Tracking Power

Not on track
Charles Devaux Ibtnswmmthe Unsplash
In this report

Power sector emissions increased 2.6% in 2017 and a further 2.5% in 2018, following three years of decline. In contrast, emissions in the SDS fall on average 4.1% per year to 2030. The SDS also sees emission intensity of electricity falling by 3.4% annually. In 2018, emissions intensity fell by only 1.3% as a result of generation from low-carbon technologies rising 6%, offset by a 2.6% increase in non-abated coal.

Power sector CO2 emissions in the Sustainable Development Scenario, 2000-2040

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Tracking progress

Global electricity demand increased 4% in 2018, with low-carbon generation expanding 6% to meet a considerable share of this growth.

Nevertheless, coal remained the largest source of electricity generation with an increase of 2.6%. Power sector CO2 emissions rose by 2.5% as a result, with coal responsible for 80% of this increase.

In 2018, 42% of all energy-related CO2 emissions came from the power sector, causing it to remain the largest source of energy-related CO2 emissions. It is therefore increasingly critical that the power sector deliver the access, air pollution and climate outcomes of the Sustainable Development Scenario (SDS) for the clean energy transition to be successful.

After stalling in 2017, the carbon intensity of power generation declined 1.3% in 2018 to an estimated 478 gCO2/kWh. This change resulted from a 7% increase in renewable generation (thanks to policy support and falling costs) and a 3.3% increase in nuclear generation, somewhat offset by 2.6% higher coal-based generation.

The decline in average carbon intensity of electricity generation must accelerate to 3.4% per year, however, to meet the SDS level of 220 gCO2/kWh in 2030, which is less than half the current value.

This considerable reduction in power generation carbon intensity is one of the cornerstones of the SDS, especially since electricity is increasingly used to meet end-use energy demand.

Achieving this reduction will entail a significant shift in the technology mix.

Carbon intensity of electricity generation in selected regions in the Sustainable Development Scenario, 2000-2040

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An important indicator of clean energy transition progress in the power sector is the share of low-carbon technologies (renewables, nuclear and carbon capture and storage) being used. In 2018, 36% of generation came from low-carbon technologies – an increase of less than 1% from 2017.

Alignment with the SDS will require profound transformation of the power sector to limit CO2 emissions, reduce air pollution and enlarge energy access. A drastic change is needed to attain 63% of generation from low-carbon technologies, with solar PV leading in installed capacity in 2030 under the SDS, followed closely by wind in the late 2030s.

Generation from coal must decline sharply to 16% in 2030 and only 5% in 2040, with 65% of plants fitted with carbon capture, utilisation and storage (CCUS). Natural gas still figures in the generation mix in the SDS because of its lower CO2 emissions, with gas-fired generation increasing until 2030 and then declining to 14% in 2040.

Shares of global electricity generation by source, 2000-2040

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Global power sector investment fell by 1% to just over USD 775 billion in 2018, with lower capital spending on generation. Investment in electricity networks edged down, although investment in battery storage surged by 45% from a relatively low base.

Investments in coal-fired power declined by nearly 3% to their lowest level since 2004, mainly as a result of decreased spending in China and India. After rising to a ten-year high in 2012, gas-fired power spending also decreased, mainly in the Middle East and North Africa (MENA) region and in the United States.

In 2018, coal-fired power final investment decisions (FIDs) declined by 30% to 22 GW, their lowest level this century.

Most FIDs are now for high-efficiency plants, with inefficient subcritical plants comprising only 10%. The largest fall in FIDs was in China, but levels in Southeast Asia were their lowest level in 14 years. India was the largest market, now largely oriented towards supercritical technology, but levels were 80% lower than in 2010.

FIDs for gas-fired power also dropped for the third consecutive year, by nearly 15%, though remained twice as high as those for coal.

The largest declines in gas FIDs were in the MENA region (-50%), where there is excess capacity in the power system, and the United States (-30%). In contrast, they grew in China by 70%, and for the first time more gas-fired power capacity was sanctioned than that of coal.

Renewables-based power investment edged down by 1%, as net additions to capacity were flat and costs fell in some technologies, but spending was also supported by plants under development

Investment in electricity networks decreased modestly (‑1%) in 2018, with China and the United States accounting for nearly half of global spending.

Spending on transmission grids (around 30% of network investment) has risen steadily since 2014 to support the connection of more generation, system integration of variable renewables and large-scale interconnection projects.

Investment in the United States increased 8%, with 60% of spending going to distribution grids.

Spending in the EU rose by 8%, largely for transmission.

In India, grid investments amounted to over USD 20 billion, mostly for transmission, as distribution spending became more moderate. The Central Electricity Authority recently announced that USD 40 billion in transmission spending is needed in the next three years – 60% more than the current level.

Global power investment by technology, 2005-2018

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For all low-carbon power technologies, long-term target and policy stability is necessary to ensure investor confidence and continued growth. At the same time, however, policies need to continuously adapt to changing market conditions to achieve greater cost-competitiveness and to better integrate variable renewables into the system.

Renewables – especially solar PV and wind – are rapidly transforming power systems worldwide. While renewables are becoming increasingly cost-competitive, market design and policy reforms will soon be necessary to guarantee at-scale investments in new renewable capacity and in power system flexibility to reliably and cost-effectively integrate high shares of variable renewables.

As variable renewable energy shares expand, policies to ensure investment in all forms of flexibility are becoming crucial.

Carbon taxes and the regulation of plant emissions could encourage coal-to-gas switching and provide an important long-term investment signal for CCUS.

Also required are additional electricity market mechanisms that recognise the potential benefits of natural gas-fired power as a lower-carbon alternative to coal-fired generation with operational flexibility that allows for better integration of variable renewables.

While CCUS in power is still at an early stage of commercialisation, complementary and targeted policy measures such as tax credits and grant funding will be needed to secure investment. Nevertheless, new coal-fired units should be constructed CCUS-ready, with efficiencies consistent with global best practices (supercritical or ultra-supercritical technologies).

Power sector technologies

Only two technologies, solar PV and bioenergy, are on track with the SDS, and four are well off track: coal-fired power, geothermal, ocean and CCUS. While renewables are making progress, much more needs to be done to decarbonise the power sector to get aligned with the SDS.

Share of renewables in power generation in the Sustainable Development Scenario, 2000-2030

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Renewable power

In 2018, renewable electricity generation rose 7%, with wind and solar PV technologies together accounting for 60% of this increase. Although the share of renewables in global electricity generation reached 26% in 2018, renewable power as a whole still needs to expand significantly to meet the SDS share of half of generation by 2030. This requires the rate of annual capacity additions to accelerate; however, renewable capacity growth stalled in 2018 for the first time since 2001.

Global nuclear capacity by scenario, 2000-2040

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Nuclear power

In 2018, 11.2 GW of additional nuclear capacity were connected to the grid, the largest increase since 1989. New projects were launched representing over 6 GW, and refurbishment projects are under way in many countries to ensure long-term operation of the existing fleet. Nevertheless, more efforts in terms of policies, financing and cost reductions are needed to maintain existing capacity and bring new reactors online. Under current trends, nuclear capacity in 2030 would amount to 497 GW, compared with 542 GW under the SDS. At least a doubling of the annual rate of capacity additions is therefore required.

Power generation in the Sustainable Development Scenario, 2000-2040

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Natural gas-fired power

Gas-fired power generation increased 4% in 2018, led by strong generation growth in the United States and China. At around 6 100 TWh, gas accounts for 23% of overall power generation. In the SDS, gas use as a flexible transition fuel increases until the late 2020s, displacing unabated coal, but gas without CCUS declines steadily thereafter. This indicator remains yellow as we don’t yet see the kind of commitments globally for CCUS with natural gas that would provide confidence of achieving an SDS trajectory by 2030.

Share of coal-fired power generation in the Sustainable Development Scenario, 2000-2040

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Coal-fired power

Coal power generation increased 3% in 2018 (similar to the 2017 increase), and for the first time crossed the 10 000 TWh mark. Coal remains firmly in place as the largest source of power at 38% of overall generation. Growth was mainly in Asia, particularly in China and India. That said, investment in coal-fired power declined by nearly 3% to the lowest level since 2004, and final investment decisions for new plants continue to decline. Coal-fired generation without CCUS needs to decrease 5.8% per year to 2030 to be in line with the SDS.

Large-scale CO2 capture projects in power generation in the Sustainable Development Scenario, 2000-2040

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CCUS in power

With only two large-scale CCUS power projects in operation at the end of 2018 and a combined capture capacity of 2.4 million tonnes of CO2 (MtCO2) per year, CCUS in power remains well off track to reach the 2030 SDS level of 350 MtCO2 per year. As CCUS applied to power is at an early stage of commercialisation, securing investments will require complementary and targeted policy measures such as tax credits or grant funding. Support for innovation needs to target cost reductions and broaden the portfolio of CCUS technologies.