The electricity sector has attracted the largest share of energy investments in 2017, exceeding the oil and gas industry for the second year in row, according to the latest review of global energy spending by International Energy Agency (IEA)
More than US$750bn went to the electricity sector while US$715bn was spent on oil and gas supply globally, according to the World Energy Investment 2018 report.
However, overall energy investment declined two per cent in real terms from 2016, totalling US$1.8 trillion in 2017.
Decline in renewables
For instance, investment in renewable power, which accounted for two-thirds of power generation spending, dropped seven per cent in 2017. According to the report, recent policy changes in China is linked to support for the deployment of solar PV raise the risk of a slowdown in investment this year. As China accounts for more than 40 per cent of global investment in solar PV, its policy changes have global implications. This confirms past IEA reports that have highlighted the critical importance of policies in driving investment in renewable energy.
“Such a decline in global investment for renewables and energy efficiency combined is worrying,” said Dr Fatih Birol, executive director of IEA. “This could threaten the expansion of clean energy needed to meet energy security, climate and clean-air goals. While we would need this investment to go up rapidly, it is disappointing to find that it might be falling this year,” Birol added.
Fossil Fuels
The share of fossil fuels in energy supply investment rose in 2017 for the first time since 2014, as spending on oil and gas increased modestly. Meanwhile, retirements of nuclear power plants exceeded new construction starts as the investment in the sector declined to its lowest level in five years in 2017.
The share of national oil companies in total oil and gas upstream investment remained near record highs, a trend expected to persist in 2018.
Final investment decisions to build coal power plants declined for a second straight year, reaching a third of their 2010 level. However, despite declining global capacity additions, and an elevated level of retirements of existing plants, the global coal fleet continued to expand in 2017, mostly due to markets in Asia. And while there was a shift towards more efficient plants, 60 per cent of currently operating capacity uses inefficient subcritical technology.
“Prospects of the US shale industry are improving. Between 2010 and 2014, companies spent up to US$1.8 for each dollar of revenue. However, the industry has almost halved its breakeven price, providing a more sustainable basis for future expansion. This underpins a record increase in the US light tight oil production of 1.3 mmbbl per day in 2018,” said IEA.
The improved prospects for the US shale sector contrast with the rest of the upstream oil and gas industry. Investment in conventional oil projects, which are responsible for the bulk of global supply, remains subdued. Investment in new conventional capacity is set to plunge in 2018 to about one-third of the total.
