More Natural Gas Is Needed as Low Power Prices Dent Solar
(Bloomberg) -- The world will probably need more power from natural gas in the coming decades than previously thought because low electricity prices during the day could limit the rise in solar plants.
The cleanest fossil fuel’s share of the primary energy mix in 2050 will be as much as 29%, according to a report by energy and maritime risk services company DNV GL AS. A similar report a year ago had pegged the share at 25%. Solar’s contribution was cut to 12%, from 16% a year earlier.
The price of electricity during the day will fall so low, investors will probably build less solar photovoltaic capacity than previously expected, Remi Eriksen, president of DNV said by phone.
The surging need for gas underscores that the world probably won’t meet targets implied in the Paris climate deal, DNV GL said. Meeting liquefied natural gas demand after 2028 will require more than $400 billion of investment, global consultants McKinsey & Co. estimated Tuesday in a separate report.
Emissions are set to peak in 2025 amid a dramatic energy transition, yet temperatures will still rise by 2.5 Celsius (4.5 Fahrenheit) by the end of the century, according to DNV GL’s forecasts.
Other features of DNV GL’s most likely energy scenario include:
- Oil demand will peak in the mid 2020s, with capital expenditure on grids and renewables exceeding fossil capex by 2025
- Natural gas will overtake oil as the single largest energy source in 2026
- In 2030 the amount of energy produced will start to decline, even in a world of rising economic production
- Battery technologies could limit the role of gas
- Meeting the Paris target of keeping temperature rises below 2C would require much higher carbon prices soon; “on top of renewables you need more energy efficiency, electrification. You need some sort of carbon capture and storage,” Eriksen said
- Lower energy use over time could free up resources for policies that more aggressively tackle climate protection
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