Low-carbon investment not keeping pace with demand

The International Energy Agency (IEA) has released its World Energy Investment 2019 report, highlighting several shifts in energy production, use and investment.

Investment plays a significant part as both a measure of energy trends and an enabler of change. Currently, the report, states that the output from low-carbon power investment is not keeping pace with demand and that a doubling of renewables spending is needed in its Sustainable Development Scenario.

The report concludes that energy investment is ‘misaligned’ and investment stalling. Calling for more investment on biofuels and better energy efficiency and end-use that play ‘increasingly important’ role in transport and heat – sectors responsible for over 70 per cent of final energy consumption and over half of the global carbon dioxide (CO2) emissions – the report predicts low-carbon investment would need to grow two-and-a-half times by 2030 to reach goals.

Perhaps more positively, the report also finds that final investment decisions (FIDs) for coal-fired power declined by 30 per cent to 22 GW, their lowest level this century (in 2015 it was 88 GW). The rise of battery storage (either behind the meter or in Grid) has seen investment rise by 45 per cent to a record of over $4bn in 2018. Capital spending on grid-scale battery storage increased by 30 per cent compared with 2017, totalling more than 1.2 GW installed in 2018. Deployment in Europe (particularly the United Kingdom) and the US comprised half of 2018 investment, supported by capacity mechanisms and contracts.

Although coal supply investment increased for the first time since 2012, by 2 per cent, the divestment movement is gathering momentum with China’s State Development & Investment Corporation and QBE, the Australian insurer, amongst several others announcing the end of exposure to the sector. Glencore, the world’s largest coal exporter, declared a coal production cap, in response to investor pressure as well.

Overall the investment picture is mixed, but in 2018, one-third of energy investment was concentrated in areas with both well-developed financial systems and good access to foreign capital, with some area without this access ironically being those most needing it. The IEA predicts 70 per cent of energy investment will be in such regions, leading to a requirement to accelerate growth in financial development in such regions.

“Energy investments now face unprecedented uncertainties, with shifts in markets, policies and technologies,” said Dr Fatih Birol, the IEA’s executive director. “But 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. Whichever way you look, we are storing up risks for the future.”

Report here.

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