Banking giant predicts wind and solar could meet two thirds of global power demand, even as electricity use more than doubles
Soaring investment in wind and solar power is set to become one of the defining economic stories of the next three decades, according to a new analysis from Dutch banking giant ING.
The bank’s economics department released an update this week predicting that global demand for electricity is set to more than double by 2050 as part of the transition to a low carbon economy. At the same time total investment in wind and solar projects is expected to reach $13tr through to mid-century, as renewables dominate the global power mix and carbon emissions fall by almost two-thirds against.
“The global power mix currently relies on fossil fuels for two thirds of its generation,” said Gerben Hieminga, energy markets economist at ING. “That could be reversed by 2050 to a combined share of solar and wind power. As a result, power markets become less dependent on global energy markets that are characterized by strong swings in oil, gas and coal prices.”
The report suggests a dramatic clean energy transition will be driven by plummeting renewables costs and soaring demand for power from electric vehicles, trucks, and ships, as well as the wider electrification of the economy.
It predicts that demand for power will rise from approximately 27,000 terawatt hours (TWh) of electricity in 2018 to around 57,000TWh in 2050.
The bank also expects wind and solar to meet the bulk of the new power demand with investment soaring from around $200bn a year currently to approaching $500bn a year from the late 2030s onwards.
“Investments in wind and solar will increase significantly, if on the one hand, the growing demand for electricity is met and on the other, the generation of power is CO2-free,” the report states. “In the period up to 2050, a $13tr investment is needed to increase the share of wind and solar from eight per cent to 66 per cent. The investments are expected to increase throughout the period and between 2036 and 2050 will be significantly higher than the current global investments in the oil and gas industry.”
The bank’s base case scenario suggests global emission can fall by 64 per cent by 2050, putting the world in line with the Paris Agreement’s goal of keeping temperature increases below 2C. But it also warns the rollout of clean technologies over the next decade is not expected to be fast enough to interim goals for 2030, nor the more demanding target to keep temperature increases below 1.5C.
In addition the report highlights how surging investment in renewables should create “plenty of opportunities” for businesses, especially if they can provide innovative new clean technology and design services.
However, it also warned that the renewables revolution continued to face some significant barriers.
“There are two important uncertainties,” it said. “First, public investment is needed globally to reinforce the electricity grid and make it smarter so that the increasing power needed from solar and wind energy can be transported and that the infrastructure can deal with the oscillation from renewables. Government support will also be crucial in spatial planning, smooth permitting procedures and labour. Secondly, power prices will fluctuate more with higher shares of solar and wind energy and can fall on average. Both factors mean that the business case for solar and wind energy is becoming more complex.”