Fossil fuels prop up recent decline in global energy spending
Global energy spending stabilised in 2018 after three years of decline, with fossil fuel investment bouncing back in comparison to falling funds for energy efficiency and renewables.
The latest report from the International Energy Agency (IEA), World Energy Investment 2019, found that global energy investment totalled more than $1.8tr in 2018, a level similar to 2017. For the third year in a row, the power sector attracted more investment than the oil and gas industry.
Upstream oil and gas spending in 2018 rose by nearly 4 per cent, year on year, to $477bn because of a rise in oil prices and a shift to shale gas and projects with shorter construction periods, according to the IEA’s report.
A similar IEA report from last year found that oil production was likely to outpace demand, largely due to soaring output from the US fracking sector.
The findings of its latest report suggest that oil and gas spending will rise to $505bn in 2019.
Investment in coal supply increased by 2 per cent to $80bn, representing the first increase since 2012. This was mainly spent on maintaining production levels rather than new mines, the report said.
However, even as investments stabilised, approvals for new conventional oil and gas projects fell short of what would be needed to meet continued robust growth in global energy demand.
At the same time, there are few signs of the substantial reallocation of capital towards energy efficiency and cleaner supply sources that is needed to bring investments in line with the Paris Agreement and other sustainable development goals.
In November 2018, another IEA report found that the global demand for energy is expected to grow by 25 per cent by 2040 and that energy grids around the world will struggle to cope.
In the global power sector, investment dipped by 1 per cent to about $775bn, but it remained the largest investment sector because of the aforementioned growing demand for electricity.
Energy efficiency investment was stable, but renewables spending edged down by 1 per cent to a little more than $300bn as net capacity additions flattened and costs fell for some technologies.
The report said there were few signs of the large reallocation of capital towards low-carbon energy, which is needed to help achieve goals to keep global warming in check.
“Energy investments now face unprecedented uncertainties, with shifts in markets, policies and technologies,” said Fatih Birol, the IEA’s executive director.
“The bottom line is that the world is not investing enough in traditional elements of supply to maintain today’s consumption patterns, nor is it investing enough in cleaner energy technologies to change course.”