The silent Energy [R]evolution
20 years in the making – June 2012
Status Quo – the global power plant market in 2011
The global power plant market continues to grow and reached a record high in 2011 with approximately 292 GW of new capacity added or under construction at the beginning of 2012. While renewable energy power plants dominate with close to 40% of the overall market, followed by gas power plants with 26%, coal power plants still represent a share of 34% or just over 100 GW. That is the equivalent of roughly 100 new coal power plants. These power plants will emit CO2 over the coming decades and lock-in the world’s power sector towards a dangerous climate change pathway.
Currently planned Power plants
The project pipeline for new renewable power plants is huge, but data are highly unsecure. Therefore, all given numbers are estimations and the experience shows that not all power plants will be built. However, those ranges show that both fossil and renewable power plants have a similar size. It is the future energy policy that will decide which projects will go ahead and which won’t. The current project pipeline for wind and solar would however be enough to implement the Energy [R]evolution scenario until 2020.
The global power plant market from 1992 to 2012 and the Energy [R]evolution plan for the next 20 years
Since 1992 the power sector has changed massively. While a renewable energy market hardly existed in the early 1990s, a steadily growing renewable industry has achieved a significant market share, especially during the past five years. However more needs to be done as the coal market is still rapidly expanding – especially in China. Between 1992 and 2012 only 22% of all the newly installed power plants worldwide used renewable energy technologies, such as wind and solar, while 75% used fossil fuels. These fossil fuel power plants will operate for at least another decade and will emit billions of tons of CO2. The majority of the new coal power plants – 70% - are in China, while only 6.5% of new coal power plants have been built in the USA and Europe combined. However, China has simultaneously rapidly expanded wind power plant installations and managed to double annual market volumes every year between 2003 and 2010. In 2011, the new installed capacity of wind turbines was close to 18,000 MW – which represents almost half of the world market. In the past 20 years, Europe installed the majority of all new solar photovoltaic power plants (66%).
The required energy mix in 20 years from now
In order to stay under a global temperature increase of +2°C, the future power plant market needs to maintain the growth rates of the renewable industry of the past 10 years, while decreasing the overall investment in new fossil fuel power plants to an absolute minimum Under the Energy [R]evolution scenario, this means an immediate halt to all new, planned coal power plants in all industrialized countries, and a stop of new coal plant installation in India and China within the next years. In summary – the power plant market for new fossil fuel power will come to an end around 2030 when no new gas power plants will be built either. Over the next 20 years, more fossil and nuclear power plants will be shut down when they come to the end of their lifetime, than new ones will be installed.
The Global Power Plant market between 1970 and 2010
Between 1970 and 1990, OECD countries that electrified their economies mainly with coal, gas and hydro power plants dominated the global power plant market. The power sector, at this time, was in the hands of state-owned utilities with regional or nationwide supply monopolies. The nuclear industry had a relatively short period of steady growth between 1970 and the mid 1980s - with a peak in 1985, one year before the Chernobyl accident - while the following years were in decline, with no sign of a ‘nuclear renaissance’, despite the rhetoric. Between 1990 and 2000, the global power plant industry went through a series of changes. While OECD countries began to liberalise their electricity markets, electricity demand did not match previous growth, so fewer new power plants were built. Capital-intensive projects with long payback times, such as coal and nuclear power plants, were unable to get sufficient financial support. The decade of gas power plants started.
Economies of developing countries, especially in Asia, started growing during the 1990s, and a new wave of power plant projects began. Similarly to the US and Europe, most of the new markets in the ‘tiger states’ of Southeast Asia partly deregulated their power sectors. A large number of new power plants in this region were built from Independent Power Producer (IPPs), who sell the electricity mainly to state-owned utilities. The dominating new built power plant technology in liberalised power markets are gas power plants. However, over the last decade, China focused on the development of new coal power plants. Excluding China, the global power plant market has seen a phase-out of coal since the late 1990s; the growth is in gas power plants and renewables, particularly wind.
Power plant markets in the US, Europe and China
Electricity market liberalisation has a great influence on the chosen power plant technology. While the power sector in the US and Europe moved towards deregulated markets, which favour mainly gas power plants, China added a large amount of coal until 2009, with the first signs for a change in favour of renewables in 2009 and 2010.
US: The liberalisation of the power sector in the US started with the Energy Policy Act 1992, and became a game changer for the entire power sector. While the US in 2010 is still far away from a fully liberalised electricity market, the effect on the chosen power plant technology has changed from coal and nuclear towards gas and wind. Since 2005, a growing number of wind power plants make up an increasing share of the new installed capacities as a result of mainly state based RE support programmes. Over the past year, solar photovoltaic plays a growing role with a project pipeline of 22,000 MW (Photon 4-2011, page 12).
Europe: About five years after the US began deregulating the power sector, the European Community started a similar process. Once again, the effect on the power plant market was the same. Investors backed fewer new power plants and extended the lifetime of the existing ones. New coal and nuclear power plants have seen a market share of well below 10% since than. The growing share of renewables, especially wind and solar photovoltaic, are due to a legally-binding target for renewables and the associated renewable energy feed-in laws which are in force in several member states of the EU 27 since the late 1990s. Overall, new installed power plant capacity jumped to a record high, due to the repowering needs of the aged power plant fleet in Europe.
China: The steady economic growth in China since the late 1990s, and the growing power demand, led to an explosion of the coal power plant market, especially after 2002. In 2006 the market hit the peak year for new coal power plants: 88% of the newly installed coal power plants worldwide were built in China. At the same time, China is trying to take its dirtiest plants offline, within 2006~2010, total 76,825MW of small coal power plants were phased out under the “11th Five Year” programme. While coal still dominates the new added capacity, wind power is rapidly growing as well. Since 2003 the wind market doubled each year and was over 18,000 MW by 2010, 49% of the global wind market. However, coal still dominates the power plant market with over 55 GW of new installed capacities in 2010 alone. The Chinese government aims to increase investments into renewable energy capacity, and during 2009, about US$ 25.1 billion (RMB162.7 billion) went to wind and hydro power plants which represents 44% of the overall investment in new power plants, for the first time larger than that of coal (RMB 149.2billion), and in 2010 the figure was US$26 billion (RMB168 billion) – 4.8% more in the total investment mix compared with the previous year 2009.
The global market shares in the power plant market: Renewables gaining ground
Since the year 2000, the wind power market gained a growing market share within the global power plant market. At this time only a handful of countries, namely Germany, Denmark and Spain, dominated the wind market, but the wind industry now has projects in over 70 countries around the world. Following the example of the wind industry, the solar photovoltaic industry experienced an equal growth since 2005. Between 2000 and 2010, 26% of all new power plants worldwide were renewables – mainly wind – and 42% gas power plants. So, two-thirds of all new power plants installed globally are gas power plants and renewables, with close to one-third as coal. Nuclear remains irrelevant on a global scale with just 2% of the global market share. About 430,000 MW of new renewable energy capacity has been installed over the last decade, while 475,000 MW of new coal, with embedded cumulative emissions of more than 55 bn tonnes CO2 over their technical lifetime, came online – 78% or 375,000 MW in China.
The energy revolution towards renewables and gas, away from coal and nuclear, has started on a global level already. This picture is even clearer, when we look into the global market shares excluding China, the only country with a massive expansion of coal. About 28% of all new power plants have been renewables and 60% have been gas power plants (88% in total). Coal gained a market share of only 10% globally, excluding China. Between 2000 and 2010, China has added over 350,000 MW of new coal capacity: twice as much as the entire coal capacity of the EU. However China has recently kick-started its wind market, and solar photovoltaics is expected to follow in the years to come.