A major new report has warned that conventional energy assets including coal, gas, nuclear and hydro power plants have been consistently and "severely" over-valued, creating a massive bubble that could exceed $US1 trillion by 2030.
The report is the latest from Rethinx, an independent think-tank that was co-founded by Stanford University futurist Tony Seba, who is regarded as one of few global analysts to correctly forecast the plunging cost of solar over the last decade.
According to the new report, co-authored by Rethinx research fellow Adam Dorr, analysts and the broader market are still getting energy valuation badly wrong, not just on the falling costs of solar, wind and batteries, or "SWB," but on the true value, or levelised cost of energy, of conventional energy assets.
"Since 2010, conventional LCOE[*] analyses have consistently overestimated future cash flows from coal, gas, nuclear, and hydro power assets by ignoring the impacts of SWB disruption and assuming a high and constant capacity factor," the report says.
Where the analysts are going wrong, according to Seba and co, is in their assumptions that conventional energy plants will be able to successfully sell the same quantity of electricity each year from today through to 2040 and beyond.
[...] This assumption, says the report, has been false for at least 10 years. Rather, the productivity of conventional power plants will continue to decrease as competitive pressure from near-zero marginal cost solar PV, onshore wind, and battery storage continue to grow exponentially worldwide.
"Mainstream LCOE analyses thus artificially understate the cost of electricity of prospective coal, gas, nuclear, and hydro power plants based on false assumptions about their potential to continue selling a fixed and high percentage of their electricity output in the decades ahead," the report says.
[...] "In doing so, they have inflated the value of those cash flows and reported far lower LCOE than is actually justified ... and helped create a bubble in conventional energy assets worldwide that could exceed $1 trillion by 2030."
[*] LCOE: Levelized Cost Of Energy.