The pace at which India – and China in particular – have developed solar power came as a surprise to BP analysts, the company’s chief economist told EURACTIV in an interview.
When oil and gas major BP published its 2018 Energy Outlook last February, the group’s chief executive underlined in the report’s foreword that “a core theme” of this year’s edition “is the speed of the transition underway”.
Speaking to EURACTIV in Brussels this week, BP’s chief economist, Spencer Dale, went even further, acknowledging that the company had made a “mistake” in evaluating the speed of the transition.
“We don’t pretend we haven’t made this mistake – we have made this mistake,” Dale admitted, saying BP has “revised up” its renewable energy growth forecasts as a result.
“A lot of the explanation is solar,” Dale pointed out, explaining that the impressive growth in solar PV worldwide followed a typical “learning curve” where the costs come down roughly by 25% every time solar capacity doubles.
“We haven’t been surprised by the steepness of that curve,” Dale pointed out, but rather by “how far along the curve” the world has got, particularly in China and India.
Last year, China saw “an unprecedented boom” in solar power, according to The ‘Global Trends in Renewable Energy Investment 2018’ report released by UN Environment and Bloomberg New Energy Finance in April.
BP surprised by “pace” of China’s energy transition
For BP, the surprising figures are “telling us less about solar energy and more about the pace of the energy transition in China. And the pace at which essentially they’ve reduced their share of coal and filled up that hole with solar energy,” Dale said.
The pattern is a familiar one. For years, the International Energy Agency (IEA) and oil majors such as BP and ExxonMobil have consistently tended to underestimate renewables growth in their annual energy outlooks.
“Every year BP has predicted a sudden slowdown in renewable energy growth, and every year it has been wrong,” said Greg Muttitt from Oil Change International, a green NGO, when BP published its 2017 energy outlook.
The most accurate renewable energy growth forecasts have tended to come from Greenpeace and other environmental NGOs, critics point out. And even those have appeared mildly conservative in retrospect.
“We have been surprised and more or less every energy forecast I’m aware of has been surprised,” Dale admitted when asked about the accuracy of predictions made by the IEA and other industry outlooks.
EU’s own projections updated
In Brussels, the European Commission, the EU’s executive branch, recently admitted it was taken by surprise by the rapid fall in renewables costs and recently updated its own projections based on new evidence.
The divergence between renewable energy forecasts and the reality can be significant at a time when lawmakers are deciding on the EU’s renewable energy policy for 2030.
The discussion in Brussels has focused mainly on targets, with the European Parliament pushing for a more ambitious goal of 35%, up from the 27% provisionally agreed by EU member states.
“Not a race for renewables” but a race to cut carbon
Responding to EURACTIV, Dale refused to be drawn into a discussion about targets, saying he wasn’t qualified to make judgements on policy. “When thinking about the transition to a lower-carbon economy, we should not frame this in terms of a race for renewables,” he said, pointing to the “diminishing returns” of renewable energy investments.
“This is not a race for renewables, this is a race to reduce carbon emissions. And there are many ways” to do that, he pointed out, citing the “massive success story” of energy efficiency improvements in Europe.
He also cautioned that China’s massive push for solar might come to a halt at some point, saying “It may not carry on at that same pace” every year.
BP is also keen to underline that its scenarios “are not predictions” but rather “a series of ‘what if’ experiments” that help decision-makers “understand better the nature of the uncertainty” that they face.
“Every single one of these scenarios will be wrong – I know,” Dale said. Despite these words of caution, he said BP was “trying to understand the source of the error” and will build the updated renewable energy figures into its next energy outlook.
“Hopefully, we’ve learned our lesson,” he said.