The decreasing costs of renewables technology could halt the global growth in demand of fossil fuels, according to a report launched on Thursday.
A new report co-authored by the Grantham Institute at Imperial College London and the Carbon Tracker Initiative shows that falling costs of electric vehicle and solar technology, and their increasing use globally could stop growth in demand for oil and coal from 2020.
The scenario analysis warns that big energy companies are seriously underestimating low-carbon advances.
As an example, growth in electric vehicles (EVs) alone could lead to 2 million barrels of oil per day (mbd) being displaced by 2025, which is the same volume that caused the oil price collapse in 2014-15.
"This scenario sees 16 mbd of oil demand displaced by 2040 and 25 mbd by 2050, in contrast to the continuous growth in oil demand expected by industry," according to the study.
Luke Sussams, senior researcher at Carbon Tracker explained that electric vehicles and solar power are game-changers.
"Further innovation could make our scenarios look conservative in five years' time, in which case the demand misread by companies will have been amplified even more," Sussams said.
This new “starting point" scenario more accurately reflects the current state of play and finds that:
Solar PV could supply 23 percent of global power generation in 2040 and 29 percent by 2050, entirely phasing out coal and leaving natural gas with just a 1 percent market share.
EVs could make up a third of the road transport market by 2035, more than half the market by 2040 and more than two thirds of the market share by 2050.
Coal demand could peak in 2020 and fall to half 2012 levels by 2050.
The study showed that oil demand could be flat from 2020 to 2030 and fall steadily to 2050. Most major oil and gas companies do not expect coal to peak before 2030 and none see peak oil demand occurring before 2040.
Meanwhile, global warming would be limited to 2.4°C to 2.7°C by 2100 (50 percent and 66 percent probabilities) in this scenario.
The power of low-carbon technology suggests that fossil fuels could lose 10 percent of market share to PV and EVs within a single decade.
"A 10 percent loss of power market share caused the collapse of the U.S. coal mining industry and Europe's five major utilities lost more than €100 billion in value from 2008 to 2013 because they were unprepared for 8 percent in renewable power, of which solar PV was a big part," the report underlined.
James Leaton, head of research at Carbon Tracker said that there is no more business as usual in the energy sector.
"There are a number of low-carbon technologies about to achieve critical mass decades before some companies expect," he explained.
According to the research, the cost of solar PV has fallen 85 percent over the last seven years and this study's starting point scenario sees it becoming “materially cheaper than alternative power options globally" with a huge build-out adding more than 5,000 GW of capacity between 2030 and 2040."
In addition, EVs are currently growing 60 percent year-on-year and there are already more than a million on the roads. Battery costs have fallen 73 percent to $268 per kilowatt hour (kWh) in the seven years to 2015, according to the U.S. Department of Energy.
Tesla, the electric carmaker, predicts they will reach $100/kWh by 2020.
"Our scenarios assume that EVs are cheaper than conventional ICEs (Internal Combustion Engines) from 2020," according to the research.
The report also finds that EVs could have a fifth of the road transport market by 2030 and, with additional growth in hydrogen cars and oil/electric hybrids, conventional ICEs could account for less than half the market. By 2050 EVs could grow to 1.7 billion (69 percent of the market) while ICEs would make up just 12 percent.
If the international response to climate change is stronger than nationally determined contributions commitments, then market trends in solar PV and EVs could help limit global warming to 2.2°C to 2.4°C (50 percent and 66 percent probabilities) by 2100, the report stated.
