Solar to dominate energy by 2035, but AI data centers will keep fossil fuels in business
Source: TechCrunch
Solar will become the largest source of power in the next decade, surpassing coal, oil and natural gas, according to a new report from BloombergNEF. The tectonic shift will occur alongside a historic rise in the use of energy driven by AI and the electrification of entire industries.
“Solar is winning the race,” Matthias Kimmel, head of energy economics at BloombergNEF, told TechCrunch.
BloombergNEF expects the shift to happen on economic grounds alone — solar is simply too cheap to ignore. Pakistan, for example, has added 25 GW of solar power in the last two years after natural‑gas prices spiked following Russia’s invasion of Ukraine. The transition could be even swifter if countries take more aggressive measures to curb their carbon emissions.
Data‑center demand
The power handoff comes as investors view energy as one of the biggest growth opportunities in recent decades. Data centers sit at the center of this obsession, and BloombergNEF’s data reinforces the scale of the opportunity. The consultancy expects data centers to drive an additional:
- 1 TW of utility‑scale solar
- 400 GW of solar
- 370 GW of natural gas
- 110 GW of coal
Because of gas and coal’s ability to operate 24/7, BloombergNEF projects those fossil fuels will provide 51 % of incremental generation for data centers by 2050. Put simply, tech companies and data‑center developers will have an outsized influence over which energy sources remain viable by mid‑century.
Competing technologies
Those forecasts aren’t ironclad. Other technologies are vying for a piece of the data‑center market, including long‑duration energy storage, geothermal, and nuclear.
- Big batteries: Google has included $1 billion worth of 100‑hour batteries from Form Energy in a recent data‑center project.
- Geothermal & nuclear: Both show promise following the blockbuster IPOs of Fervo Energy and X‑energy this month.
Solar’s rapid cost decline
Competition from photovoltaics will be stiff. Solar panels have spread dramatically in recent years, spurred by declining costs that show no sign of stopping. By 2035, prices are expected to drop another 30 % (see BloombergNEF’s analysis here), outcompeting coal and natural gas. By 2050, solar panels are expected to generate more than twice as much electricity as natural gas.
Solar’s falling costs can be attributed to two causes:
- China’s industrial policy – subsidies for manufacturers and market flooding.
- Mass manufacturing – economies of scale that have wrung costs out of solar at a remarkable pace.
“Costs fall with every doubling of installed capacity,” Kimmel said. “In the case of solar, it has gone even faster than that.”
Hybrid renewable power plants
Solar’s abundance is pushing grid‑scale batteries down the same path. In Spain and Italy, standalone solar farms are no longer profitable because a surplus of solar power has driven down daytime electricity prices. Developers are now building hybrid renewable power plants, pairing solar panels with batteries to capture higher evening prices.
The current state of the battery market is akin to where solar was in 2020, BloombergNEF noted. Last year, 112 GW of grid‑scale batteries were installed worldwide. By 2035, the company expects that figure to nearly triple. Companies from Redwood Materials to Ford have launched energy‑storage businesses to capitalize on the trend.
Geopolitical context
The report’s missing piece was the Iran War, which started when BloombergNEF was too far along in the process to make major changes. The team did test the effects of two scenarios on various countries’ dependence on energy imports:
- Economic transition scenario: Decarbonization driven largely by dollars and cents rather than regulations; every country would reduce its reliance on foreign energy, including oil powerhouse Saudi Arabia.
- Net‑zero scenario: Regulations drive deeper decarbonization; every country could virtually eliminate its reliance on energy imports.
“The transition, which in many ways is cost‑efficient, is actually good for energy independence,” Kimmel said.
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About the author
Tim De Chant is a senior climate reporter at TechCrunch. He has written for a wide range of publications, including Wired, the Chicago Tribune, Ars Technica, The Wire China, and NOVA Next (where he was founding editor).
- Lecturer in MIT’s Graduate Program in Science Writing.
- Knight Science Journalism Fellow at MIT (2018), studying climate technologies and new business models for journalism.
- PhD in environmental science, policy, and management, University of California, Berkeley.
- BA in environmental studies, English, and biology, St. Olaf College.
You can contact or verify outreach from Tim by emailing tim.dechant@techcrunch.com.