Energy Blue Print
Archive 2010

Moving from principles to action for energy supply that mitigates against climate change requires a long-term perspective. Energy infrastructure takes time to build up; new energy technologies take time to develop. Policy shifts often also need many years to take effect. In most world regions the transformation from fossil to renewable energies will require additional investment and higher supply costs over about twenty years

future investment

investment in new power plants The overall global level of investment required in new power plants up to 2030 will be in the region of $15 trillion. A major driving force for investment in new generation capacity will be the ageing fleet of power plants in OECD countries. Utilities must choose which technologies to opt for within the next five to ten years based on national energy policies, in particular market liberalisation, renewable energy and CO2 reduction targets. Within Europe, the EU emissions trading scheme could have a major impact on whether the majority of investment goes into fossil fuelled power plants or renewable energy and co-generation. In developing countries, international financial institutions will play a major role in future technology choices, as well as whether the investment costs for renewable energy become competitive with conventional power plants. In regions with a good wind regime, for example, wind farms can already produce electricity at the same cost levels as coal or gas power plants.

It would require $14.8 trillion in global investment for the Energy [R]evolution Scenario to become reality – approximately 27% higher than in the Reference Scenario ($11.2 trillion). The advanced Energy [R]evolution scenario would need $17.9 trillion, approximately 20% of the basic version. Under the Reference scenario, the levels of investment in renewable energy and fossil fuels are almost equal, about $4.8 trillion each up to 2030. Under the Energy [R]evolution Scenarios, however, the world shifts about 80% of investment towards renewables and cogeneration, whilst the advanced version makes the shift approximately five to ten years earlier. By then, the fossil fuel share of power sector investment would be focused mainly on combined heat and power and efficient gas-fired power plants.

The average annual investment in the power sector under the basic Energy [R]evolution Scenario between 2007 and 2030 would be approximately $644 billion and $782 billion in the advanced version. This is equal to the current amount of subsidies paid for fossil fuels globally in less than three years. Most investment in new power generation would occur in China, followed by North America and Europe. South Asia, including India, and East Asia, including Indonesia, Thailand and the Philippines, would also be ‘hot spots’ of new power generation investment.

fossil fuel power generation investment Under the Reference scenario, the main market expansion for new fossil fuel power plants would be in China, followed by North America, where the volume required would be equal to India and Europe combined. The advanced Energy [R]evolution Scenario would mean a far lower overall investment in fossil fuel power stations up to 2030; this would total of around $3.9 trillion, compared to $6.2 trillion required under the Reference Scenario.

In all scenarios, China will be by far the largest investor in coal power plants. Under the Reference scenario the current growth trend would continue up to 2030, although under the Energy [R]evolution scenario growth slows down significantly between 2011 and 2030. The advanced version would phase out new build coal power plants after 20 years of lifetime rather than 40, which could lead to stranded investments, depending on coal prices and CO2 costs after 2030. In the Reference scenario the massive expansion of coal firing is due to activity in China, followed by the USA, India, East Asia and Europe.

fuel cost savings with renewable energy The total fuel cost savings in the Energy [R]evolution Scenario reach a total of $4.1 trillion, or $180 billion per year. The advanced Energy [R]evolution has even higher fuel cost savings of $6.5 trillion, or $282 billion per year. This is because renewable energy has no fuel costs. Under the Reference scenario, the average annual additional fuel costs are higher than the additional investment requirements of the basic as well as the advanced Energy [R]evolution.

So in both cases the additional investment for renewable power plants refinance entirely via the fuel cost savings, which add up to $3.6 trillion ($6.9 trillion advanced) from today until 2030. This is enough to compensate for the entire investment in renewable and cogeneration capacity required to implement both of the Energy [R]evolution scenarios. These renewable energy sources would then go on to produce electricity without any further fuel costs beyond 2030, while the costs for coal and gas will continue to be a burden on national economies. Part of this money could be used to cover stranded investments in developing countries which may emerge under the advanced Energy [R]evolution scenario.