Every year, the clean energy experts at Bloomberg New Energy Finance (BNEF) predict what will happen in the sector in the year ahead. This year’s predictions have landed.
BNEF chief editor Angus McCrone writes that the falling costs in lithium-ion batteries, solar and wind energy that 2017 saw will continue in 2018 thanks to economies of scale and technological improvements, while the global economic recovery and associated strengthening of oil and coal prices will make clean energy and electric vehicles more competitive against their fossil fuel counterparts.
However, tightening monetary policies and higher interest rates “could start to affect the cost of capital, and therefore the relative competitiveness, of high-capex, low-opex technologies such as wind and solar”.
The research group predicts that 2018 investment in clean energy will be about the same as 2017’s $333.5 billion, but more capacity will be installed because of “the remorseless reductions in solar (and to some extent, wind) project capital costs”. More than 100GW of solar capacity will be installed in 2018, BNEF head of solar Jenny Chase predicts and although China will still dominate with about half the market, new markets will also open up. “This is the year that Latin America, south-east Asia, the Middle East and Africa will make up a measurable slice of the total. For instance, Mexico is likely to be a 3GW-plus market in 2018, and Egypt, the UAE and Jordan between them at 1.7-2.1GW,” she writes.
The increase in renewable energy capacity will be accompanied by a continuing fall in the price of lithium-ion batteries, although the pace of the fall will be slower than in recent years because of an increase in raw material prices, says Logan Goldie-Scot, head of energy storage. “Cobalt and lithium carbonate prices rose 129% and 29% respectively in 2017. This will start to increase average cell prices in 2018, leading to many headlines about how the EV revolution and the rise of energy storage are under threat. Despite this, we expect average pack prices to decline by 10-15%, driven by economies of scale, larger average pack sizes and energy density improvements of 5-7% per year,” he asserts.