New wind will be cheaper than existing gas by 2028: BNEF

By 2028 it will be cheaper to generate power by building a new onshore wind farm than by turning on an existing gas plant, according to an annual report by Bloomberg New Energy Finance.

The report said the UK’s generation mix will “change dramatically” over the next 25 years, with new utility-scale solar also becoming cheaper than existing gas by 2033.

Between now and 2040 $186 billion will be invested in the UK’s generating capacity, the report said, with 77 per cent being spent on renewables. As a result fossil fuels’ share of the generation mix will roughly halve to 30 per cent, while renewables share will roughly double to 70 per cent. Despite this gas will remain the largest single source of power (110TWh).

It said government support for “uneconomic nuclear and offshore wind capacity will account for nearly half of all investment” with $56 billion being spent on offshore wind and $34 billion being spent on nuclear. Solar will account $49 billion of spending, largely driven by domestic uptake.

Because of the government’s support, the report said offshore wind and nuclear will make up a majority of new capacity between now and 2030, with gas and small-scale solar also making significant contributions.

However, it said beyond then, new gas and nuclear builds will largely drop off as new onshore wind and utility-scale solar builds begin to make up a significant proportion of new capacity.

The UK’s energy mix: Now and 2040

Source: Bloomberg New Energy Finance

In total 10GW of new gas plants will be built to replace lost coal and deal with fluctuations in nuclear capacity, bringing the overall total to 28GW – down 5GW on 2015.  The report said by 2040 small-scale solar capacity will reach 41GW – more than 10 times its current capacity. Utility-scale solar and offshore wind will also increase by large multiples, reaching 26GW and 27GW respectively.

Large additions to variable renewable generation will require more flexible capacity, the report added. As a result, it said flexible capacity – including demand-side response and storage – will reach 12 per cent of the UK’s total capacity of 167GW by 2040, with 5GW coming from DSR and 9GW coming from batteries.

Power demand is predicted to rise by 15 per cent over the period, as a 12 per cent fall in underlying demand is offset by the impact of the large-scale uptake of electric vehicles from the 2020s onwards, which will increase demand by 80TWh.