The World Energy Investment is an annual report published by the International Energy Agency (IEA) providing a wealth of data and analyses for governments as well as the energy industry to set policy frameworks, implement business strategies and develop new technologies. IEA annually explores trends in energy sector and investment decisions taken today and how these decisions can affect energy supply and demand in years to come. 2017 was characterized by falling investment and failure of energy investment to keep up with energy security and sustainability goals.
2017 was the third consecutive year of decline in global energy investment. The electricity sector attracted the largest share of energy sector investments (750 billion USD) and exceeded the oil and gas industry (716 billion USD). This trend reveals move of the energy sector toward greater electrification. In this context, electricity investment has shifted towards renewables, networks and flexibility. Nonetheless, the expected output from low-carbon power investments fell 10% in 2017 and did not keep pace with demand growth.
IEA World Energy Investment 2018 affirmed that the energy sector is extremely regulated - more than 95% of investment is now based on regulation or contracts for remuneration. Thus, governmental policies play an important role in driving private investments. In addition, increase of state-backed investments to over 40% reveals rising share of global energy investment driven by state-owned enterprises.
Investment in renewable power, which accounted for two-thirds of power generation spending, dropped 7% in 2017. Energy efficiency was the only sector of growth. Especially auctions are supporting larger renewable projects, mainly in emerging countries where awarded solar PV projects in auctions rose by 4.5 times. In Europe, auctions did not result in large renewable energy projects, except projects in offshore wind, the most dynamic European energy sector. According to the report, government low-carbon energy RD&D spending in 2017 increased by 13% in 2017 (to USD 22 billion). Corporate investment in new technologies - mostly investing in EV start-ups and digital solutions for smart grids and efficiency - are growing strongly, reaching their highest ever level of just over USD 6 billion in 2017.
"The decline in global investment for renewables and energy efficiency combined 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,” said Fatih Birol, Executive Director, IEA.
The share of fossil fuels in energy supply investment rose last year for the first time since 2014, as spending in oil and gas increased modestly. Global investment in coal-fired generation fell 18%, driven by a slowdown in China, India and Southeast Asia. IEA’s emphasises that while there was a shift towards more efficient plants, 60% of currently operating capacity uses inefficient subcritical technology. On the other hand, investor confidence in the upstream oil and gas sector continues to recover in response to rising oil prices and sustained oil demand growth. Investment in conventional assets remains focused on expansion of existing projects rather than developing new sources of production. IEA also identified decoupling of upstream costs from oil prices (while prices have more than doubled since 2016, global upstream costs have remained substantially flat). According to the report, the shale sector remains the main driver of this growth. Retirements of nuclear power plants exceeded new construction and investment in the sector declined to its lowest level in five years in 2017.