Electricity sector tops 2017 global energy investments
The electricity sector attracted the largest chunk of investments in the energy sector amounting to $750bn in 2017, out of $1.8trillion invested in the sector; the International Energy Association (IEA) has said indicating the increasing role electrification from alternative sources is playing as the world turns from fossil fuels.
Paris-based energy think tank IEA in its World Energy Investment 2018 report, says this feat achieved, the second time in a row, sustained by robust spending on grids, which is more than $715billion spent on oil and gas supply globally actually represents a 2 percent decline in real terms from the previous year.
“State-backed investments are accounting for a rising share of global energy investment, as state-owned enterprises have remained more resilient in oil and gas and thermal power compared with private actors. The share of global energy investment driven by state-owned enterprises increased over the past five years to over 40% in 2017,” IEA said in a release.
“Meanwhile, government policies are playing a growing role in driving private spending. Across all power sector investments, more than 95% of investment is now based on regulation or contracts for remuneration, with a dwindling role for new projects based solely on revenues from variable pricing in competitive wholesale markets. Investment in energy efficiency is particularly linked to government policy, often through energy performance standards,” the organisation said.
The report also finds that after several years of growth, combined global investment in renewables and energy efficiency declined by 3% in 2017 and there is a risk that it will slow further this year.
“For instance, investment in renewable power, which accounted for two-thirds of power generation spending, dropped 7% in 2017. Recent policy changes in China linked to support for the deployment of solar PV raise the risk of a slowdown in investment this year,” the organisation said.
As China accounts for more than 40% of global investment in solar PV, its policy changes have global implications. The IEA believes this confirms its past reports that have highlighted the critical importance of policies in driving investment in renewable energy.
Energy efficiency, which is the group’s main policy thrust showed some of the strongest expansion in 2017, but was not enough to offset the decline in renewable. Moreover, efficiency investment growth has weakened in the past year as policy activity showed signs of slowing down the group said.
“Such a decline in global investment for renewable and energy efficiency combined is worrying,” said Fatih Birol, the IEA’s executive director. “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.”
Meanwhile, 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. Meanwhile, retirements of nuclear power plants exceeded new construction starts as investment in the sector declined to its lowest level in five years in 2017.
