BloombergNEF has revealed predictions for 2020 – in the report — for the low-carbon transition in energy, transport, commodities and sustainability
January 17, 2020. By Darshana Daga
# Investment in renewables
Investment in renewable energy capacity rose 1 percent to $282.2 billion in 2019 — driven by late surge in offshore wind deals, and despite lower costs for wind and PV equipment and a cooling in the Chinese solar market.
Renewables capacity investment will be reaching about $300 billion in 2020. It will be helped by increased financing of European offshore wind, strong flows into U.S. wind and solar, and widespread deployment of projects without any long-term power price support set by governments. The sum of wind and solar additions could exceed 200 gigawatts.
Wind installations in 2020 will have a record year, driven by 69GW of new onshore capacity – up from 55.3GW in 2019. The U.S., China, Sweden, Norway and Spain will see a surge in onshore wind installations.
Offshore wind capacity additions will drop in 2020 after 2019’s record year, before they accelerate again for the rest of the decade.
The solar market will grow at 14 percent in 2020 in installed capacity terms, to somewhere in the middle of the 121-154GW range from about 121GW in 2019. Europe will build about 4.7GW of solar projects with short-term power contracts or selling directly to the merchant power market in 2020 from 1.3GW in 2019.
# Energy storage
Over $5 billion of deals will be announced in 2020 for renewables-plus-storage projects globally. Falling energy storage costs, coupled with the adoption of renewable energy in key markets, will encourage co-location at an unprecedented rate.
Solar-plus-storage is increasingly common in the U.S.: NextEra – a U.S. electricity company – had a 50 percent attachment rate for energy storage as part of its new solar pipeline in 2019. Companies can benefit from the federal Investment Tax Credit (ITC), which offers a credit of up to 26 percent for solar-plus-storage projects.
# Electric vehicles and autonomous driving
There will be 10 million EVs on the road by the end of 2020 from just 1 million in 2015. Sales growth of EVs is slowing in several markets as direct purchase incentives are phased out. Global passenger EV sales will grow 20 percent to touch around 2.5 million in 2020. China will be the largest EV market, but the gap between China and Europe will look a lot smaller by the end of the year.
Chinese passenger EV sales will be 1.2 million, allowing that country to hit its target of 5 million EVs on the road by the end of the year. Tesla’s newly opened factory in Shanghai should contribute around 150,000 to the total and make life difficult for China’s home-grown EV startups.
2020 will be a breakout year for EVs in Europe. Most automakers are on track to miss their 2020-2021 fleet-wide CO2 targets and will need to sell significantly more plug-in vehicles than the 500,000 they moved in 2019. Europe’s EV sales will touch just over 800,000, with growth especially strong in the second half of the year as VW ramps up production of the ID.3.
EV sales in North America will be flat again at just under 400,000. Other than Tesla’s upcoming Model Y, there are few new high-volume models hitting the U.S. market in 2020.
# 6 Liquified natural gas
Global LNG imports surged 13 percent in 2019, adding 40 million metric tons per annum (MMtpa), to reach 351MMtpa, based on Bloomberg’s LNG berth-visit estimates. Such growth was primarily supply-driven, but would not have been done without Europe, which alone received 37MMtpa more LNG than the previous year. The majority of the growth was a price-elastic demand response to oversupply and achieved on historical low spot prices. Low LNG prices and supporting carbon prices made possible a large amount of coal-to-gas switching, with LNG replacing pipeline gas in Europe. The response from Asian demand was muted, while the rest of the world reduced their imports of LNG.
Global LNG imports will expand modestly, adding 20MMtpa to reach about 370MMtpa. Growth in demand from China, South and Southeast Asia will slow, while consumption in Japan and South Korea will be stable rather than down.
In Europe, coal-to-gas switching will remain a key driver of further LNG demand growth. As coal prices have fallen about 40 percent from the beginning of 2019, to $50-60/t, LNG prices in 2020 need to fall further from 2019 levels to trigger the next round of fuel switching and realize the required volume potential to balance the global market.
# 7. Oil
Big oil producers buckled to investor and consumer pressure in 2019 and began to set targets to reduce their emissions.
Companies like BP, ConocoPhillips and Eni limited the scope of their targets to emissions from operations, a small share of their overall carbon footprint. But Royal Dutch Shell, Total and Repsol set ambitious targets to include emissions from their products, such as the gasoline they sell at refuelling stations. Repsol was by far the most ambitious, targeting net zero emissions by 2050.
The trend toward all-encompassing emission cut targets will continue in 2020. Laggards such as the U.S.’s ExxonMobil and Chevron will face pressure to catch up with their rivals across the Atlantic, while Europe’s Equinor and BP may extend their targets to include emissions from their products, like some of their regional competitors.
There will be more oil company takeovers of, and investment in, digital and renewable technology projects. This includes more solar-powered refineries and wind-powered offshore oil platforms, which will help big oil to reduce their direct emissions. There will be a further push into consumer-facing technologies to help big oil reduce the emissions of their oil products.
# 8. Battery metals
2020 promises to bring an important benchmark for the viability of nickel refining in Indonesia. Tsingshan Holding Group’s high-pressure acid leaching (HPAL) Morowali project with GEM and China Molybdenum is set to achieve final environmental permitting and trial production by the end of the year. Tsingshan stunned the industry with the project’s accelerated timeline and low costs.
Lithium hydroxide spot prices will be staying at $7,500-$8,000/t, and lithium carbonate around $7,000/t in 2020, with more upward pressure than downward pressure. Major producers, notably Albemarle and producers in Australia, have scaled back capacity expansion plans enough to bring the lithium resource market back into balance.
Challenges over developing new lithium chemical conversion capacity outside of China, as well as new capacity in China under development by non-tier 1 producers, means the hydroxide market is likely to stay tight.
Cobalt prices have experienced a three-year rollercoaster, starting 2017 at $32,734 a metric ton, rising as high as $95,000 in March 2018, and visiting $25,000 last summer. The global cobalt market will come back into balance in 2020, which will help to support a slight recovery in prices.
# 9. Sustainability
By the end of 2020, the number of companies that have set science-based decarbonization targets will have jumped by well over 100 percent from 2019’s total of 754. Signups to the Science Based Target initiative have doubled every year since it started in 2015, and 2020 will be an extra-big year thanks to the many companies with expiring 2020 targets. The combined market capitalization by 2020 will exceed $25 trillion, compared to $14.5 trillion today.
# 10. Circular economy
In 2020, continued progress on the circular economy will cause scrap plastic prices to rebound to pre-2018 levels. It has now been two years since China announced that it would stop importing low-quality plastic waste, throwing the recycling and scrap markets into turmoil. Scrap dealers and waste-management companies were left with the choice of sending it to landfill or to waste-to-energy plants, or storing the material.
Companies like Coca-Cola, Unilever and McDonald’s put targets to increase the amount of their packaging made from recycled materials. The price for natural (undyed) high-density polyethylene, a material commonly used for shampoo bottles and other rigid packaging, has increased above the spot price for new material ($0.81 per kilogram) to $1.02 per kilogram, up from $0.84 last year.
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