Global energy investment stabilised in 2018, with a bounce back in fossil fuel spending while renewables investment stalled, according to the International Energy Agency’s (IEA) latest annual review.
The findings of the World Energy Investment 2019 report signal a “growing mismatch between current trends and the paths to meeting the Paris Agreement and other sustainable development goals,” said the agency.
Global energy investment totalled more than $1.8trn 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.
The biggest jump in overall energy investment was in the US, where it was boosted by higher spending in upstream supply, particularly shale, but also electricity networks, according to the review.
The increase narrowed the gap between the US and China, which remained the world’s largest investment destination in 2018.
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, found the report.
“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,” stated the IEA’s review.
IEA executive director Fatih Birol said: “Energy investments now face unprecedented uncertainties, with shifts in markets, policies and technologies.
“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.”
The world is witnessing “a shift in investments towards energy supply projects that have shorter lead times,” according to the IEA.
In power generation and the upstream oil and gas sector, the industry is bringing capacity to market more than 20% faster than at the beginning of the decade.
This trend reflects industry and investors seeking to better manage risks in a changing energy system, and also improved project management and lower costs for shorter-cycle assets such as solar, onshore wind and US shale.
Even though decisions to invest in coal-fired power plants declined to their lowest level this century and retirements rose, the global coal power fleet continued to expand, particularly in developing Asian countries, found the report.
The continuing investments in coal plants, which have a long lifecycle, appear to be aimed at filling a growing gap between soaring demand for power and a levelling off of expected generation from renewables and nuclear.
The report stated: “Without carbon capture technology or incentives for earlier retirements, coal power and the high carbon dioxide emissions it produces would remain part of the global energy system for many years to come.
“At the same time, to meet sustainability goals, investment in energy efficiency would need to accelerate while spending on renewable power doubles by 2030.”
Among major countries and regions, India had the second largest jump in energy investment in 2018 after the US.
However, the poorest regions of the world, such as sub-Saharan Africa, face persistent financing risks, receiving 15% of investment in 2018 even though they account for 40% of the global population.
“Far more capital needs to flow to the least developed countries in order to meet sustainable development goals,” the IEA advised.
The report also found that public spending on energy research, development and demonstration (RD&D) is far short of what is needed.
Apart from a modest rise, led by the US and China, most countries are not spending more of their economic output on energy research.
“Current investment trends show the need for bolder decisions required to make the energy system more sustainable,” Birol said, adding: “Government leadership is critical to reduce risks for investors in the emerging sectors that urgently need more capital to get the world on the right track.”