The International Energy Agency annually releases its World Energy Outlook with an objective of deepening our understanding of the future of energy. This report is over 800 pages and has great insights around the future of energy. In this two-part blog post, , we have summarized five insights every utility professional needs to know when it comes to the future of energy.
No. #1: Two technologies are forecasted to make the biggest gains in levelized cost of electricity (LCOE)
While building a new coal plant no longer offers the lowest LCOE in many regions, existing coal plants still have the lowest LCOE across most regions today. Meanwhile, there are two technologies that are making big gains to deliver lower LCOE in the next two decades: offshore wind and solar photovoltaic (PV).
Offshore wind is positioned to experience the biggest gains in lowering LCOE and is expected to be even less than solar PV in regions such as China and the European Union. Moreover, offshore wind projects already feature annual capacity factors of 40-50%, which are well above capacity factors for solar PV and approximately the same with gas-fired power plants in several regions.
No. #2: Utility industry is getting increasingly more capital intensive
On average about $2 trillion dollars have been invested into energy sector each year over the last decade. This investment is expected to jump to $2.7 trillion per year over the next two decades. The majority of this uptick will be associated with increased investments in electricity networks, renewables and energy efficiency.
Consequently, the utility industry will become more capital intensive in most regions, driven by an increased use of technologies with zero or low fuel costs, but higher upfront costs per unit of electricity produced. While there is more investment into fuels today, there will be more investments into power in the next two decades, again making the utility industry more capital intensive.
Utility professionals are able to influence and make a difference in the future of energy with their decisions today, by making the right choices when it comes to technologies and fuels. A big part of making the right choices is working with insightful information. This blog post is to share insights about the future of energy, to help you in your everyday decision-making process.
Part II of this article will highlight the remaining three insights focused on increasing the need for flexibility, the role of regulations, and on-going energy transition. Sign up below for Energy IQ to receive Part II and other relevant insights about energy management. To learn more about distributed generation solutions Cummins Inc. offers, visit our webpage.
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