Energy IQ : Five insights into the future of energy for independent power producers – Part II

The International Energy Agency’s annual World Energy Outlook aims to deepen our understanding of the future of energy. With this blog post, you can digest the insights most relevant to independent power producers when it comes to the future of energy. Part I of this blog post was themed, “how the pace of growth in electricity use will vary from energy demand and the increasing need for power system flexibility.” Part II highlights three additional insights for energy consultants.

No. #3: Africa offers vast opportunities for power producers

Demand for electricity generation is forecasted to grow in Africa faster than any other region. A mix of factors including over half a billion people to join the continent's urban population, increased access to electricity and expanding mineral extraction activities drive this demand. 

Africa is also well positioned to find the fuels to fulfill this need. On the renewables side, Africa is solar rich, yet only less than 1% of the world's installed solar capacity is in Africa, offering vast opportunities for power producers. When it comes to low carbon fuels, Africa benefitted from recent discoveries of gas deposits. In fact, 40% of global gas discoveries from 2010 to 2018 were in Africa. 

No. #4: There are two sides of the scalability story for renewables

The installed base of solar photovoltaic (PV) has grown over the recent years and forecasted to account for more installed capacity than any other energy source by 2040. Meanwhile, scaling up solar PV results in more electricity produced around the same time of the day in a given region. This could be interpreted as decreasing the value of additional electricity production as the solar PV installed capacity increases (according to Hirth), unless there is enough installed base of energy storage batteries to re-deploy electricity produced for another time of the day.

On the other hand, offshore wind becomes the star performer when it comes to scalability, thanks to its high average annual capacity factor. Offshore wind's annual average capacity factor is already comparable to gas-fired power plants in many regions and better than other variable renewables. This means the growth in installed base in offshore wind wouldn't result in diminishing value of electricity output.

No. #5: Battery storage technologies will become an integral part of energy infrastructure 

Energy storage batteries are projected to be the rising star in building our energy infrastructure, thanks to advancements in battery technologies and decreasing costs. It is estimated there will be a 40-fold increase in battery storage capacity by 2040, an increase faster than almost every other mainstream technology.

Increased use of energy storage batteries will also impact how we manage the intermittent nature of solar and wind. As mentioned above, scaling up solar PV results in producing more electricity around the same time of the day in a given region, and could reduce the value of additional electricity production. Meanwhile, a combination of solar PV and batteries could address this challenge. While the addition of batteries increases the levelized cost of electricity (LCOE), LCOE for solar PV and batteries is forecasted to be competitive with fossil fuels. 

With the rapid changes in energy markets, new insights emerge continuously. Independent power producers that stay current with the latest insights could outperform others in bringing the ideal solutions to address our increasing need for energy and electricity to life. This article aimed to provide you a few of these key insights.

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