 2003), Lawrence Berkeley National Laboratory (LBNL)

Wind turbines are getting cheaper

0

0.5

1.0

1.5

2.0

2.5

3.0

1980 1985 1990 1995 2000 2005 2010 2015 2020

Year

mEUR/MW (2019 real)

Denmark (ExTool) Germany (ExTool) US (LBL) Vestas global WTPI (BNEF)

Rapid reduction 1980s – early 2000s

Maturing supply chain, economies of

scale, larger turbines

Plateau period 2000-2008

Costs fall but rising demand

keeps prices stable

Resumed decline 2009-present

Oversupply, completion and

auctions drive down prices

Wind turbine price trend

Technology costs


Source: BloombergNEF. Note: Operational projects and forecast calculated using our proprietary Wind Farm Capacity Factor Tool and a P50 value.

Wind turbine capacity factors are going upGlobal onshore wind capacity factors

Technology costs

0%

10%

20%

30%

40%

50%

60%

70%

1990 2000 2010 2020 2030 2040 2050

Capacity Factor

BrazilU.K.AustraliaU.S.

Germa

nyChinaIndia

Japan

Operational projects Global forecast range


Source: BloombergNEF. Note: This diagram is a generalization, in reality not all markets will sit explicitly on one curve

Offshore wind is becoming an established technologyOffshore wind cost curves moving from new to established market

Technology costs


Source: Paul Maycook, BloombergNEF

PV modules are getting cheaper fastPV module experience curve

1975

1985

1995

2005

2015

2019e

0

1

10

100

1,000

1 10 100 1,000 10,000 100,000 1,000,000

Cummulative capacity (MW)

Module price ($W, 2018 real, DC)

Historic prices (Maycock)

Chinese c-Si moduleprices (BloombergNEF)

Experience curve

28% learning curveFor every doubling of

capacity costs drop 28%

Technology costs


Source: BloombergNEF

The trend is set to continue

Global benchmark capex forecast for fixed-axis utility-scale PV system

2.03

0.65

0.23 0.18 0.14 0.11 0.10 0.09 0.08

3.53

1.45

0.77

0.620.53

0.45 0.39 0.36 0.33

2010 2015 2020 2025 2030 2035 2040 2045 2050

$/W (2018 real, DC)

Module Inverter Balance of plant EPC Other

Technology costs


Source: BloombergNEF. Note: Excludes pumped hydro

When we say storage we mean Li-ion batteriesGlobal commissioned energy storage breakdown based on energy capacity

67%

95%

85%

3%

3%26%

3% 4%9%

2016 2017 2018

Storage type (% based on MWh)

Other / unknown

Flywheels

Flow batteries

Sodium sulphur

Lead-based

Lithium-ion

Technology costs


Source: BloombergNEF. Note: Prices are for EVs and stationary applications and include both cell and pack costs

Batteries are getting cheaper

Lithium-ion battery pack prices, historical and forecast

2024 estimate price $94/kWh 2030 estimate

price $62/kWh

0

200

400

600

800

1,000

1,200

1,400

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Lithium-ion battery pack price (real 2018 $/kWh)

Observed prices

18% learning rate

Technology costs


Levelized costs

Wind, solar, and batteries beat fossil fuels

in Europe


Source: BloombergNEF. Note: LCOE curves represent realized capacity factors

New vs new – a battle long won

U.K. LCOE for new build solar, onshore wind, and combined cycle gas (CCGT)

Levelized costs

Utility-scale PV

Onshore wind

CCGT

0

20

40

60

80

100

120

140

2019 2025 2030 2035 2040 2045 2050

$/MWh (real 2018)


Source: BloombergNEFSource: BloombergNEF

German LCOE of new solar and wind, and short

run marginal cost of existing coal and gas

Italian LCOE of new solar and wind, and short

run marginal cost of existing coal and gas

New vs old – closing the gap or already there

0

20

40

60

80

100

120

2019 2025 2030 2035 2040 2045 2050

$/MWh (real 2018)

Utility-scale PV Onshore wind Coal (MC) CCGT (MC)

0

10

20

30

40

50

60

70

80

90

100

2019 2025 2030 2035 2040 2045 2050

$/MWh (real 2018)

Utility-scale PV Onshore wind Coal (MC) CCGT (MC)

Levelized costs



German levelized cost of capacity for peaking

technologies

U.K. levelized cost of capacity for peaking

technologies

Batteries are also getting cheaperLevelized costs

0

25

50

75

100

125

150

175

200

225

250

275

2019 2025 2030 2035 2040 2045 2050

$/kW/yr (real 2018)

Utility-scale battery (4h) Utility-scale battery (1h) OCGT

0

25

50

75

100

125

150

175

200

225

250

275

2019 2025 2030 2035 2040 2045 2050

$/kW/yr (real 2018)

Utility-scale battery (4h) Utility-scale battery (1h) OCGT


Source: BloombergNEF. Note: we assume a four-hour battery storage system, the range is a combination of capacity factors and capacity of the battery relative to the power

generating asset (25% to 100%)

Renewables + storage compete with gas

0

50

100

150

200

250

300

2019 2025 2030 2035 2040 2045 2050

$/MWh (real 2018)

Non-tracking PV + storage CCGT Coal Onshore wind + storage

U.K. LCOE of wind and solar paired with a Li-ion battery and LCOE of a CCGT


Capacity and

generation outlook

A wind and solar swept Europe


Source: BloombergNEF

Economic growth of wind and solarCumulative installed capacity in Europe

Capacity and generation outlook

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2012 2019 2025 2030 2035 2040 2045 2050

GW Demand-side flexibility

Utility-scale batteries

Small-scale batteries

Other

Solar thermal

Small-scale PV

Utility-scale PV

Offshore wind

Onshore wind

Biomass

Geothermal

Pumped hydro

Hydro

Nuclear

Oil

Peaker gas

Gas

Coal



Cumulative onshore wind capacity Cumulative utility-scale PV capacity

Growth comes everywhere but at a different pace

0500

2012 2019 2025 2030 2035 2040 2045 2050GW Other Europe Germany France U.K. Iberia Italy North Europe


0

50

100

150

200

250

2012 2019 2025 2030 2035 2040 2045 2050

GW

0

50

100

150

200

250

300

350

2012 2019 2025 2030 2035 2040 2045 2050

GW


Source: BloombergNEF. Note: Does not include storage technologies as they consume more energy than they produce

The face of generation is permanently alteredEuropean generation by source

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2012 2019 2025 2030 2035 2040 2045 2050

TWh Other

Solar thermal

Small-scale PV

Utility-scale PV

Offshore wind

Onshore wind

Biomass

Geothermal

Hydro

Nuclear

Oil

Peaker gas

Gas

Coal



Source: BloombergNEF. Note: Does not include storage technologies as they consume more energy than they produce

The face of generation is permanently alteredEuropean generation indicators

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012 2019 2025 2030 2035 2040 2045 2050

Zero carbon Fossil fuels Renewables Variable renewables



Market revenues?

Power markets struggle with high shares of

renewables


Source: Terminal, BloombergNEF. Note: Realized power price is also known as captured price, or generation weighted price. Future prices reflect the forward curve as of April

24, 2019

Some technologies are already capturing a discounted priceGerman historical power price and wind realized power price

Market revenues?

Power price

Wind realized power price

0

10

20

30

40

50

60

2010 2011 2012 2013 2014 2015 2016 2017 2018

EUR/MWh, nomial

2010 discount:

2 EUR/MWh

2012 discount:

5 EUR/MWh

2018 discount:

7 EUR/MWh



German utility-scale PV discount as a function

of PV capacity installed

U.K. onshore wind discount as a function of

wind capacity installed

The problem is directly related to capacity installed

R² = 0.9507

0%

10%

20%

30%

40%

50%

60%

70%

80%

0 100 200 300 400

Cumulative solar capacity (GW)

Discount on baseload power price

R² = 0.8365

0%

5%

10%

15%

20%

25%

0 20 40 60 80 100

Cummulative wind capacity (GW)

Discount on baseload power price

Market revenues?


Operating profit0

10

20

30

40

50

60

70

2020 2025 2030 2035 2040 2045 2050

EUR/kW/yr, nominal

Operating profit

0

20

40

60

80

100

120

140

160

180

2020 2025 2030 2035 2040 2045 2050

GBP/kW/yr, nominal


Operating profits for German utility-scale PV Operating profit for U.K. onshore wind

Cannibalization dents the returns of projects

0100

2020 2030 2040 2050

GBP/kW/y, nominalOperating loss Missing money Fixed O&M Margins needed for new build

Market revenues?


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europe's economic renewables path (and problem) · capacity and generation outlook 0 500 1,000...

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