Global investment in energy fell by 12% in 2016 according to new figures from the International Energy Agency, the second consecutive year of investment decline for the sector, with continued decreases in upstream oil and gas spending.
The figures are the key findings from the International Energy Agency’s (IEA) annual World Energy Investment report, published this week, which concluded that total energy investment worldwide amounted to $1.7 trillion in 2016, a decrease of 12% than 2015, and accounting for 2.2% of global gross domestic product (GDP). This follows the 8% decrease in global energy investment seen in 2015, equating to $1.8 trillion in global energy investment, down from $2 trillion in 2014.
To be clear, this is not investment in clean energy spending, but rather spending across the entire energy sector. That doesn’t mean clean energy investment figures were much better. Figures published by Bloomberg New Energy Finance (BNEF) earlier this year showed that clean energy investment in 2016 fell by 18%, down to only $287 billion. It was unsurprising for anyone who watched its quarter-by-quarter reports, which fell compared to its year-previous comparisons each quarter: the first quarter was down 12% from a year earlier, the second quarter down 32%, and the third quarter down 43%. But it was still unwelcome news, especially following the record investment in 2015. Unfortunately, in April, BNEF published its first quarter clean energy investment figures and the slump continued, falling 17% year-over-year.
However, everything is relative these days, and truth is in how you look at the numbers (or so I’ve been told). For the first time, spending on the electricity sector itself exceeded the combined spending on oil, gas, and coal supplies, while the share of clean energy spending reached 43% of the global total investment in energy, a record high. However, that has more to do with the overall slump than anything, considering that investments in renewable based power capacity fell 3% to $297 billion. Nevertheless, thanks to cost declines and technology improvements, renewable power will still generate 35% more power than it did five years ago.
Energy efficiency spending increased 9% to $231 billion, while spending on electricity networks increased by 6%. The dropoff, however, was primarily seen in the upstream oil and gas sector, which saw investment fall by more than a quarter in 2016, while investment in power generation fell 5%.
Unsurprisingly, China remained the primary destination for energy investment, with 21% of the global investment total. Thankfully, the 25% decline in the commissioning of new Chinese coal-fired power plants has opened the way for energy investment to be increasingly driven by low-carbon electricity supply and networks, as well as energy efficiency measures.
Looking at other parts of the world, energy investment in India jumped 7%, solidifying its position as the third-largest country for energy investments behind China and the United States.
“Our analysis shows that smart investment decisions are more critical than ever for maintaining energy security and meeting environmental goals,” said Dr Fatih Birol, the IEA’s Executive Director.
“As the oil and gas industry refocuses on shorter-cycle projects, the need for policymakers to keep an eye on the long-term adequacy of supply is more important. Even with ambitious climate-mitigation goals, current investment activity in oil and gas will have to rise from its current slump.
“The good news is that in spite of low energy prices, energy efficiency spending is rising thanks to strong government policies in key markets.”