Tracking Power 2020

Not on track
Tracking Power
In this report

Power sector emissions declined by 1.3% in 2019, while emissions intensity decreased 2.5%. These trends are the result of greater generation from low-carbon technologies (+5.6%) and a decrease in non-abated coal (-3.1%) being offset by a 2.5% increase in gas-fired generation. This sector’s transformation is critical to clean energy transitions, as power generation accounts for 41% of energy-related CO2 emissions and electricity is increasingly used to meet end-use energy demand. Unfortunately, recent trends are not on track with the SDS, which requires that power sector emissions fall an average 4% per year to 2030 and electricity emissions intensity drops 5.6% annually.

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

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Tracking progress

While power sector CO2 emissions decreased 1.3% in 2019 global electricity demand increased 1.4%, with low-carbon generation expanding 5.6% to meet a considerable share of this growth. Coal remained the largest source of electricity despite a 3.1% decrease in generation, while natural gas-fired generation rose 2.5%.

Once again, the power sector remained the primary source (41%) of energy-related CO2 emissions in 2019. 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 a 1% decline in 2018, the carbon intensity of power generation fell a further 2.5% in 2019 to an estimated 463 gCO2/kWh. This change resulted from a 3.1% decrease in coal-fired generation, a 6.5% increase in renewable generation (thanks to policy support and falling costs) and a 3.3% increase in nuclear generation. The decline was somewhat offset by a 2.5% increase in natural gas-fired generation.

However, the drop in average carbon intensity of electricity generation must accelerate to 5.6% per year to meet the SDS level of about 240 gCO2/kWh by 2030, which is about 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 2019, 37% of generation came from low-carbon technologies – an increase of just over 1% from 2018.

Alignment with the SDS will require a profound transformation of the power sector transformation to limit CO2 emissions, reduce air pollution and expand energy access. A drastic change is needed to attain 60% of generation from low-carbon technologies by 2030. In the SDS, solar PV leads in installed capacity in the late 2020s, followed closely by wind as offrom 2035.

In the SDS, generation from coal declines sharply to 16.5% in 2030 and 6% in 2040, with 40% of coal-fired generation coming from 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 the late 2020s and then declining to 14% in 2040.

Shares of global electricity generation by source, 2000-2040

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Global power sector investments, at below USD 760 billion in 2019, dropped 2% from 2018 as capital expenditures on electricity networks fell strongly, offsetting a mild increase in spending on generation. Investment in battery storage consolidated.

Global spending on coal-fired power plants dropped by 6% to reach a decade low, with the main reduction occurring in China once again. However, the gas-fired power spending trend reversed in 2019, rising to the levels of 2014-15. Spending continued to wane in the United States as well as the MENA region, and increased mainly in Europe and Russia.

Final investment decisions (FIDs) for coal-fired generation dropped for the fourth year in a row (to cover less than 17 GW) – the lowest level since 1980, despite an increase in China. The majority of the 2019 FIDs for coal-fired plants (almost 90%) were once again for higher-efficiency plants, with only a very small portion of inefficient subcritical projects, mainly in Indonesia.

The number of FIDs for gas-fired generation rose for the first time since 2015, covering more than 55 GW. The increase in planned gas-fired plants globally, especially combined-cycle, resulted from the growing need to provide flexibility, firm capacity and ancillary services to the system as more variable renewable generation comes online.

The strongest growth was in the United States (+150%), propelled by low gas prices, followed by the MENA region (+40%), particularly the Gulf Cooperation Council countries. Although China’s investment decisions fell to below 10 GW, they remained high compared with approvals in recent years, prompted by broader targets to increase gas use.

Renewable power spending, at around USD 310 billion, increased 1%, mostly to finance wind and solar PV expansions. Investment in distributed solar PV and battery storage comprised half of total spend in these technologies.

Electricity grid investments declined for the third consecutive year, falling to less than USD 275 billion (‑7% from 2018). The United States overtook China as the top grid investor for the first time in a decade.

Grid investment in the United States increased by 12%, following a continuous upward trend in the last decade to finance the considerable labour required to upgrade aging infrastructure, digitalise the system, electrify sectors such as transport and heat, and secure the grid against natural disasters and cyberattacks.

China’s downward investment trend accelerated with a drop of 11% in 2019, mainly as a result of regulatory changes and reduced grid tariffs.

In Europe, 2019 investments remained stable at nearly USD 50 billion, with a larger portion of spending allocated to upgrading and refurbishing the existing grid to accommodate more variable renewable energy and greater electrification.

In India, despite significant pressure in the past five years to strengthen inter- and intra-state transmission capacity, the build-out pace slowed (-20%) in 2019.

Smart meters, utility automation and electric vehicle charging infrastructure now account for more than 15% of total grid spending (USD 40 billion) globally.

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).