Wind and solar continued their march in 2017, while battery technology and electric vehicles came of age
Renewable energy already provided a quarter of the world's power, and 2017 was another stellar year of growth that will help push that share higher. Wind and solar costs continued to fall, and advances in battery technology promised improved storage for power from intermittent sources and longer-range electric vehicles.
Net additions to renewable energy capacity—which includes hydropower, solar, wind, bioenergy, wave and tidal—grew by a record 165 gigawatts in 2016, 6% higher than in 2015, with further substantial gains likely to be reported for 2017, once all the data is in. The US aside, virtually all major economies now have ambitious renewables targets in place for the next 15 to 25 years.
Falling manufacturing costs and improved power efficiency helped offset the reduction or phasing out of subsidies for the sector in many developed countries, and kept momentum going.
The election of President Donald Trump, who has put coal's revival at the centre of his energy agenda, didn't slow things down in the US. Nearly $30bn was spent on solar and wind projects, Bloomberg reported in October, showing that renewables can now compete on a level playing field with fossil fuels in the right circumstances. If anything, the biggest headache US onshore wind and solar producers faced was too much competition among themselves, which pressured profit margins.
China's government, keen to press its advantage as a renewables powerhouse, charged ahead with its own ambitious plans. In 2017, solar installations passed the country's 2020 capacity target of 105 GW with three years to spare, having installed an impressive 35 GW of solar capacity in the first seven months of this year alone. New targets could now take that total to more than 200 GW in 2020, smashing the previous target. China is also shutting coal-fired power plants. Chinese premier Li Keqiang in March set a target of stopping, delaying or closing down at least 50 GW of coal-fired plant projects in 2017.
9m b/d—Oil demand forecast to be at risk by 2040 through the rise of EVs
For all clean energy's growth, coal still rules the Middle Kingdom. Beijing still expects 58% of its total energy mix to come from coal by 2020, albeit sharply down on the 64% of 2015.
In addition to lower costs, improvements in large-scale battery storage technology added to the sector's buoyant mood. The world's largest grid-linked battery storage system was installed, a 30-MW system in Southern California that helps even out the region's wind and solar intermittency. There's some way to go before such systems are rolled out on a wide scale, but their potential to render gas-fired peaker plants obsolete during times of high demand, when the sun isn't shining or the wind isn't blowing, was made clear.
Battery improvements are also underpinning more bullish forecasts—and beefed-up national targets—for electric vehicles (EVs). The year 2017 may come to be regarded as the point at which the world got serious about replacing gasoline as a transport fuel. EVs still account for only 1% or less of the total global car fleet, but that share is growing fast. The UK, France, China and California all seemed to take steps, albeit small, to eventually phase out the internal combustion engine.
If economies of scale and the sheer weight of effort being put into EV development pays off then costs could fall, range could increase and a lot of people's next car could be an EV—that wasn't something many were thinking even a year ago.
Analysts at Barclays said in October that EV uptake and increased fleet fuel-efficiency could cut oil demand by around 3.5m barrels a day by 2025—roughly the same amount of oil that Iran produces. If EVs were to account for one-third of new cars by 2040—in line with some forecasts—that could wipe around 9m b/d off demand, Barclays added.
Given these developments, it's unsurprising that diversification into renewables is back in play for the international oil companies. While they still talk positively about the long-term future of oil and gas, they're once more taking strategic positions in the renewable sector—and this time they look more likely to stick around for the long haul.
This article is part of Outlook 2018, our annual book looking at energy market trends for the year ahead. To purchase a copy, click here