Wind and solar set to dominate energy investments to 2040

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Wind and solar to dominate new energy investments; cheapest solar power in Africa; India mulls energy auctions; Saudi Arabia ready for first wind investment.

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The world will continue to make large investments in renewable energy despite the strong competition provided by power from cheap coal and gas, according to the latest long-term energy forecast from Bloomberg New Energy Finance.

The New Energy Outlook 2016 projects an investment of $11.4 trillion in power generation over the next 25 years, to 2040. Over two-thirds of this will be invested in renewable energy while the balance will go towards fossil-fuel and nuclear power generation plants.

The forecast “charts a significantly lower track for global coal, gas and oil prices than did the equivalent projection a year ago. Crucially, however, it also shows a steeper decline for wind and solar costs,” Bloomberg New Energy Finance said. The transformation of the energy sector in different regions, as well as the key findings of NEO 2016 can be seen on the microsite here.

Solar is set to become the cheapest source of energy for most countries, and glimpses of that trend can be seen currently. Earlier this week, Zambia managed to bag the lowest bid for solar in Africa, at 6.02 US cents per kWh , through a World Bank organised auction programme. The 45MW plant will be built by First Solar, the biggest US panel producer, and France’s Neoen. To put that tariff in context, the lowest bid that has been received in India, which has over 7GW of solar installed currently, was at about 6 US cents per kWh.

The auction in Zambia was conducted through the “Scaling Solar” programme, developed to help introduce solar to a country using competitive auctions and the endorsement of the World Bank. That support helps overcome international banks’ concerns about political risk and makes these emerging markets more appealing to developers.

It also includes standardised contracts, eliminating the often lengthy process of negotiating power-purchase deals one at a time. Senegal and Madagascar are also participating in the programme, which may eventually spur development of 850MW of solar capacity in the three power-deprived countries. That would be roughly $1bn in investments.

The largest capacity additions in solar have been in China. Last week, it announced a quota of 18.1GW of solar PV projects in 2016. These are projects which will get subsidy support from the government. In addition to these utility scale projects, China will also set up some projects outside the quote scheme, such as PV poverty alleviation, and building-integrated PV. More details can be found in our note: 2016 Chinese PV quota: changing the rules of the game.

In mergers and acquisitions, Blackstone Group agreed to sell its majority interest in WindMW, the owner of one of Germany’s largest offshore wind farms, to China Three Gorges. Blackstone held 80% of WindMW, which owns the EUR 1.2bn Meerwind park, while German wind project developer Windland Energieerzeugungs owns the remainder.

India’s Tata Power agreed to buy Welspun Renewable’s 1.1GW portfolio of solar and wind in what is being dubbed the country’s biggest clean energy deal. The transaction values Welspun’s assets at INR 77m ($1.15m) per megawatt, said Tata Power’s chief executive officer, Anil Sardana. The acquisition’s enterprise value is INR 92.49bn ($1.4bn), of which the debt component is $820m, he said. Welspun’s assets will boost capacity of Tata Power’s renewable energy unit to about 2.3GW. Barclays advised Welspun and JM Financial Institutional Securities advised Tata. The deal is expected to be closed in September.

India also announced that it would introduce competitive auctions for wind projects and replace the current feed-in tariff model, in a bid to reach the target of 60GW of installations by 2022.

Saudi Arabia, for the first time, sought “expressions of interest” from international developers to build two solar PV plants of 50MW each in the kingdom’s northern region.

The last date for submissions is six days away. General Electric said it would work with Saudi Arabia’s state oil producer to build the kingdom’s first wind turbine. The demonstration plant will be at the Turaif Bulk Plant, in the northwest of the country.

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