Are energy futures forecasts grounded in reality?

This week’s energy seminar was given by Rembrandt Koppelaar, a researcher at the Institute for Integrated Economic Research and PhD student in Imperial’s Centre of Environmental Policy. During the talk he discussed developments in electricity and transport markets, and whether energy futures forecasts are already outdated. He has written us this blog post to complement the talk. You can also download a copy of his slides.

Are energy futures forecasts grounded in reality?

The hard work in solar, wind, batteries, hydrogen and electric cars, and not to forget power plant efficiency and grid systems is resulting in a new wave of electricity and transport system renewal. Today, solar PV and wind turbines generate 1.4% and 3.9% of our electricity globally with secured growth thanks to record low costs per kWh. Electric car sales will likely top 1.2 million this year, such that 1 out of 60 cars sold is a plug-in hybrid or battery electric vehicle. And to everyone’s surprise China has since 2013 managed to stabilise and even reduce its coal consumption as government power plant efficiency measures paid off, alongside a slow-down in coal for steel.

Electric car being chargedIf we go back to the energy futures forecasts of key energy institutions like the International Energy Agency (IEA) or oil companies such as BP and ExxonMobil from a few years ago, several key developments today were not picked up. The US electric car company Tesla and its Chinese ‘sister’ BYD took the world by storm and inspired a transformation where now all major car manufacturers will launch plug-in and battery vehicles in the next years, yet electric cars were nowhere to be found.

If we assume that such scenario reports provide guidance for current trends, like the IEA’s current and new policy scenarios, and what action to take to reach a 2° degree world, it is quite problematic that many key developments are ‘invisible’ until after the fact, even though they come from early beginnings. As a case in point in India a surge in solar-PV construction is expected on the back of recent price declines to 3.8 to 4.8 dollar cents per kWh in tenders for ground-mounted solar parks. Yet in its 2016 WEO the IEA’s learning curve in the ‘new policies’ scenario yields a cost reduction to 6 dollar cents by 2040 for large scale solar-PV in India. A trend that should have already been visible at the time of writing of the outlook, as already 5 to 6 dollar cents per kWh bids had been awarded.

Bid results India auctions for ground-mounted solar PV parks btewen Jan '09 and Jan '17 in US Dollars per kilowatt hour
Bid results India auctions for ground-mounted solar PV parks btewen Jan ’09 and Jan ’17 in US Dollars per kilowatt hour

The key challenges are when new technologies will take-off and they will scale. In BP’ Energy Outlook 2017 ‘base case’ it foresees 102 million electric cars on the road by 2035, relative to the 2 million car on the road milestone we reached last year. ExxonMobil thinks there will be 54 million and Statoil calls for closer to 300 million. Statoil’s expectation just became a lot more plausible with China’s policy acceleration target of 20% of sales by 2025 to be electric (or hydrogen), guided by a quota system for car manufacturers, in conjunction with ambitious announcements to electrify all cars sold in India by 2032. To be fair to BP, the company did incorporate a second ‘electric revolution’ scenario calling for 300 million electric cars by 2035, yet it is buried deep in the report, and the scenario team self-identifying its ‘base case’ scenario as the “single ‘most likely’ path over the next 20 years” does not help to inspire confidence.

The lesson that can be learnt is that energy futures forecasts are not as robust as we would like to think, despite the authority of these institutions, and the knowledge of their teams. A closer look at recent events, the plausible near-term future in technology development at company level, as well as policy acceleration what-if’s, can provide important guidance to build more robust forecasts. Such a ‘what’s the absolute latest in technology land’ will help to pick up and incorporate key technology accelerations happening today.  Offshore wind and Concentrated Solar Power will then definitely be on the radar, as these technologies are rapidly maturing. Today they are not even recognised as separate technologies being lumped together with solar-PV and onshore wind as ‘solar’ and ‘wind’ in most energy scenario reports.

Biography

Rembrandt KoppelaarRembrandt Koppelaar is a researcher at the Institute for Integrated Economic Research (IIER) on energy and resource analyses of technologies and city-regions.

He is also close to finishing his PhD at Imperial College London’s Centre for Environmental Policy on electricity system simulations, and has published several peer-reviewed papers on solar energy, phosphorus, copper, and electricity systems.

He combines his academic work with writing and has published two books: ‘The Tesla Revolution’ in 2017 and ‘De permanente oliecrisis’ (The permanent oil crisis) – in 2008, and was an editor for http://www.theoildrum.com, which until its closure in 2013 was one of the best read energy blogs with over a million monthly visitors.

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