 "Global investment on energy fell 8% last year")
Global energy investment fell eight per cent in 2015, the International Energy Agency said on Wednesday. A fall in oil and gas upstream spending outweighed continued robust investment in renewables, electricity networks and energy efficiency.
Total investment in the sector was $1.8 trillion in 2015, down from $2 trillion in 2014, said its World Energy Investment 2016 report.
With $315 billion, China was again the world’s largest energy investor, with robust effort in building low-carbon generation and electricity networks, and implementing of energy efficiency policies.
Investment in America's energy supply declined to about $280 billion in 2015, down $75 bn, due to low oil prices and cost deflation, half the total decline in global spending. West Asia and Russia emerged the most resilient to spending cuts, due to lower production costs and currency movements, respectively. As a result, national oil companies accounted for 44 per cent of overall upstream investment, an all-time high.
The report provides a detailed picture of investment across fuels, technologies and countries. It shows the energy system is undergoing a broad reorientation towards low-carbon energy and efficiency but investment in clean energy technologies needs to be further ramped up, to put the world economy on track for climate stabilisation.
“We see a broad shift of spending towards cleaner energy, often as a result of government policies,” said Fatih Birol, executive director at IEA. “Our report clearly shows such government measures can work and are key to a successful energy transition. But, investors need clarity and certainty from policy makers. Governments must heighten their commitment to achieve energy security and climate goals.”
Investment in coal globally is increasingly affected by climate policy, which is expected to drive down demand, especially in Europe and America, said the report. While, Indian coal production continues to be supported by strong investment.
Renewables are expanding rapidly but asymmetrically— wind, solar and hydropower are reshaping the system. In dollar terms, renewable investment has remained relatively stable since 2011 but investment supports an accelerated production expansion due to declining technology costs. On the other hand, with the exception of solar heat in China, the investment in biofuels and renewable heat remains minor.
Renewable energy investment of $313 billion accounted for nearly a fifth of total energy spending last year, establishing renewables as the largest source of power investment. While spending on renewable power capacity was flat between 2011 and 2015, electricity generation from the new capacity rose by a third, reflecting the steep cost declines in wind energy turbines and solar photo-voltaics. The investment in renewable power capacity in 2015 generated more than enough to cover global electricity demand growth.
Technology innovations boosted investment in smart grids and storage, expected to play a key role in integrating large shares of wind and solar. While grid-scale battery storage investment has expanded 10-fold since 2010, their value is predominantly to complement the grid, which continues to absorb much larger investment.
In emerging markets such as Mexico and India, long-term contracts are helping to mobilise investment in renewables but difficulties in upgrading the grid, to integrate them into the system, persist. Investment in transmission lines is critically dependent on the regulatory framework and often faces licensing obstacles. For systems where variable renewables account for a large and growing share of the power generation mix, investment in both electricity storage and smart demand-response solutions will need to expand substantially.
Global gas-fired power generation investment declined nearly 40 per cent. Asian markets continued to favour investment in coal power. Investment activity in European gas power remained muted, despite large retirements anticipated in the next decade.
Energy efficiency investment increased by six per cent in 2015, despite falling energy prices. Nevertheless, low oil prices risk derailing fuel efficiency improvements in the transport sector, especially in countries with low taxes. Lower oil prices have had a visible impact on vehicle markets in some regions. The rate of fuel economy improvements in new light-duty vehicle sales slowed by two-thirds in America and stagnated in India, though it continued to accelerate in China. Reaching fuel economy targets will require robust efficiency standards, which can be reinforced by price incentives such as excise taxes and reduced fossil fuel subsidies.
With investment rising six per cent, energy efficiency spending was robust in 2015 due to government policies such as minimum standards that cover a rising share of new buildings, appliances and motor vehicles. In certain countries, lower prices slowed the trend towards more fuel-efficient vehicles, most notably in America, where the rate of improvement in efficiency was two-thirds lower than that in recent years.
Rapid growth in electricity demand, as well as energy security and cost considerations, are continuing to drive large investments in coal-fired capacity in India and Southeast Asia. Gas is the preferred generating option in areas with abundant low-cost resources, such as North America, West Asia and Russia. In America, its cost advantage is reinforced by environmental and climate regulations.
