CRU’s Power Transition Service details how the energy transition in the power sector, i.e the power transition, will lead to big changes. Solar and wind power will form the largest proportion of most national power generation and capacity mixes by 2050. Power costs and prices will change in ways the reader may not expect– the intermittent nature of solar and wind power means they are not necessarily as inexpensive as claimed. Large-scale solar and wind capacity additions will also increase metal demand. This Insight presents a brief introduction of important transition themes covered in more detail in CRU’s Power Transition Service.
Generation will rise >2x, led by solar and wind power
Economic growth will support rising electricity generation while the use of new technologies, including AI, will push electricity generation growth to a higher trajectory. Decarbonisation efforts will raise this trajectory still further. More people will swap fossil-powered vehicles and boilers for EVs and electric heat pumps, respectively. By 2050, we forecast global power generation will exceed twice the current level.
Solar and wind power will form the bulk of rising electricity generation. Solar PV and wind turbine manufacturing costs are declining and CRU carbon abatement curves show that replacing fossil-fired generation with solar and wind power is among the least expensive steps to decarbonise. Many countries are planning to significantly reduce fossil-fired generation and increase solar and wind power over the next decade; and a rise in carbon taxes will help incentivise this transition. While many renewable energy targets and ambitions may not ultimately be realised within the timeline expected, there will still be a significant shift to solar and wind power.
More solar and wind do not necessarily reduce power costs
Increasing solar and wind power reduces grid stability. To address this, intermittent power needs to be supplemented by Battery Energy Storage Systems (BESS) or other means. While solar PV and wind turbine costs have declined, the Levelised Costs of Electricity (LCOEs) of solar and wind will remain elevated once such storage costs are included.
Indeed, energy storage costs will become more important as solar and wind generation begins to comprise a larger proportion of power mixes. For example, some Chinese provinces are already mandating energy storage additions to accompany further intermittent power capacity additions given the grid problems being experienced.
If grid systems do not match solar and wind capacity additions to their natural resource availabilities, they will incur inefficiencies. For instance, Europe is planning to expand both solar and wind power generation significantly, but this may not be most cost efficient route. For example, in Europe, solar power is highest during summer and lowest during winter, while power demand is lowest during summer and highest during winter. Wind better matches the power demand profile, so more wind and less solar may achieve a more cost efficient balance, once storage requirements are considered.
Electricity prices will generally rise in the power transition. Carbon taxes will need to increase steeply to help decarbonise hard-to-abate sectors such as steel production, but these higher carbon taxes will lift the costs of fossil power, which will still be used to help stabilise the grid.
Meanwhile, solar and wind LCOEs will be elevated, partly due to energy storage costs and because LCOE reductions will slow as marginal cost savings become more difficult to achieve. Higher fossil and renewable power will contribute to higher power prices. This interplay between underlying costs, optimal grid configuration and power costs is a key attribute of the analysis in CRU’s Power Transition Service.
Solar and wind power manufacturing will consume 100+ Mt/y metal by 2050
Solar PV and wind turbines are more metal-intensive per unit of power generated than coal, gas and nuclear power installations. As solar and wind power capacities will grow substantially, metal demand will also grow. We expect >80 Mt/y of metal demand from solar and wind manufacturing in 2030 and over 140 Mt/y by 2050.
Wind turbine manufacturing will grow significantly, supporting iron and steel demand; and steel plate consumption will grow particularly quickly. Solar PV manufacturing will also consume steel, though it also consumes significant quantities of silicon, silver and aluminium; and solar installations are starting to support notable demand in these metal markets. Copper will be used extensively in wire and cable, and consumption will be intensive for offshore wind turbines that need to transmit electricity across long distances to shore.
Do we need even more solar and wind power?
The world is warming and is on a 2.5+ degrees C pathway by 2050, which will cause widespread and significant disruption. One way to reach net-zero by 2050 and track a <2.0 degrees C pathway which would cause less disruption, is to drastically reduce fossil power generation and add even more solar and wind power to grids than currently forecast. Understanding how the power mix, costs, prices and metal demand would change under such a scenario is important.
CRU is working to help organisations understand how power generation will change under different assumptions and CRU’s Power Transition Service will soon include a scenario, in addition to our base case, to reflect a more rapid decarbonisation pathway.
If you would like to discuss any aspect of the power transition with us, please contact us. If you would like a demo of CRU’s Power Transition Service, to better understand its features and how it can best serve your organisation, please do get in touch.
