An energy transition is underway.

Solar and wind are being added in ever-greater numbers. Electric vehicles are becoming more commonplace. Meanwhile, policymakers are grappling with the right mix of policies to pay for it all.

“The past tells us a very clear lesson, and that is that we have underestimated the pace of the energy transition,” BNEF analyst Kobad Bhavnagri said at the start of Bloomberg New Energy Finance’s conference on the future of energy in Shanghai last week.

Some of the conference highlights:

• Electric vehicles are here to stay. BNEF expects 530 million EVs on the road by 2040. Moreover, the researcher expects more electric buses and trucks. The implications for oil are significant, with the researcher expecting EVs to displace 8 million barrels of day of oil demand by 2040.

Meanwhile, China is not only interested in EVs for the domestic market. The world’s most-populous nation is aiming to become a globally competitive automaker by the 2020s — with the latest EV technology.

Long term, EVs will likely account for 8 percent of total vehicle sales by 2025, 24 percent by 2030 and 54 percent by 2040, according to BNEF.

“The disruption will come very fast because of economies of scale,” said Tomas Kaberger, chair of the executive board at the Renewable Energy Institute in Tokyo.

• Storage is key. Battery costs are coming down and energy densities are increasing. After battery-pack prices fell about 22 percent from 2010 to 2016, battery manufacturers are ramping up capacity — good news for Asia where most of the battery capacity is centered, BNEF said.

Asia’s lead is about to become even bigger. Contemporary Amperex Technology Co. plans to raise as much as $1.98 billion through an initial public offering, potentially enabling it to become the world’s largest lithium-ion battery maker.

• Even with momentum clearly in favor of renewables such as wind and solar, gas still has an important role to play in the energy transition, with China, Japan and South Korea expected to account for a significant increase in demand by 2030.

On the supply side, North America and Australia are set to play a bigger role. In September, BNEF released an outlook showing that demand was growing at the fastest pace since 2011.


Upadhyay and Wilson write for Bloomberg.