Top Ten Predictions of Global Energy Development in 2018

Recently, Angus McCrone, editor-in-chief of Bloomberg New Energy Finance, released the 2018 global energy development forecast analysis. The forecast covers the development trend of new energy such as photovoltaics and wind power, the trend of emerging industries such as battery energy storage, electric vehicles and smart mobile, as well as the supply and demand situation of North American natural gas and international LNG and market research, as well as the direction of US energy policy and China and India. Predictive judgments such as the activity level of the two major power markets. The following is an excerpt from AngusMcCrone's presentation at the press conference.

There are several general signs that there may be obstacles in the energy development process in 2018, but more may be a good driving force - the continuous decline in solar, wind and lithium battery production and construction costs means that the market will Continue to meet clean power, energy storage, and electric vehicles in an open manner.

In recent months, the upward trend in the world economy has also contributed to the transformation of the energy and transportation sectors, which has pushed up the price of oil and coal (and to a lesser extent natural gas) to some extent, thus making it competitive. The advantages are further tilted towards wind power, solar power, and electric vehicles.

At the same time, investor confidence in the clean energy industry is undoubtedly quietly improving. The WilderHill New Energy Global Innovation Index (NEX) tracks the performance of approximately 100 clean energy and transportation stocks worldwide. According to the tracking results, stocks generally rose by about 28% between the end of 2016 and January 11, 2018.

For the challenges and risks of new energy development in the wider world in 2018, as well as the impact on the energy transformation and energy revolution, we still need more attention and consideration.

One of the risks that need special attention is the coexistence of the most active financial markets and possible political or geopolitical shocks for more than a decade. This may be a clash between President Donald Trump and Robert Mueller, a special adviser to Russia’s intervention in the US presidential election; or a misjudgment on the Korean peninsula; or between Iran and Saudi Arabia. special conflict.

At the same time, there are traditional market risks that cannot be ignored. The growing world economy not only increases the possibility of US monetary tightening but also affects Europe and Japan (countries). Long-term interest rates have been rising all the time – the US 10-year interest rate has risen from 2% in September last year to more than 2.5% today. If this situation continues, it may begin to affect the capital operation and investment costs, thus affecting the relative competitiveness of technologies including high capital expenditures such as wind and solar energy and low operating inputs.

The following are the top 10 predictions from Bloomberg New Energy Finance on the development of energy and transportation in 2018.

Clean energy investment will be presented again

Investment growth in 2018 is basically in line with 2017, and such a forecast is based on factors that push up the forecast index and seem to fit quite well with those that claim lower numbers. First, from a bearish perspective, the reduction in the cost of capital for solar (and, to some extent, wind) projects means that the same $1 billion will buy more electricity than it did a year ago. In addition, offshore wind power investment may be lower than last year's $20.8 billion unless French projects are funded in 2018. From a bullish perspective, open market investments are likely to be higher than the $8.7 billion in 2017, the lowest level in five years – and of course, the general turmoil in the stock market is not ruled out.

An electric car battery manufacturer called "Contemporary Amperex Technology" has applied for a $2 billion initial public offering in Shenzhen, China. Therefore, our solar analysis team predicts that there will be some growth in solar industry investment in 2018, and the energy storage analysis team is also optimistic about investment. These may be enough to offset the cut in capital costs.

Solar installed capacity will exceed 100 GW

In 2018, global solar installations will remain at least 107 GW, which is still growing faster than the “better-than-expected” 98 GW installed capacity last year. More countries will join this emerging market, and China will continue to be in the PV industry. Staying ahead and leading the way, its installed capacity will remain at 47~65 GW.

At the same time, solar installations in Latin America, Southeast Asia, the Middle East and Africa will account for a “measurable” share this year. For example, Mexico may become a photovoltaic emerging market of more than 3 GW in 2018, and the PV market between Egypt, UAE and Jordan will remain between 1.7 and 2.1 GW. China installed 53 GW of solar installed capacity during the 2017 PV boom, but fundamentally it is somewhat unreasonable – payment measures in the subsidy mechanism have not been improved. However, from a realistic perspective, Chinese state-owned developers and investors will develop and build photovoltaic projects regardless of whether subsidies are in place, perhaps optimistic about the state's subsidy policy, or because the project's own return on investment can make up for the corresponding Loss.

At the same time, a mandatory renewable energy quota measure will be fully implemented in China in 2018, which may answer the question of "where does renewable energy subsidies come from?"

Among these new projects, half of the projects are related to China's distribution network reform, for example, small-scale photovoltaic projects will be balanced on the spot. These projects do not involve “quota,” but they are about the ability of large investors to coordinate numerous small, fragmented power deals.

Wind power installed again

We expect the global wind power industry to recover slowly and continuously in 2018. The newly installed capacity will remain at 59 GW. Perhaps the US production tariff credit will expire in 2019, and the wind power installed capacity will have a new record of 67 GW. China and Latin America may become the main growth areas for wind power installations from 2017 to 2018.

Regarding offshore wind power, the main market scope will continue to be delineated in the UK, Germany, the Netherlands, and China. At the same time, there are more indications that the US and Taiwan regions are also preparing for the 2020 wind power development project in 2018.

Of particular concern is the Netherlands’ auction of zero subsidies for the Hollande's KUSTI and Phase II projects in 2018, for a total of approximately 700 MW. Two bidders (VattenfallandStatoil) have confirmed their participation, and we are also expecting the emergence of other bidders because the competition between powerful developers will play a strong role in the substantial increase in the cost-effectiveness of offshore wind energy.

Despite the long-term pressure, the price of battery components continues to decline

The price of lithium battery components will continue to decline in 2018, but it is gradually slowing down from the previous downward trend. In 2017, the prices of cobalt and lithium carbonate rose by 129% and 29% respectively. This factor will cause the average price of lithium battery components to rise in 2018, which will also lead to the slowdown of the electric vehicle revolution and the rising risk of energy storage investment into the next headline news.

Nonetheless, based on economies of scale, larger component model developments, and annual energy efficiency improvements of 5% to 7%, we still have reason to expect average battery component prices to fall by 10% to 15%.

Declining investment costs, increased demand for flexible resources, and confidence in fundamental and potential technology developments will continue to drive the development of the energy storage industry.

The 2018 global energy storage plan will exceed 2 GW / 4 GWh. South Korea will occupy the world's largest energy storage market for the second consecutive year.

However, the market is still fragile. The expectations for the speed of development proposed by the plan are somewhat unrealistic. Energy storage is sought after to address all the problems of intermittent renewable energy – including priority issues, system-level balances, and network constraints. It is true that, unlike economic development, policies can better determine the development of the energy storage industry and boost efficiency.

Energy sector and policymakers still have a bias toward understanding energy storage, but this will have a crucial impact on investment orientation, as investing in energy facilities such as natural gas power plants with a life span of more than 25 years will either cause long-term lock-in. The effects, restrictions on the development of other flexible resources such as storage, will lead to the further stranding of investment.

Sales of electric vehicles remained at 1.5 million units

In 2018, global electric vehicle sales will reach nearly 1.5 million units, of which China accounts for more than half of the global electric vehicle sales market share, which means that the country will increase sales by about 40% compared to 2017. As China's 2019 electric vehicle quotas gradually reduce direct subsidy support and other policies tightened, its growth rate will slow down slightly.

As a result, sales of electric vehicles will decline in the first quarter of 2018 and will slowly recover in the coming period. Europe will gradually occupy second place in the global sales of electric vehicles. European governments are increasingly concerned about urban air quality. With the decline in gasoline and diesel prices, the electric vehicle market will also benefit. Especially in Germany, 2017 electric car sales have doubled and may double again in 2018.

In 2018, the sales of electric vehicles in North America will reach 30,000, of which Tesla is the "wildcard" of the North American electric vehicle market. If the company can achieve its production targets, the sales of electric vehicles in the United States may be higher.

Auto-driving cars approaching 10 million miles of the target

At the end of 2017, according to the latest data from Waymo’s and Bloomberg New Energy Finance's analysis of other related companies, the global self-driving car has reached 5.2 million miles.

By the end of 2018, we expect this number to reach 8.3 million miles. So far, most of the automatic mileage has come from testing vehicles, but this situation is likely to change in 2018. At present, Tesla is the leader in the field of autonomous vehicles. Although the company has not yet launched a "automatic driving suit", the sales of unmanned driving has been carried out.

Privately owned cars will be the main source of driverless mileage in 2018, and it will likely drive the accumulation of fully automated driverless mode miles beyond 10 million miles. However, once consumers abuse the technology, it will trigger more risks like the May 2016 Tesla ModelS fatal crash. Of course, more accidents will further promote the implementation of more stringent restrictions on self-driving cars.

US natural gas production and output risks persist

Bloomberg New Energy Finance estimates that the New York Mercantile Exchange (Nymex) natural gas price benchmark price, the average price in 2018 will be close to $ 3 / MMBtu (million British thermal units), affected by seasonal demand and short-term market changes, the index will There is a change of about 10%.

The US natural gas market will continue to grow in 2018, thanks to domestic production growth and increased demand. Natural gas prices will remain at a price range similar to 2017.

Bloomberg New Energy Finance expects this trend to continue in 2018. The trend will be driven by Marcellus/Utica in the northeastern United States and the TexasPermian region in the west – the breakeven point of natural gas production in these regions will fall below the average of $3/MMBtu. Bloomberg New Energy Finance expects US natural gas production to break through 80 Bcfd (million cubic feet per day) by the end of the year, setting a new record.

In 2018, we expect natural gas production to rise again by 4% to 26.6 Bcfd (million cubic feet per day). Even if the installed capacity of wind and solar power will reach 17 GW, it is possible to cut some of the demand for natural gas. The recovery in natural gas production is mainly due to the commissioning of new high-efficiency natural gas power generation facilities in the United States, which will further squeeze the share of coal power in the country's energy system. At the same time, the two new LNG pipeline projects will make natural gas exports once again play an important role in stabilizing natural gas balance and price.

LNG trading involves $120 billion

The global LNG market will usher in another significant year of growth – demand surged 10% in 2017 to 285MMtpa. This is the fastest growth since 2011. Bloomberg New Energy Finance expects that there will be a 7% to 10% increase in 2018.

With the increase in trading volume and the rising price factor, the LNG trade volume will be close to 120 billion US dollars, an increase of 15% over last year. The increasing demand for LNG in China and the price competitiveness of LNG compared with primary energy such as oil and coal will be important factors to watch.

In Asia, where global consumption of LNG accounts for 75% of the world, the spot price of LNG is US$9/MMBtu in the fourth quarter of 2017, up 35% from the fourth quarter of 2016, which also implies a tightening of the winter natural gas market. .

The key driver in Asia is China. In China, industrial and residential gas demand has accelerated the country's conversion from coal to natural gas. At the same time, demand for winter heating in other parts of the world has soared – in January 2018, the spot price of natural gas in North Asia rose further, breaking through $11/MMBtu. This phenomenon has also raised concerns about whether the LNG market will tighten again in 2018. The new LNG production capacity of 35MMtpa will be put into production in 2018, which indicates that the natural gas market should become more relaxed.

Coal power slipped from Trump's fingers

The Trump administration will continue to use all the policy levers it can find to incite the revitalization of coal-fired power generation in the United States, but unfortunately, the decline of coal-fired power is unstoppable and inevitable.

We have no default position on the use of coal-fired power, but in 2018, there was a second wave of decommissioning of coal-fired power plants in US history – the 13-kilowatt coal-fired power plant project was scheduled to shut down. In addition, on January 8 this year, the Federal Energy Regulatory Commission rejected the proposal by Energy Minister Rick Perry to renew coal power andspecial power plants in the US electricity market, enabling it to continue to provide “fast resilience” to the grid.

Coal power will stage a curtain call in India

China is committed to smaller-scale photovoltaic power generation

The two major power systems in Asia – India, and China – will continue to undergo an in-depth energy transformation, although the opportunities and challenges facing the two countries are quite different.

The lag between financing and construction means that India may only build about 10 GW of renewable energy capacity in 2018, while as many as 13 GW of fossil energy power is put into use, many of which were not completed last year. project.

However, 2018 will be the last year for India to add more fossil energy than renewable energy. From 2019 onwards, the certainty and benefits of the renewable energy policy will gradually increase, and the shrinking of the coal-fired power economy will mean that it will be printed every year in the future.

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