NEO 2017

Americas

Ethan Zindler

May 04, 2017

1 June 15, 2017
Preamble

-term analysis
of the future of energy. Focussed on the electricity system, NEO combines the expertise of over 65 in-house
country and technology-level specialists in 12 countries to provide a unique assessment of the economic drivers
and tipping points that will shape the sector to 2040.
What sets NEO apart is that our assessment is focussed on the parts of the system that are driving rapid change
in markets, grid systems and business models. These include the cost of wind and solar technology, battery
storage, electricity demand, electric vehicles and consumer dynamics. To say something meaningful about the
evolution of the system as a whole, we also analyse coal, gas and oil markets and their fundamentals.
In the near term, our market projections are based on an assessment of policy drivers and Bloomberg New

retrofits and retirements, by country and sector. In the medium to long term, the forecast is driven by the cost of
building different power generation technologies to meet projected peak and average demand, country by country.
The modelling then preferentially deploys least-cost technology options that change over time in line with shifting
capital, operating and financing costs.
We explicitly model small-scale and large-scale battery systems, as well as taking a view on growth of demand
response and charging electric vehicles. These new sources of flexibility allow for more dynamic balancing of
supply and demand and become particularly important in markets where large amounts of variable wind and solar
are deployed and conventional assets retire.
It is important to note that NEO explicitly removes renewable energy subsidies once they have run their course,
and does not assume national climate targets are met, unless a mechanism to ensure compliance has been
legislated. For example, we not include the US Clean Power Plan or assume the Paris Agreement is achieved.

2 June 15, 2017

 The objective of the study, therefore, is not to provide a political document or a BNEF house view, but to highlight
the changing fundamentals of renewable and conventional energy, how these may shape the future energy
landscape and what opportunities and risks may arise for market participants as a result. Since NEO is a least-
cost optimization exercise, for it to come true would require significant market reform and new price signals to
maximise value from new technologies a topic of ongoing focus for the analyst team at BNEF
This year we have incorporated a number of interesting changes. On the demand side we have included dynamic
electric vehicle charging and lithium-ion peaker
account uptake of air-conditioning. On the supply side we have updated our PV, onshore wind and lithium-ion
battery cost curves, and for the first time, explicitly modelled offshore wind. In addition, we have updated a
number of the proprietary models central to this forecast, including: our EV and small-scale solar PV and storage
consumer uptake models, our electricity demand fundamentals model, and our capacity-build and dispatch.
Clients value this unique view of the changing market, and we look forward to helping you make the most of this
flagship Bloomberg New Energy Finance report.
The New Energy Outlook is published in seven volumes Global Synthesis, Americas, EMEA, Asia Pacific, Wind,
Solar and Fossil Fuels.

3 June 15, 2017

Acknowledgements
The following people from Bloomberg New Energy Finance are responsible for
producing NEO 2017 Americas:

NEO Americas
Lead Author NEO Lead Author
Ethan Zindler Seb Henbest

North America NEO Lead Analyst

Amy Grace Elena Giannakopoulou

US Power NEO Analyst

Nick Steckler Matthias Kimmel

US Power Chile
Will Nelson Ana Verena Lima

Canada Brazil
Colleen Regan Helena Chung

Mexico Canada
Luiza Demoro Rachel Jiang

4 June 15, 2017

Contents

THE AMERICAS 6

UNITED STATES OF AMERICA 20

MEXICO 38

BRAZIL 50

CANADA 62

CHILE 74

5 June 15, 2017

THE AMERICAS
Regional Overview

6 June 15, 2017

THE AMERICAS

TOTAL POWER GENERATION

Source: Bloomberg New Energy Finance

8 June 15, 2017

THE AMERICAS

EXECUTIVE SUMMARY

North America (Canada, the U.S., and Mexico) and Latin America are both poised to see massive changes to their
power sectors by 2040, but the transformation unfolds in substantially different ways between the continents. In
the north, little load growth requires new power plants to elbow out incumbent generators for generation on the grid. In
Latin America, strong growth of less developed, more energy-intensive economies creates opportunities for new players;
comparably few plants retire.
Extraordinary natural gas resources in the U.S. influence the power generation mix all across the Americas,
particularly as exports accelerate.
the fuel is cheapest and most accessible. But cross-border exports to Mexico and liquid natural gas exports further south
keep gas prices in check across both continents, particularly through 2030. This allows new gas plants to displace retiring
coal and nuclear in North America while offering a relatively low-cost option in parts of Latin America for new build.
A mix of technologies contributes to capacity additions in the proximate 10 years, while wind and solar represent
most growth from around 2027 onward. In Canada, the addition of a carbon tax helps wind and solar. In the U.S., aging
coal and nuclear fleets offer opportunities. In Mexico, Brazil, and everywhere else, exceptional renewable energy
resources accentuate the cost-competitiveness of these technologies.
Power-generating capacity grows far faster than demand for electricity across the Americas resulting in lower
average capacity factors for plants. Thermal load factors decline in nearly all countries through 2040. The major
exception: the U.S., where a much reduced coal fleet operates more often to provide 24-7 supply to the grid.
Distributed resources, specifically rooftop solar, play a growing role across the Americas through 2040 due to
price declines. The economics and uptake rates vary by country but all told, 314GW of distributed PV gets built in North
and South America approximately the same as all the capacity from all technologies online today in India.
and drives
A greater presence of wind and solar creates the need to shift availability of power into
different hours. As battery prices plummet, deployment skyrockets and the equipment becomes widely used both in homes
.
9 June 15, 2017
THE AMERICAS

POWER GENERATION

North America (U.S., Canada and Mexico) Latin America

TWh

6,000 100%

90%

5,000
80%

70%
4,000

60%

3,000 50%

40%

2,000
30%

20%
1,000

10%

0 0%
2012 2016 2020 2025 2030 2035 2040

Source: Bloomberg New Energy Finance Source: Bloomberg New Energy Finance

10 June 15, 2017

THE AMERICAS
TWO CONTINENTS, TWO ENERGY
DEVELOPMENT PATHS
North America
Total electricity generation rises by a mere 8% through
2040 across the three nations of North America
Canada, the U.S., and Mexico. Strong demand growth in
Mexico is overshadowed by anaemic growth from its
northern neighbors. While generation in Mexico rises
60% to 510TWh in 2040, it grows only 6% in the U.S. and
Canada to 5,023TWh.
Major natural gas deposits accessible through fracking
ensure that gas plays a major role in power generation
through 2040 across all three countries. Gas accounts for
one third of total North American generation in 2016 at
1,653TWh and about the same percentage in 2040 at
1,829TWh.
Renewables generation (inclusive of large hydro) rises
from 22% (1,141TWh) to 47% (2,599TWh) in 2040. The
vast majority of new generation comes in the form of
wind, utility-scale solar, and rooftop solar, which grows
fastest after 2030 due to cumulative price declines.
11 June 15, 2017
Latin America
Latin America is poised to see strong demand growth
through 2040 as its economy grows rapidly and remains
relatively energy intensive compared to more developed
parts of the world. Total generation grows 66%, from
1,245TWh in 2016 to 2,066TWh in 2040.
The nations of Latin America today rely heavily on zero-
carbon power generation, due to the strong presence of
large hydro power generation. Hydro accounted for
757TWh of generation in 2016, or 61% of the total across
the region. By 2040, hydro production rises to 933TWh
but represents substantially smaller share of overall
generation at 45%.
Nearly all net new generation is accounted for by wind
and solar. Today, these technologies account for just 4%
of generation across Latin America, but by 2040, that
rises to 37%. Overall, renewables (inclusive of large
hydro) reach 88% of total electricity production in Latin
America in 2040. With nuclear included, total zero-carbon
generation in the region rises to 90%.
THE AMERICAS

AMERICAN GAS: PLENTIFUL AND

COMPETITIVE FOR A DECADE
Natural gas prices, by region Mexico new wind/solar vs. new/old gas

$/MMBtu
20
United States
18 Canada
Brazil
16
Chile
Mexico
14
Japan
China
12
Europe

10

0
2012 2016 2020 2025 2030 2035 2040

Source: Bloomberg New Energy Finance Source: Bloomberg New Energy Finance

12 June 15, 2017

THE AMERICAS
MORE EXPENSIVE GAS IN
MEXICO
INEXPENSIVE GAS, HEMISPHERE-WIDE
Thanks primarily to the U.S., the Americas have access
to some of the lowest-priced natural gas in the world.
Today, gas trades at approximately $3/MMBtu at Henry
Hub. By 2030, we anticipate those prices at
approximately $4/MMBtu.
The U.S. has such extensive gas reserves that it is
undertaking major investments to promote exports both
through pipelines across the border directly to Mexico
and aboard tankers in liquefied form. In 2017, the U.S. is
poised to be a net gas exporter for the first time and its
neighbors stand to benefit directly. We anticipate gas
prices in Mexico and Canada will track closely with Henry
Hub.
Prices for gas in Latin America are likely to remain $1-$2
higher than in North America, but again the region
benefits from a relatively low-priced resource. Gas prices
in Chile and Brazil do not exceed $6/MMBtu earlier than
2034, under our forecast.
13 June 15, 2017
MEXICO
The result of such ample supply is cost competitiveness
for existing gas generation across much of the Americas
for at least a decade. However we expect the cost of new
wind and solar to fall rapidly, at first making it cheaper
than new gas, and later cheaper than running existing
gas plants.
Take Mexico for example:
We see some renewables growth over the next decade
as wind and solar plants meet new demand and
replace the oldest and least efficient gas plants.
Over this time the gas fleet is
expected to remain competitive.
However from around 2028 on wind and solar are the
lowest-cost sources of electricity versus both new, and
existing, gas-fired generation.
On a strictly new-build basis, wind and solar are
already the cheapest forms of generation in Mexico
with LCOEs ranging between $60 and $70/MWh.
THE AMERICAS

CAPACITY ADDITIONS &

INVESTMENT
Cumulative capacity additions, 2017-2040 Investment in power generating capacity, 2017-2040

GW

US 737

Brazil 191

Rest of LatAm 192

Mexico 173

Canada 77

Chile 27

0 200 400 600 800

Source: Bloomberg New Energy Finance Source: Bloomberg New Energy Finance

14 June 15, 2017

THE AMERICAS
1,397GW total new power-generating capacity gets built in the Americas through 2040 for a total of $1.5
trillion with zero-carbon emitting power plants attracting 82% of total capital deployed
We expect 1,397GW of new power-generating
capacity to be built in the Americas through 2040. Of
that, 1,110GW, or 79%, is renewables, primarily wind
and solar. In Canada, wind represents the largest
portion. Everywhere else, solar dominates.
As the largest economy, the U.S. sees the largest
volume of net new power-generating capacity adds
with 263GW. Brazil, the second-largest economy,
adds a net 166GW with Mexico, Canada and others
following.
capacity expands just 31% due to slower economic
growth, a less energy-intensive economy, and
base.
15 June 15, 2017
Gas sees 269GW of new capacity built through 2040
(with 189GW retiring) while virtually no new coal
capacity is added across the region and 192GW is
retired.
Just under $1.5 trillion gets invested in new power-
generating capacity in the Americas through 2040
an average of $62bn per year.
Onshore wind receives the largest single share of
investment dollars at 36%. This is driven by
substantial activity in Canada and Mexico in
particular, as well as other nations, including the U.S.
New gas attracts 18%, or $260bn investment across
the Americas to 2040.
Virtually no capital is deployed to build large-scale oil-
or coal-fired generation as neither technology is cost-
competitive in the Americas.
Investment activity peaks in the 2031-2035 period,
driven partly by plant retirements and partly by the
improved economics of renewables.
THE AMERICAS

EMISSIONS

CO2 emissions U.S. CO2 emissions Rest of Americas Emissions intensity

MtCO2
2,500

2,000

1,500

1,000

500

Source: Bloomberg New Energy Finance

16 June 15, 2017

THE AMERICAS
CO2 EMISSIONS
U.S.
As by far the largest CO2 emitter
in the Americas, the U.S. has the
most potential room for
reductions, in volume terms.
Thanks to relatively flat overall
demand growth, coal-to-gas
switching, deployment of
renewables, and the addition of
flexible capacity such as
batteries, we expect U.S. power
sector emissions to sink 30%,
from 1,837MtCO2 in 2016 to
1,283MtCO2 in 2040.
17 June 15, 2017
Rest of America
In percentage terms, other
nations in the Americas achieve
much deeper rates of CO2
emissions cuts. Mexico goes
furthest, fastest, by retiring its
fleet of oil-burning plants first and
replacing them with gas and
renewables.
lower-carbon power mix follows a
similar trajectory to Mexico. This
is largely due to the near phase-
coal plants by 2032.
first as coal run less. Coal then
rebounds in the mid 2020s as the
market tightens. Emissions drop
again in the 2030s as both coal
and gas plants retire, replaced by
renewables.
Emissions intensity
Chile has by far the smallest
installed power generation base
of the nations modeled explicitly
in our NEO 2017 analysis. As
such, the addition of even a few
gigawatts of capacity make a
major impact on its emissions
maturing meaning it is becoming
more energy efficient and also
carbon efficient.
For similar reasons, Mexico is
poised to see a sharp drop in its
emissions intensity.
actually rises to 2021, as natural
gas generation increases to
offset the refurbishment of
nuclear reactors in Ontario.
Emissions drop thereafter
reaching 0.041t/MWh by 2040.
THE AMERICAS

THREE COUNTRIES, THREE

PATHS TO DE-CARBONIZATION
U.S. CANADA MEXICO

$/MMBtu
6

0
2012 2016 2020 2025 2030 2035 2040

Source: Bloomberg New Energy Finance

18 June 15, 2017

THE AMERICAS
The U.S, Canada and Mexico each see their power-sector emissions plummet through 2040, but each
achieves the goal through different means
U.S.
A vast supply of inexpensive
natural gas available in the U.S.
has major repercussions for
power generation through 2040.
Cheap gas is already
accelerating the retirement of
coal plants.
While we do anticipate gas prices
to rise somewhat into the next
decade, they will still remain
relatively low by historical
standards, trending from $3.50 to
$5.00 through 2020, to $5.10 to
$5.90 by 2030 then $4.90 to
$7.50 by 2040.
Coupled with falling prices for
renewables including their
supportive tax credits in the near
term gas is helping to
accelerate coal plant retirement
and CO2 reductions.
19 June 15, 2017
CANADA
New wind begins to compete with
both with new and existing gas
plants after 2025. With flat
electricity demand, wind
generates at the expense of gas,
lowering emissions over the long
term.
Policy also plays a crucial role.
The carbon-intensive province of
Alberta has committed to retire its
entire fleet of coal plants.
Meanwhile, through various
schemes, Canada is set to
impose an effective carbon price
nationwide, amounting to
$23/tCO2e in our modeling.
MEXICO
grow at a rapid clip over the next
two decades, potentially putting
upward pressure on emissions
growth.
However, Mexico is also home to
some of the best solar and wind
resources much of which has
yet to be developed.
Wind and solar are already cost
competitive in the country and
are poised to get deployed ahead
of more costly natural gas plants.
As a result, most new load
should be met by zero-emitting
renewables.
UNITED STATES OF
AMERICA

20 June 15, 2017

UNITED STATES OF AMERICA

CAPACITY MIX

Cumulative installed capacity, by technology Distribution of capacity, traditional vs new

sources
GW

1,600

1,400

1,200

1,000

800

600

400

200

0
2012 2016 2020 2025 2030 2035 2040

Source: Bloomberg New Energy Finance Source: Bloomberg New Energy Finance

22 June 15, 2017

UNITED STATES OF AMERICA
U.S. power capacity expands sharply
The U.S. power capacity mix changes drastically
between now and 2040. Shrinking coal and nuclear
fleets are replaced by a mix of solar, wind and natural
gas plants. This shift from a fossil-heavy to lower-
carbon grid requires more installed capacity per unit
of generation, due to the relatively lower capacity
factors of wind and solar. The result: U.S. capacity
grows much faster than generation.
The flexibility of the U.S. power system is bolstered
as 46GW of demand response and 47GW of battery
storage get added to an increasingly-nimble gas-
fuelled generation fleet. Utility-scale and small-scale
deployment of battery storage will be roughly equal
through 2040.
Gas-fired generation capacity rises to 501GW by
2040 from 451GW today. The U.S. fracking revolution
propels combined-cycle plant build with low marginal
cost advantage. Meanwhile, the construction of
smaller, open-
cheapest form of capacity for meeting peak demand
for at least a decade.
23 June 15, 2017
PV capacity grows almost 800% by 2040
Utility-scale solar PV dominates net new capacity
additions through 2040. We predict over 230GW of
such new build.
Small-scale solar PV for households, commercial,
and industrial consumers grows to 140GW of total
installed capacity, up from 19GW today.
After a near-term rush in order to capture expiring
U.S. federal tax credits, net capacity additions of
onshore wind become relatively lower but steady,
averaging 2.8GW per year through 2040. Already
cost-competitive in some regions of the country, wind
will reach 174GW of installed capacity by 2040.
Offshore wind made its U.S. debut in 2016, and over
the next few decades the nascent U.S. industry will
gradually add over 5GW of capacity.
The U.S. grid in 2040 retains 655GW of thermal
capacity. Gas retains its dominant position in the U.S.
power system with PV coming in a close second.
UNITED STATES OF AMERICA

CAPACITY ADDITIONS &

INVESTMENTS
Gross capacity additions & decommissioning Investments in power generating capacity

GW

60

50

40

30

20

10

-10

-20

-30

-40

-50
2017 2020 2025 2030 2035 2040

Source: Bloomberg New Energy Finance Source: Bloomberg New Energy Finance

24 June 15, 2017

UNITED STATES OF AMERICA
More PV is added in the U.S. to 2040 than any other technology, averaging 15GW and $10bn invested per
year
Through 2040, over 60% of U.S. power capacity
additions are represented by renewable sources.
More than twice as much new capacity will come
from solar PV than from wind.
In the near term, much of the renewables build is
driven by state targets and the rush to exploit federal
tax credits before they expire. By the late-2020s,
reduced costs of the technologies push the
economics of wind and solar into competition with
existing fossil assets.
Almost 60GW of onshore wind power plants reach
the end of their expected lives in the 2030s.
Repowering existing wind projects (replacing older
turbines with newer ones) offers key opportunities for
wind in the those later years.
178GW of new gas-fired capacity gets built through
2040 with net additions averaging 2.3GW per year.
25 June 15, 2017
Over the 2017-2040 period, BNEF forecasts $750bn
of investment in U.S. power generation (excluding
fuel costs and transmission infrastructure).
Utility-scale solar is expected to see an average
investment of nearly $5bn per year.
Small-scale solar is expected to attract nearly
$5bn per year.
Onshore wind will average $12bn per year, with
much of that going to repowering existing sites in
the 2030s.
Fossil-fuelled generation will still capture $189bn,
or one quarter of total investment, with natural gas
predominating.
Nuclear garners only $27bn of investment through
2040. The long-term outlook of U.S. nuclear relies
primarily on small modular reactor technology.
UNITED STATES OF AMERICA

ECONOMICS

New-build levelized costs of electricity Cost of new renewables vs marginal cost of

(renewables vs fossil fuels) existing fossil fuel plants
$/MWh (real 2016)
120

100

80

Coal
60

CCGT
40

20 Onshore wind

Utility-scale PV

0
2017 2020 2025 2030 2035 2040

Source: Bloomberg New Energy Finance Source: Bloomberg New Energy Finance

26 June 15, 2017

UNITED STATES OF AMERICA
By 2023, onshore wind and PV are competitive with new build gas plants. Five years later, PV undercuts
existing gas generation
Based on our analysis, both onshore wind and utility-
scale PV are expected to reach cost parity with
combined-cycle natural gas turbines (CCGT) in 2023
at a levelized cost of energy of approximately
$40/MWh. At that time, new build wind and solar will
be cost competitive with what is currently the
predominant form of new fossil-fueled generation in
the U.S.
The median LCOE of a new CCGT in the U.S. is
expected to stay fairly constant in real terms. Rises in
fuel costs will be offset by continued improvements in
efficiency and automation.
The new build cost of coal generation is almost
irrelevant because new build is virtually prohibited by
federal New Source Performance Standards.
The marginal costs of coal and gas-fired generation
remain ultra-competitive with each other. We expect
-cost
advantage by a small margin.
27 June 15, 2017
In the U.S., where load is flat (in most regions), there
is less need for new build and thus for wind and solar
build to occur. Wind and solar LCOEs must come in
below the marginal costs of existing fossil generation.
New-build wind and solar will be less competitive with
existing fossil-fired generation. The marginal cost of
generation from existing coal and gas generators
hovers much lower, around $24/MWh, and is not
undercut by solar PV until 2027. Cost parity between
onshore wind and existing CCGT is only seen
between the best new build wind projects and the
least efficient, most expensively supplied CCGTs.
In the U.S., subsidized wind and solar power
purchase agreements have been signed at levels far
below the unsubsidized LCOEs shown in the
previous slide: under $20/MWh for wind (in the
windiest regions) and below $40/MWh for solar (in
the sunniest regions). These represent the lowest
and most recent prices following a steep and
continuous downward trend.
UNITED STATES OF AMERICA

BEHIND THE METER

Small-scale PV cumulative capacity Small-scale batteries cumulative capacity

MW

140,000

120,000

PV (only)
100,000

80,000

60,000

40,000
PV (with
storage)
20,000

Source: Bloomberg New Energy Finance Source: Bloomberg New Energy Finance

28 June 15, 2017

UNITED STATES OF AMERICA

Small-scale PV grows to 140GW by 2040 with a minority of systems paired with batteries

In 2040, U.S. homes and business operate 140GW of small-scale PV assets, surpassing the installed
-fired generators.
Yearly additions of small-scale PV are expected to be steady through 2040, keeping to a vigorous average
of 5.1GW/year and making up 17% of total U.S. generation capacity additions over the time period.
The recent growth in PV additions continues steadily until the early 2020s, when the phase-down of the
federal Investment Tax Credit kicks in and, we assume, full retail rate net metering is eliminated. New build
does not accelerate again until the 2030s, when payback periods recover from the loss of these favorable
regulations.
Distributed generation grows to become a major component of the U.S. generation mix with serious
implications for the wholesale markets. The economics of small-scale PV systems are fundamentally driven
by retail power price economics. However, the scale of distributed solar growth in the U.S. through 2040 is
substantial enough to cut into overall demand for power. That, in turn, impacts traditional generators,
including independent power producers.
The majority of small-scale PV systems installed in the U.S. through 2040 are not coupled with storage
systems as these systems only gradually become truly economically viable for most consumers. In the
2020s, PV-plus-storage system demand does pick up rather sharply driven by battery cost reductions and
the elimination of full retail rate net metering in many U.S. regions. Nonetheless, there continue to be
significant opportunities for PV systems on their own through 2040.

29 June 15, 2017

UNITED STATES OF AMERICA

TOTAL DEMAND

Electricity intensity EV demand Total demand

kWh/$

0.30

0.25 EV fixed charging

0.20

0.15

0.10

0.05

0.00

Source: Bloomberg New Energy Finance

30 June 15, 2017

UNITED STATES OF AMERICA
U.S. electricity demand is propped up by growing electric vehicle adoption
The past five years in the U.S. have seen a
fundamental decoupling between electricity
demand and economic growth with every unit of
GDP requiring less electricity to produce. This
trend continues as GDP and population rise over
the next 25 years, while energy efficiency
improvements depress electricity demand.
Changes in demand vary substantially by region
in the U.S. but two general trajectories
predominate:
Steadily rising demand in sun-belt states such
as Texas, California and Florida.
Stagnant demand followed by decline in most
other states
Altogether, average U.S. load growth is forecast
below 0.25% year-on-year through 2040.
31 June 15, 2017
Electricity consumption associated with new
electric vehicle (EV) adoption is one of the few
growth drivers of U.S. electricity demand. A
growing number of EV models coming to market
gives U.S. consumers more options to switch from
hydrocarbons to electricity as their primary
transport fuel. The trend is a result of falling
battery prices, favorable policies, and competitive
economics compared with internal combustion
engine vehicles.
We anticipate that EVs become over one quarter
of the U.S. light-duty vehicle fleet by 2040,
contributing 8.4% to overall U.S. electricity
demand. This creates an associated 370TWh of
new demand.
EV sales ramp most sharply in the 2030-2040
period. As a result, EV-related energy demand
remains negligible in most of the U.S. through
much of the 2020s, with the exception of
California, where uptake occurs earliest.
UNITED STATES OF AMERICA

PEAK DEMAND

Peakiness New England ISO Hourly EV charging & load Utility-scale batteries for peak
profile ERCOT Q1 2040 U.S.
2.05 MW MWh

EV flexible charging
2.00

1.95

EV fixed charging
1.90

1.85
Other load
1.80

1.75

1.70

1.65

Source: Bloomberg New Energy Finance

32 June 15, 2017

UNITED STATES OF AMERICA
Hourly demand patterns are re-shaped due to the proliferation of highly optimized utility-scale batteries
and the flexible charging capabilities of electric vehicles
one of the most
important characteristics of
demand on the grid and
influences what type of
generation gets built. The
metric is the ratio between a
average electricity demand. As
economies move from energy-
intensive heavy industry to
services, demand profiles
typically shift to create more
disparate hourly demand (and
more need for flexibility).
Through 2040, many regions in
the U.S. will confront growing
peakiness with the New
England states one of the more
extreme examples.
33 June 15, 2017
BNEF expects over half of U.S.
electric vehicle charging
meaning such cars charge
during times of day when
renewable energy production is
abundant. This is likely to be
midday in regions with high
solar penetration. This also
means that EVs are often not a
drag during times of peak
demand when the grid is most
strained.
The net effect is that EVs
through 2040 play an important
role in helping to smooth U.S.
daily demand profiles, reducing
peakiness.
Power markets that value
availability, along with declining
costs for battery storage,
automation and energy
management technologies lead
to greater adoption of batteries
and demand response for
ancillary services, intra-day
balancing and resource
adequacy. We expect 58GWh
(26GW) of utility-scale battery
storage and 81GW of demand
response to be on line by 2040.
We anticipate that U.S. non-
reach 856GW in 2028.
Incorporating our view of
growth in demand response,
non-coincidental U.S. net peak
load in 2040 is expected to be
7.8% of lower than in 2017.
UNITED STATES OF AMERICA

ELECTRICITY GENERATION

Electricity generation, by technology Annual average nuclear, coal and gas load
factors
TWh

5,000 100%

4,500 90% Coal

Gas
4,000 80%
Oil

3,500 70% Nuclear

Hydro
3,000 60%
Geothermal

2,500 50% Biomass/WtE

Onshore wind
2,000 40%
Offshore wind

1,500 30% Utility-scale PV

Small-scale PV
1,000 20%
Solar thermal

500 10% Other

Renewables share
0 0%
2012 2016 2020 2025 2030 2035 2040

Source: Bloomberg New Energy Finance Source: Bloomberg New Energy Finance

34 June 15, 2017

UNITED STATES OF AMERICA
Growth in renewable and gas-fired generation weighs on the economics of coal and nuclear. All
technologies will have to compete for a share of overall demand, which is hardly growing.
While capacity grows, U.S. electricity generation is
projected to be relatively flat over the coming
With the pie hardly growing, gas and renewables
must elbow out existing coal and nuclear to gain
market share.
A clash of gas and renewables build amid stagnant
load growth creates a period of prolonged
overcapacity in the U.S. Without substantial coal or
nuclear retirements before 2030, U.S. power markets
will maintain more than ample generation and
reserve margins.
Nuclear power comprises 8.6% of U.S. capacity but
19.1% of generation. As a result, premature
retirements of nuclear plants could cause step-
changes in the local economics and fuel burn of
surrounding generators. Our analysis predicts most
U.S. nuclear plants remain on line through their 40-
year licenses and then 20 years beyond with re-
licensing.
35 June 15, 2017
The share of wind and solar in the U.S. generation
mix swells to over 18% by 2030 and to 31% by 2040.
Post-2025, solar and gas expand their market shares
rapidly and mainly at the expense of coal and
nuclear.
Through 2040, capacity factors for coal and gas
plants in the U.S. rise to approximately 67% and
39%, respectively. In 2016, the U.S. natural gas glut
crushed coal load factors but these are already
rebounding and should remain generally up over the
next few decades.
The U.S. gas plant fleet benefits from improved
thermal load factors thanks to the deployment of
higher efficiency combined-cycle gas turbines. As for
coal, only the most efficient plants survive the
onslaught from gas. Those that do will, by definition,
be the most efficient and operate at higher load
factors.
UNITED STATES OF AMERICA

EMISSIONS

Carbon intensity Emissions

tCO2/MWh

0.60

0.50

0.40

0.30

0.20

0.10

0.00
2012 2016 2020 2025 2030 2035 2040

Source: Bloomberg New Energy Finance Source: Bloomberg New Energy Finance

36 June 15, 2017

UNITED STATES OF AMERICA

The CO2 emissions intensity of the U.S. power sector drops by 35% by 2040 from 2017 levels.

Carbon emissions from the U.S. power sector fall steadily with the continued evolution of the generation mix. A
less carbon-intense grid more dependent on renewables and natural gas deflates yearly power sector emissions
from 1,985MtCO2e today to 1,686MtCO2e by 2030 and 1,283MtCO2e by 2040.
In the near term, the relative shares of coal and natural gas in the U.S. generation mix hold greatest sway over
power emissions as combined-cycle natural gas plants emit approximately 60% less CO2 compared with coal.
Deep coal-to-gas fuel switching and improving efficiency of modern gas turbines will equate to lower emissions.
The growing contribution of renewables also chips away at the carbon intensity of U.S. electricity overall. We
anticipate a particularly severe emissions drop between 2030 and 2040 when 100GW of U.S. coal comes to the
end of its useful life and is replaced almost entirely by modern gas turbines and solar PV. Given that building new
coal generation is effectively impossible in the U.S. today, we know that reluctance to abandon coal-fired power
generation can only last as long as the plants themselves.
Federal support for greenhouse gas emissions reductions has been largely overturned by the Trump
administration, and in response, some U.S. states might look to tighten their emissions reductions goals. The
federal Clean Power Plan was anticipated to reduce power sector emissions by 32% below 2005 levels by 2030
and the U.S. pledge in the UNFCC Paris Accord set an economy-wide goal of 26-28% below 2005 levels by 2025.
W
headline goal without any new federal or state policies (assuming business-as-usual, without the CPP).

37 June 15, 2017

MEXICO

38 June 15, 2017

MEXICO

CAPACITY MIX

Cumulative installed capacity, by technology Gross capacity additions & decommissioning

GW

250

200

150

100

50

0
2012 2016 2020 2025 2030 2035 2040

Source: Bloomberg New Energy Finance Source: Bloomberg New Energy Finance

40 June 15, 2017

MEXICO
Solar overtakes gas and hydro to dominate the capacity mix, which more than triples in size to 2040
Wind and solar account for 86% of all new power
generating capacity additions in Mexico as the power
sector more than triples in size, from 73GW today to
223GW in 2040.
Utility-scale solar is poised to play a leading role in
revolution. By 2040 it makes
up 43% of total capacity. Falling PV prices accelerate
deployment starting around 2025. From then through
2040, installed PV more than triples from 8.7GW to
40GW.
New distributed generation regulations and rising
-scale PV
market. The build-out starts relatively slowly, with only
11GW installed from 2017 to 2030, but accelerates
with over 35GW added over the next 10 years.
Wind continues to be an important source of
generation. Cumulative capacity jumps from 3.5GW
in 2016 to 53GW in 2040 with some of the biggest
gains in the 2030s.
mix but we do not anticipate more than around
2.1GW of new hydro build through 2040.
41 June 15, 2017
In the near term, we expect Mexico will be a strong
market for new wind, solar and gas, with 23GW of the
three technologies added through 2020.
However, a large pipeline of new plants under
development combined with slower than expected
demand growth creates a period of oversupply. As a
result, we anticipate a hiatus in new capacity additions
from 2021 to 2023.
From 2016 to 2040 Mexico adds 20GW of gas, mostly
replacing aging coal- and oil-fired plants. Toward 2040
12GW is retired. Today, gas comprises 49% of
installed capacity, but by 2040 its share shrinks to 19%
as renewables growth dominates.
Mexico becomes less reliant on oil and coal. By 2030,
we expect installed capacity for these two to be less
than 1GW and 3GW, respectively. By 2040, they
represent just 700MW, combined.
MEXICO

INVESTMENTS

Investments in power generating capacity renewables industry offers a $162bn

investment opportunity through 2040
$bn - 2016 real

70
2040, 89% is likely to flow to renewables, primarily wind
and solar.
60
Onshore wind claims the largest individual share with
over $92 billion, around 72% of which we expect to flow
50 between 2026 to 2035.
PV is the second largest recipient, with $66 billion
40 invested through 2040. Of this, 53% goes to small-scale
PV which grows steadily over the period, rising from
$1.2 billion in 2017-2020 to $13.4 billion in 2036-2040.
30
Gas is the only fossil fuel source that attracts new
investment through 2040, with $13 billion expected.
20
We forecast 21% of the $32 billion invested in 2021-
2025 to finance 1.2GW of nuclear capacity with one new
10
plant currently planned.

0
2017-20 2021-25 2026-30 2031-35 2036-40

Source: Bloomberg New Energy Finance

42 June 15, 2017

MEXICO

ECONOMICS

New-build levelized costs of electricity Cost of new renewables vs marginal cost of

(renewables vs fossil fuels) existing fossil fuel plants
$/MWh - 2016 real

90

80 CCGT

70

60
Coal
50

40
Onshore wind

30

20
Utility-scale PV

10

0
2017 2020 2025 2030 2035 2040

Source: Bloomberg New Energy Finance Source: Bloomberg New Energy Finance

43 June 15, 2017

MEXICO
Already competitive with new gas, wind and solar get cheaper than existing gas by 2029
Today, the cost of new solar and wind in Mexico is
broadly equivalent to a new gas plant on a levelized
dollar per MWh basis.
However our forecasts suggest that by 2020 wind
and solar are going to be around 18% cheaper than
new gas. Based on recent tenders held for power
contracts in Mexico, there is some evidence that
solar is already considerably less expensive than our
benchmark values suggest.
Similarly, coal appears cheaper today, but by 2020
wind and solar reach $54/MWh and $57/MWh,
respectively, and coal is still over $60/MWh.
Over the next 23 years, we expect the cost of
generation from existing coal plants to be lower than
any other technology, at $20/MWh. However, Mexico
has limited coal capacity currently operating and
adding new coal is more costly. As a result, we do not
grid.
44 June 15, 2017
While coal is less expensive on an LCOE basis,
coal generation conflicts with recent reforms in
Mexico to bring cleaner fuels to generation.
Natural gas has aided the switch of coal and fuel
oil generation as Mexico has internal gas
production and a large amount of import capacity
via pipelines from the U.S. and LNG on the
coasts.
By 2023 we expect solar to emerge as the
cheapest new power generation in Mexico. This is
driven mainly by the sharp cost declines which
reduce the lifetime cost of solar by 64% between
2017 and 2040.
Onshore wind costs also decline steadily, falling
from $72/MWh in 2017 to $33/MWh in 2040.
The cost of electricity generation from new wind
and solar projects will be cheaper than running
existing combined-cycle gas turbines by 2029.
MEXICO

TOTAL & PEAK DEMAND

Total electricity demand Peakiness

Electricity intensity of GDP Flexible capacities - cumulative capacity

Source: Bloomberg New Energy Finance Source: Bloomberg New Energy Finance

45 June 15, 2017

MEXICO

60% from 2016 to 2040 thanks to strong economic growth

but the country also becomes 29% more efficient in how it uses electricity over that time.

Mexico is a rapidly developing country with an
economy forecast to grow from an annual GDP of
$1.1 trillion in 2016 to $2.4 trillion in 2040,
according to IMF and OECD projections. That
growth results in overall electricity demand rising
60% from 320TWh in 2016 to 509TWh in 2040.
As it grows, Mexico becomes more efficient in
how it uses electricity. We expect its electricity
intensity of GDP to fall 29% over this time, from
0.30kWh/$ in 2016 to 0.21kWh/$ in 2040. Our
forecast
of development, meaning its
economy is capable of becoming substantially
more efficient through 2040.
Growth in demand for grid-scale power is curbed
somewhat by growth in small-scale PV which
weakens demand from utility-scale plants from the
mid-2020s.
The ratio of peak to average demand in Mexico is
relatively narrow compared to other countries,
We anticipate this will rise through 2040, but not
dramatically. This means there are likely to be
fewer opportunities for new peak management
technologies in the country.
In all, our analysis suggests around 10GW of new
flexible capacity, such as battery storage, is likely
to be added in Mexico over 2017-40, with more
than 90% of this coming after 2035.
This is in addition to the 58GW of gas and hydro
that will still be available to manage the increasing
penetration of variable wind and solar.

46 June 15, 2017

MEXICO

ELECTRICITY GENERATION

Electricity generation, by technology Annual average coal and gas load factors

TWh

600 100%

90%
500
80%

70%
400
60%

300 50%

40%
200
30%

20%
100
10%

0 0%
2012 2016 2020 2025 2030 2035 2040

Source: Bloomberg New Energy Finance Source: Bloomberg New Energy Finance

47 June 15, 2017

MEXICO
Clean energy stands to revolutionize the Mexican
power-generating mix. Oil, gas and coal accounted
for 81% of around 320TWh generated in 2016.
However by 2040 it is renewables at 82% of 509TWh
which dominate.
We expect steady growth in renewable generation
throughout the forecast period, accompanied by
lower thermal production. A tipping point of sorts
occurs in around 2030, when renewables start to
undercut gas and coal.
Onshore wind generation rises from just 3% in 2016
to 38% of total generation in 2040. Solar grows from
almost nothing in 2016 to 173TWh, or one-third of
generation, by 2040. We expect this figure to be
equally divided between utility-scale and distributed
solar.
In the short term, we anticipate solar can play a key
role in meeting afternoon peak demand. Other
technologies will primarily be dispatched during the
evening and overnight hours when solar is
unavailable.
48 June 15, 2017
-fold increase from today
While the importance of gas diminishes in the long-
term, we expect gas generation to expand into the
mid-2020s, supported by cheap gas from the U.S.
Over time, however, renewables depress gas
capacity factors, with an increasing number of units
used only to supply at times of peak demand, or
when wind and solar are operating at a minimum. As
a result, gas goes from providing 57% of generation
in 2016 to a mere 15% by 2040.
- and oil-fired
plants to be decommissioned over the next 23 years.
As a result we expect to see little generation from
these sources by 2040.
Mexico aims to have 35% electricity generation from
low-carbon sources, including nuclear and efficient
cogeneration plants, by 2024 and 50% by 2050.
Despite growth in wind and solar, it appears Mexico
may miss its 2024 goal with the country not reaching
achievable with Mexico reaching its 50% target as
early as 2029, according to our analysis.
49 June 15, 2017
BRAZIL

50 June 15, 2017

BRAZIL

CAPACITY MIX

Cumulative installed capacity, by technology Gross capacity additions & decommissioning

GW

400

350

300

250

200

150

100

50

0
2012 2016 2020 2025 2030 2035 2040

Source: Bloomberg New Energy Finance Source: Bloomberg New Energy Finance

52 June 15, 2017

BRAZIL
Wind and solar join hydro and biomass to
dominate the power mix in Brazil in 2040.
installed power-generating capacity is poised to more
than double through 2040. Total generating capacity
jumps 128%, from 149GW today to 338GW in 2040.
Nearly two thirds of current capacity is accounted for
by large hydro. That drops to approximately one third
by 2040 as the overall matrix grows.
Lower-carbon energy sources today account for 88%
of capacity, with hydro at 97GW and biomass at
13GW, by far the largest contributors.
While hydro remains a critical source by 2040 with
120GW on line, other technologies take the lead in
terms of new additions: solar with 104GW and wind
with 40GW. We expect an average of 7GW of new
renewables added per year through 2040, nearly
tripling installed capacity to 281GW.
Solar goes from near non-
today to 104GW of installed capacity by 2040. This is
driven by small-scale PV, which makes up 87%, or
90GW, of those installations.
53 June 15, 2017
Small-scale PV accounts for 42% of
net capacity additions to 2040
Natural gas capacity benefits as overall demand
grows. From now through 2030, gas capacity rises
almost three-fold from 13GW to 34GW. It then
plateaus and gradually declines to 24GW by year-
end 2040.
From today to the end of the 2020s, new gas projects
are added to play an important role in meeting peak
demand. However between 2030 and 2040, 10GW of
gas plants are decommissioned. By 2040 gas
capacity is still up 85%.
New sources of flexible capacity, such as batteries
and demand response schemes, become critical to
the grid post-2030 with the growing penetration of
renewables. These represent 7% of capacity by 2040
compared with virtually zero today.
In 2020, we assume Brazil adds 1GW of new nuclear
capacity with the commissioning of the Angra 3 plant.
BRAZIL

INVESTMENT
$167 billion to flow to renewables,
Gross capacity additions & decommissioning $18 billion to gas

$bn - 2016 real Around 90% of the $185 billion invested in Brazil
power generation through 2040 goes toward
50 renewables. Another $18 billion finances the building
of gas plants.
45

40 and PV. The former sees $52 billion and the latter
$78 billion, 86% of which goes to small-scale PV.
35 The bulk of utility-scale PV investment comes after
2025.
30
Hydro still attracts investment in the short- and mid-
25 term with $24 billion deployed through 2030.
20 Similarly, approximately $18 billion flows into new
gas plant build until 2030.
15
Small-scale PV dwarfs everything between 2030
10 and 2040, when $48 billion of investment by
households and businesses helps to install 69GW of
5 capacity around the country.
0
2017-20 2021-25 2026-30 2031-35 2036-40

Source: Bloomberg New Energy Finance

54 June 15, 2017

BRAZIL

ECONOMICS

New-build levelized costs of electricity Cost of new renewables vs marginal cost of

(renewables vs fossil fuels) existing fossil fuel plants
$/MWh - 2016 real
600
Coal

500

400
CCGT

300

200

100
Utility-scale PV

Onshore wind
0
2017 2020 2025 2030 2035 2040

Source: Bloomberg New Energy Finance Source: Bloomberg New Energy Finance

55 June 15, 2017

BRAZIL
Wind is the cheapest new utility-scale electricity source in Brazil today and remains so to 2040
As of year-end 2016, onshore wind is already cost-
competitive in Brazil with a levelized cost of $70/MWh
for an average project.
We see this gradually dropping to $29/MWh by 2040.
Wind remains the most competitive technology
through the period, due to a combination of excellent
natural resources and ongoing efficiency
improvements in turbines. Already, Brazil is home to
wind projects with capacity factors that routinely top
50%.
Utility-scale solar is by comparison an expensive
source of generation at around $121/MWh today.
That drastically changes post-2020 as costs drop to
$60/MWh. By 2040 utility-scale PV costs $38/MWh in
Brazil.
While new coal is broadly competitive today with wind
and solar, by 2020 renewable technologies have
begun to pull away. By 2025, thanks to declining
utilization rates, costs for coal rise.
56 June 15, 2017
By our estimate, new-build gas projects are
uncompetitive in Brazil today at $323/MWh. This
high levelized cost reflects anticipated low utilization
of gas plants through 2040.
Nonetheless, gas is still likely to be added to the
capacity mix to provide supply at times of peak
demand or when wind and solar generation might be
at a lull.
Existing coal and gas plants remain cheaper options
than building new PV and wind projects in the short
term. However this changes in 2025. First, new wind
projects become cheaper than running an existing
gas plant and then in 2030 new solar becomes cost
competitive with existing gas.
BRAZIL

TOTAL & PEAK DEMAND

Total electricity demand Peakiness

Electricity intensity Batteries and flexible capacity

Source: Bloomberg New Energy Finance Source: Bloomberg New Energy Finance

57 June 15, 2017

BRAZIL
demand grows 49% between
2016 and 2040.
depressed demand for power in recent years and we
see little growth in this until 2020. During the 20 years
that follow, however, growth returns to rates seen
previously. From 2021 through 2040, gross demand
rises by about half to reach a total of 933TWh.
A gap between gross demand and net grid demand
first appears in approximately 2027 as Brazilian
consumers and businesses begin adopting small-
scale PV. Distributed PV really picks ups in the 2030s
and eventually subtracts 191TWh from demand by
national grid, but demand for utility-scale power stops
growing in the early 2030s.
electricity through 2040. In the last few years,
electricity intensity has actually spiked to a record
high of 0.35kWh/$ due to a shortage of hydro power
and economic contraction. However, we see this
gradually improving to 0.27kWh/$
economy both grows and matures.
58 June 15, 2017
Brazil sees around 14GW of batteries by 2040
to provide additional system flexibility
82GW to 136GW by
2040, widening the gap between peak and average
electricity use. This creates greater demand for
flexible power resources and technologies that can
generate at times of maximum demand.
Demand response activity picks up after 2020 and
eventually reaches 7GW of availability by 2040.
Utility-scale batteries that shave sharp, short-duration
peaks are expected to replace gas-
plants from 2031-2033 with 6GW of new capacity.
Behind-the-meter battery deployment expands as
small-scale PV grows in the 2030s to eventually
reach 8GW by 2040.
BRAZIL

ELECTRICITY GENERATION

Electricity generation by technology Capacity factors

TWh

1,000 100%

900 90%

800 80%

700 70%

600 60%

500 50% Renewable penetration (% of generation)

400 40%

300 30%

200 20%

100 10%

0 0%
2012 2016 2020 2025 2030 2035 2040

Source: Bloomberg New Energy Finance Source: Bloomberg New Energy Finance

59 June 15, 2017

BRAZIL
Brazil power generation: starts clean, gets cleaner and more diverse by 2040
Electricity demand in Brazil has remained essentially
flat in the past three years as the economy has
suffered through deep recession. Nonetheless, we
expect generation in the country to grow by 49% to
933TWh through 2040 once economic growth returns
as forecast.
Coal, gas and oil see their combined contribution fall
from 19% of generation now to 2% in 2040.
Nevertheless, due to the influx of renewables, gas
plays a vital role in meeting peak demand.
The ascendancy of renewables results in less
reliance on fossil-fuelled plants for Brazil by 2040.
Installed natural gas-fired capacity actually rises over
the next few decades, but the rate at which those
plants generate plummets.
We anticipate the capacity factor of an average gas-
fired plants in Brazil to sink from over 65% today to
below 6% by 2040 as fossil generation is increasingly
pushed out of merit order by zero marginal cost
renewables.
60 June 15, 2017
Generation from oil-burning plants falls away first,
followed by coal, then ultimately gas. Coal remains a
marginal contributor throughout making its capacity
factor whipsaw around to 2040.
Wind and solar generation rises from 5% in 2016 to
43% in 2040. Just under half that new generation is
in the form of small-scale PV.
Onshore wind generation quadruples from 5% today
to 19% by end of 2040. Utility-scale and small-scale
solar PV both climb, to 3% and 21% respectively.
generation in Brazil at 79%, thanks primarily to large-
scale hydro projects. This grows to no less than 96%
through 2040 thanks to major jumps in production
from wind and solar.
Zero-carbon sources (renewables plus nuclear)
accounted for 81% of all generation in 2016. This
grows to 98% by 2040.
BRAZIL

EMISSIONS

Power sector CO2 emissions low and will get lower

MtCO2e
80 quite low compared to other countries due to the its
heavy reliance on large hydro generation.
70 Oil gas, and coal combined account for just 18% of total
generation in 2016. As a result, the power sector overall
60
CO2 emissions in 2015. Still, there is room for
improvement, given the presence of CO2-intensive oil
50 and coal in the power mix.
Oil We see emissions dropping from 70MtCO2 in 2016 to
40
Gas less than 10MtCO2 in 2040. The decline is defined by
Coal three periods. In the first, now through 2022, emissions
30 plummet as coal plant capacity factors drop sharply as a
slew of new plants arrive. In the second, emissions
rebound to approximately 40Mt as coal capacity factors
20
rise due to tighter market conditions. Finally, in the third,
emissions drop due to gas plant retirements and another
10 fall in coal plant capacity factors. Renewables growth is
strong during this period.
0
2012 2016 2020 2025 2030 2035 2040

Source: Bloomberg New Energy Finance

61 June 15, 2017

CANADA

62 June 15, 2017

CANADA

CAPACITY MIX

Cumulative installed capacity, by technology Distribution of capacity, fossil vs non-fossil

GW

200

180

160

140

120

100

80

60

40

20

0
2012 2016 2020 2025 2030 2035 2040

Source: Bloomberg New Energy Finance Source: Bloomberg New Energy Finance

64 June 15, 2017

CANADA
Installed capacity in Canada grows by 35%
between 2017 and 2040
Installed generation capacity in Canada is expected
to grow steadily through 2040, at a compound growth
rate of 1.1%. The entire capacity mix reaches 189GW
at the end of our modeling horizon, including
contributions from demand response and storage.
Changes to the coal and nuclear stack are the
biggest drivers of near-term build:
Coal:
6.3GW of coal-fired generation by 2030; additional
only 2.1GW in that year, down from 9.2GW in 2016.
By 2040, our analysis expects only 570MW of coal
operating in Canada.
Nuclear:
(totalling nearly 13GW) undergo refurbishment in
cycles from 2017-2030; the operating nuclear stack
thus troughs at only 9.2GW in 2021, or 32% below
As a result, Canada adds a net 8.2GW of natural gas-
fired plants from 2016-2025, alongside 14.6GW of
wind and solar and 5.2GW of hydro, to meet demand.
65 June 15, 2017
Renewables and hydro make up over 80% of new
capacity
sectors, Canada grows even cleaner by 2040: its
capacity mix is on track to be 89% carbon-free, up
from 79% in 2016. Over 80% of new additions to the
fleet are expected to be renewables or large
hydroelectric facilities; demand response and storage
bring this total to 87%.
Hydro remains the largest source of installed capacity
in 2040, at 45% of the stack; its overall share of the
pie shrinks from 56% in 2016 (even as it grows by
6.7GW), due to the scale of wind and solar additions.
Onshore wind surpasses gas as the second-largest
source of capacity in the country in 2026. By 2040,
30.8GW is connected to the grid, good for 16% of the
mix. Offshore wind arrives beginning in the early
2020s, reaching 2.3GW by 2040.
Small-scale PV represents the greatest source of
incremental growth, increasing from near-zero to hit
8% (16GW) of installed generating capacity in 2040.
Utility-scale PV also grows significantly, but it is
overtaken by distributed solar in 2036.
CANADA

CAPACITY ADDITIONS &

INVESTMENTS
Gross capacity additions & decommissioning Investments in power generating capacity

GW

-2

-4
2017 2020 2025 2030 2035 2040

Source: Bloomberg New Energy Finance Source: Bloomberg New Energy Finance

66 June 15, 2017

CANADA
Canada continues to lean heavily on hydroelectric, wind and natural gas for new capacity, until PV
cost declines make that technology the cheapest new source of capacity in 2029
Renewables make up the bulk of new additions
through 2040. Our analysis expects onshore wind
to exceed total solar installations in most years
prior to 2030; thereafter, solar PV economics
trump all others, making it the best choice for new
capacity on a levelized cost basis.
Solar PV additions tilt away from primarily utility-
scale (in the early years of our forecast) to small-
scale as costs fall: two-thirds of additions in the
2030s are distributed.
Gas build booms in the early 2020s as Alberta
prepares to retire its 6.3GW coal fleet. In total, we
anticipate that 10.5GW of new gas will be built in
the country, 8GW of which will be in the 2020s.
Retirements primarily take the form of older,
inefficient coal and gas plants. Aging wind farms,
too, will be decommissioned and in some cases
repowered. Wind retirements will total 11.4GW
from 2024-40, significantly less than the 25GW of
onshore wind installed over that time.
67 June 15, 2017
the bulk of its investments is expected to be
directed to onshore wind, at a total of $52bn over
the 2017-40 timeframe. This figure represents just
over half of total investment dollars. Only $5bn is
sunk into offshore wind in our forecast.
Solar, the second largest source of additions, also
receives the second largest investment flows, at
$19bn. Of this figure, more than half ($12bn)
promotes the adoption of 15GW of small-scale
PV; the remaining $7bn creates 12GW worth of
utility-scale solar arrays.
Fossil fuels receive only $9bn in capital for new
additions in our modeling, all of which pays for
new natural gas-fired units. The majority of these
funds are disbursed from 2017-2025 for the rollout
of 9GW of new gas plants.
CANADA

ECONOMICS

Utility-scale PV and onshore wind LCOE vs. gas Utility-scale PV and onshore wind LCOE vs. coal
marginal generation cost marginal generation cost
$/MWh - 2016 real

90

80

70 Onshore wind

CCGT
60

50

40

30

20
Utility-scale PV

10

0
2017 2020 2025 2030 2035 2040

Source: Bloomberg New Energy Finance Source: Bloomberg New Energy Finance

68 June 15, 2017

CANADA

Wind and solar costs undercut the economics of existing coal and gas generation by the late 2020s

Rapidly falling costs for wind and solar make these
technologies the cheapest sources of electricity in the
late 2020s. The levelized cost of new wind drops
37% over our forecast, while the levelized cost for
solar falls even faster, by 65%, from 2017-2040.
These costs decline mean that by 2025, installing
new wind facilities in high-resource areas is cheaper
than the cost of running existing, efficient coal-fired
power plants. For solar, this crossover point occurs in
2029.
Carbon prices will increasingly make the economics
of running coal-fired power plants untenable. Under
Prime Minister Trudeau, all Canadian provinces will
be required to implement some form of carbon pricing
beginning in 2018, although a number of provinces
already have their own schemes in place. Our
modeling assumes a carbon price of C$30/t
(US$23/t), applied beginning in 2022; this quickly
puts even existing coal-fired power plants out of the
money relative to new wind and solar.
Gas-fired power plants are less impacted by carbon
pricing: a typical natural gas-fired power plant is 60%
cleaner than an average coal-fired unit, meaning that
its compliance costs are only about C$12/MWh in our
forecast, compared to C$30/MWh for coal.
Nonetheless, existing natural gas units also find
themselves losing out to wind and solar, with
inflection points occurring in 2027 and 2029,
respectively. This is primarily due to rapidly falling
costs for these renewable technologies, as
mentioned, but also due to a rebound in natural gas
prices, making these units relatively more expensive
to operate.

69 June 15, 2017

CANADA

ELECTRICITY GENERATION

Electricity generation, by technology Annual average gas load factors

TWh

700 100%

90%
600
80%

500 70%

60%
400

50%

300
40%

200 30%

20%
100
10%

0 0%
2012 2016 2020 2025 2030 2035 2040

Source: Bloomberg New Energy Finance Source: Bloomberg New Energy Finance

70 June 15, 2017

CANADA
Fossil generation rises 48% in the near-
Over the next 10 years, generation from fossil-fired
plants ticks up as fuel prices remain near historic
lows and Ontario cycles out its nuclear reactors for
refurbishment. We anticipate that a decline in coal-
fired generation will be more than offset by a
doubling of natural gas-fired generation, such that
fossil fuel-fired power peaks at 28% of the mix in
By 2040, production from fossil fuel units totals only
51TWh (including 46TWh from gas units), only 8% of
total generation.
71 June 15, 2017
electricity is 92% zero-carbon
Hydroelectric facilities remain the workhorse of the
Canadian fleet, producing 55% of its power in 2040,
Hydro generation
drops due to inroads from other renewables and
falling load. Hydro continues to play a critical role in
providing system flexibility, facilitating the integration
of intermittent renewables such that Canada is one
of the few countries modeled without a significant
need for utility-scale storage.
Onshore wind generation grows steadily, breaching
100TWh for the first time in 2038. Improvements in
technology and site-selection push average capacity
factors to 38% in the out-years of our forecast.
Although solar across both utility- and small-scale
deployments makes up 17% of total installed
capacity in 2040, lower capacity factors constrain its
electric contributions to only 7% of total generation.
In total, non-hydro renewables escalate from only
5% of generation in 2016 to 24% in 2040.
CANADA

EMISSIONS

Carbon intensity Emissions

tCO2/MWh

0.20

0.18

0.16

0.14

0.12

0.10

0.08

0.06

0.04

0.02

0.00
2012 2016 2020 2025 2030 2035 2040

Source: Bloomberg New Energy Finance Source: Bloomberg New Energy Finance

72 June 15, 2017

CANADA
Retirement of coal and the displacement of natural gas by cheap wind and solar means Canada
should easily achieve its emissions targets for the power sector.
Blessed with abundant hydro resources, Canada
already claims an extremely clean electricity sector:
the carbon emissions intensity of its electric
production in 2016 was only 0.14 metric tons of
CO2e per megawatt-hour. This compares to
0.4t/MWh for a typical combined-cycle natural gas
plant.
The near-term uptick in fossil-fired generation (due to
factors such as the
fleet) should boost this intensity to 0.18t/MWh in
2021, still far below the levels exhibited by other
industrialized countries.
Thereafter, the power sector becomes cleaner, with
emissions intensity dropping below 0.1t/MWh for the
first time in 2031. It ends our forecast horizon at only
0.04t/MWh in 2040, as zero-carbon resources
produce 92%
73 June 15, 2017
On an aggregate level, greenhouse gas emissions
from fossil fuel generation totalled 87MtCO2 in 2016.
This figure itself is an 11% decrease from 2014
levels, due primarily to a reduction in coal-fired
generation.
In 2021, emissions crest at 115Mt, a 32% increase,
and
the baseline of its Paris target, in which the country
pledged to reduce economy-wide emissions by 30%.
But while Canada may lag in the short run, ultimately
we expect it will easily achieve its target due to three
coincident drivers: cost declines in wind, solar, and
storage; rising carbon and fuel costs for emitting
generators; and weaker electricity demand. By 2040,
has emissions of 25Mt,
a comfortable 78% below 2005 levels.
CHILE

74 June 15, 2017

CHILE

CAPACITY MIX

Cumulative installed capacity, by technology Gross capacity additions & decommissioning

GW

50

45

40

35

30

25

20

15

10

0
2012 2016 2020 2025 2030 2035 2040

Source: Bloomberg New Energy Finance Source: Bloomberg New Energy Finance

76 June 15, 2017

CHILE
doubles, reaching 48GW in 2040
from 23GW today. This is due both to brisk economic
growth and to an increasing reliance on renewables
which run at lower capacity factors.
democracy, and economy make it well suited to
attract clean energy investment.
The make-
fossil capacity today to 58% renewables in 2040. To
get there, Chile adds 26GW of wind, solar, hydro and
biomass through 2040. Overall, 96% of all new build
is likely to be renewables, including large hydro.
Large hydro and thermal power plants remain
essential for system reliability, with batteries likely to
play some role.
The growth of PV is the result of cheaper equipment
and excellent solar resources. PV represents nearly
two thirds of all capacity added in Chile, with
cumulative capacity jumping to 19GW in 2040 from
1.6GW in 2016.
77 June 15, 2017
Renewable energy makes up 94% of all new
capacity additions in Chile to 2040
To 2025, wind and solar account 3.3MW of new build
each, as the two technologies compete on price and
Chile adds wind farms in locations with best resources.
However from 2026, solar begins to dominate. Of the
18GW added, small-scale PV makes the greatest
impact, as consumer and businesses increasingly
choose to offset retail price tariffs. From 2026-40,
7.1GW of small-scale PV is added, accounting for
more than half of the PV additions during that time.
Around 6.9GW of utility-scale PV is added in the same
period.
Hydro remains important, with around 2.3GW of new
capacity added to 2040, however it drops from 35% of
the total installed capacity .
Gas build diminishes, with Chile installing only 0.7GW
of new capacity by 2040, as 3.7GW retires after 2030.
For oil and coal, we expect each to add 0.2GW of new
capacity and to retire 0.2GW and 1.1GW by 2040,
respectively.
CHILE

BEHIND THE METER

Cumulative small-scale PV and storage
Cumulative small-scale PV, by sector
From 2026 to 2040, 51% of solar new build will
come from small-scale PV
Small-
mix today but we think that will start to change quickly
around 2020 as more and more businesses and
households choose to invest in PV.
We expect Chile to host at least 8GW of rooftop
systems by 2040. It represents 48% of all PV
capacity added in the next 24 years.
The increase in consumer PV is driven by
increasingly cheap and commoditized modules. This
creates a steep drop in payback periods for
residential systems by 2020, when activity starts to
pick up.
Toward the end of the 2020s, PV plus storage
becomes economically viable and adoption rates for
those systems begin to rise as demand for more
conventional systems wanes. Chile adds 1.2GW of
small-scale batteries by 2040.

Source: Bloomberg New Energy Finance

78 June 15, 2017

CHILE

INVESTMENT
Chile invests $28bn into new power
Investments in power generating capacity Text generation to 2040

$bn - 2016 real

From now through 2040, Chile attracts a total of
$28bn to fund 29GW of new power-generating
9 capacity. Around 88% of this goes to wind, solar and
biomass, with solar accounting for 46% on its own.
8 Investment from 2017-2020 totals $8bn. This results
in over-capacity that slows down activity post-2020.
7
Chile is set to see strong wind build over the next five
6 years with $4.1bn invested during 2017-2020. That
drops to around $0.26bn per year from 2021
5 onwards, with investment totalling $5.2bn through to
2040.
4
The investment to 2020 reflects power contracts
signed in three auctions held in Chile between 2014
3
and 2016, in which 24TWh/year was contracted.
2
Winning bids are due to start operation between
2016-2021. We expect that half of the power
1 contracted will be supplied by renewables.
We expect relatively flat investment in new hydro and
0 biomass plants, totaling $3bn and $1.5bn through
2017-20 2021-25 2026-30 2031-35 2036-40
2040, respectively. New biomass investments will be
mainly driven by the agricultural market. We expect
Source: Bloomberg New Energy Finance just $0.7bn to be invested in new gas capacity.
79 June 15, 2017
CHILE

ECONOMICS

New-build levelized costs of electricity Cost of new renewables vs marginal cost of

(renewables vs fossil fuels) existing fossil fuel plants
$/MWh - 2016 real

350
CCGT

300

250

200

150

Coal
100
Onshore wind

50 Utility-scale PV

0
2017 2020 2025 2030 2035 2040

Source: Bloomberg New Energy Finance Source: Bloomberg New Energy Finance

80 June 15, 2017

CHILE
New PV in Chile gets as cheap as $18/MWh by 2040
Chile has very high insolation rates which gives PV an
advantage over other technologies.
In 2018, we anticipate the cost of utility-scale PV
falling below onshore wind to around $52/MWh. By
2020, it gets cheaper than new coal at $39/MWh. By
2040 PV in Chile falls to $18/MWh, and as low as
$17/MWh at the best sites in the Atacama.
By 2040, our benchmark LCOE for onshore wind sits
at $32/MWh.
Solar, and then wind, begin to get deployed and cut
into the running hours of gas. These reduced capacity
factors raise their lifetime costs per MWh. For that
reason, we forecast gas LCOE to average $293/MWh
through 2017-40. Load factors will go from 28% in
2016 to 5% in 2040.
Note: LCOE stands for Levelized Cost of Electricity
81 June 15, 2017
In August 2016, Chile attracted worldwide attention
when developer Solarpack agreed to deliver a PV
project at just $29.1/MWh. At the time, this was the
lowest PV contract price ever seen. Levelizing this bid
and adjusting it for 2021 delivery sees it at $34/MWh,
in line with our benchmark forecast of $37/MWh in the
same year.
Today, the cost of new solar and wind in Chile is
higher than existing gas and coal plants on a levelized
dollar per MWh basis.
We expect the cost of new solar to undercut existing
coal only by 2038, despite a slump of 71% on its
costs, from $62/MWh to $18/MWh over 2017-40.
The marginal costs of coal generation remain ultra-
competitive and relatively flat, averaging $19/MWh
over the next 24 years. However, adding new coal
would be costly. As a result, we do not anticipate coal
having significant impact on grid.
The cost of new wind falls too. It remains broadly
competitive and undercuts existing gas plants from
2025, at $44/MWh.
CHILE

ELECTRICITY GENERATION

Electricity generation, by technology Annual average coal and gas load factors

TWh

120 100%

90%
100
80%

70%
80
60%

60 50%

40%
40
30%

20%
20
10%

0 0%
2012 2016 2020 2025 2030 2035 2040

Source: Bloomberg New Energy Finance Source: Bloomberg New Energy Finance

82 June 15, 2017

CHILE
Chile hits its 70% clean energy (including large hydro) generation target 20 years ahead of plan
diversified by 2040 with wind and solar accounting for
over half of generation. This rises to 86% including
hydro and biomass.
Chile has substantial large hydro resources and the
technology accounts for nearly a quarter of
generation in 2040, approximately the same as today.
The capacity factors of coal and gas fall through 2040
as additional renewable capacity comes on line.
Generation from coal, gas, and oil declines 68% from
47TWh in 2016 to just 15TWh in 2040.
Gas generation however has a much bleaker future
in Chile, falling 93% by 2040, squeezed by cheap
coal and cheap renewables.
Ultimately, gas power plants will mainly be reserved
for meeting peak demand and helping balance
renewables generation. This flexible capacity will
remain indispensable until
2030 when grid-scale battery become more
economical for use in peak demand management.
83 June 15, 2017
Coal drops most notably, down 59% to 13TWh in
2040 from 32TWh in 2016, as cleaner technologies
crowd it out on price. However, coal plants still
account for 12% total generation in 2040, playing an
important role in Chile and dispatching at an
approximate 40% load factor.
Wind accounts for 13% capacity in 2040 but 18%
generation thanks to rising expected capacity factors
for the technology.
-term goal of 70%
generation from wind, solar, geothermal, and other
zero-carbon emitting sources, including large hydro
by 2050. The country is already at 37% clean energy
by this definition. This analysis suggests that Chile
should have no trouble meeting its target and could
achieve it by 2030 20 years ahead of schedule.
CHILE

DEMAND
offers flexibility
to help balance growth in wind and solar
Total Demand Total electricity consumption is expected to grow 46%,
from 74TWh in 2016 to 108TWh by 2040.

sector becoming more important. The country also should

see energy efficiency gains thanks to the continued
proliferation of relevant technologies. Those two factors
will result in lower intensity of electricity demand.

by about one third over the next 24 years, from

Flexible capacities
0.31KWh/$ in 2016 to 0.21KWh/$ in 2040. As new
technologies are adopted, their inherently higher
efficiency impacts electricity intensity which falls year on
year.
Generation from small-scale PV rises to 17TWh in 2040,
reducing demand growth for utility-scale assets. Despite
a 46% rise in electricity demand, grid demand only rises
23% to 91TWh in 2040.
We anticipate an additional 3.4GW of flexible capacity to
-2040. A third of this is
batteries, both small-scale and utility-scale, after 2030.

provides sufficient flexibility to balance the growth in wind

Source: Bloomberg New Energy Finance and solar.
84 June 15, 2017
CHILE

EMISSIONS

Emissions CO2 emissions sink 62% by 2040

We expect CO2 emissions in Chile to fall 62%, to
17MtCO2 in 2040, down from 45MtCO2 today.
Coal generation in Chile has already peaked, however we
expect a more rapid emissions reductions from 2028 as
PV build accelerates. Post 2028, emissions shrink
another 39% from the 2016 baseline.

under the Paris agreement is not on an absolute basis,

Specifically, Chile has committed to cutting CO2

Zero-carbon vs fossil fuels penetration emissions per unit of GDP by 30% below 2007 levels by
2030.

emissions from industrial processes, the use of solvents

and other products, agriculture and waste, and use of the
land, change of use of the land and forestry (LULUCF).

Source: Bloomberg New Energy Finance

85 June 15, 2017

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86 June 15, 2017

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