London 14 September 2016
The context Investment is the lifeblood of the energy system, which determines long-term trends of supply, emissions and fuel demand Investors face new challenges and opportunities from recent trends Macroeconomic uncertainty and structural change affects demand patterns The energy sector faces accelerated technological change Lower energy prices and increasing inter-fuel competition reshape investment Global energy investment declined in 2015, mainly due to lower oil and gas spending Share of renewables in investment boosted by technology progress, strong policy support and growth in good resource markets
Investment flows signal a reorientation of the global energy system Global Energy Investment, 2015 USD 1.8 trillion Electricity Networks 14% Energy Efficiency 12% Power Generation 23% Coal 4% Biofuels and Solar Heat 1% Oil & Gas 46% An 8% reduction in 2015 global energy investment results from a $200 billion decline in fossil fuels, while the share of renewables, networks and efficiency expands
Investment flows signal a reorientation of the global energy system Global Energy Investment, 2015 Electricity Networks 14% USD 1.8 trillion Energy Efficiency 12% Thermal Power 7% Renewables 17% Coal 4% Oil & Gas 46% An 8% reduction in 2015 global energy investment results from a $200 billion decline in fossil fuels, while the share of renewables, networks and efficiency expands
Top five markets comprised over half of global energy supply investment Energy supply investment in 2015, selected markets USD (2015) billion 0 50 100 150 200 250 300 350 China United States European Union Russia India Boosted by record power sector spending, China regains its position as top investment market, while the US declines due to sharply lower oil and gas investment
Energy efficiency investment rose 6%, bucking the trend despite lower energy prices 3% Annual improvements in average fuel economy of new vehicles 2% 1% 0% US W. Europe China 2008 to 2013 2014 to 2015 Lower oil prices can reduce energy efficiency spending. But government policies remain the key driver, a warning against complacency
Unprecedented wave of investment cuts in the upstream oil and gas industry USD (2015) billion 2010 2011 2012 2013 2014 2015 2016 2017 Global upstream capital spending 2010-2017 900 800 700 600 500 400 300 200 100-25% -24% 0 Cost deflation, efficiency improvements and reduced activity levels might lead for the first time to three consecutive years of investment decline
The share of NOCs in global upstream investment reaches an all time high Share of upstream oil and gas investment, by company type 100% 80% 36% 36% 44% 60% 40% 27% 27% 24% 20% 27% 21% 24% 0% 10% 16% 8% 2007 2014 2016 US Independents Majors Other private NOCs Upstream investment remains robust in the Middle East and Russia while North American shale and global offshore spending have been hit most severely
Renewables investment buys much more electricity Global renewable power investment USD (2015) billion 350 +0% 300 250 200 150 100 50 Generation from investment in capacity TWh 400 +33% 350 300 250 200 150 100 50 0 2011 2013 2015 0 2011 2013 2015 Hydropower Solar PV Wind Other renewables Investment in renewables-based capacity more than covers 2015 global electricity growth. Wind leads, surging 35% in 2015 on economics and record offshore growth
In electricity networks, batteries accelerate though grids comprise most investment growth USD (2015) billion USD (2015) billion Global grid-scale battery storage investment Total networks investment 1.2 x10 300 1.0 250 0.8 200 0.6 150 0.4 100 0.2 50 0.0 2010 2011 2012 2013 2014 2015 0 2015 0.4% Grid-scale battery storage spending has expanded tenfold since 2010. Their value lies most in complementing grids that constitute the bulk of investment
Infrastructure costs favour coal power over gas in Asian energy importers 2015 (USD) billion Infrastructure investment cost for a 1 GW power plant in Asia Coal and gas-fired power investment in Asian markets (2015) 70 60 50 40 High efficiency 30 20 10 0 Gas Subcritical Coal Asian markets comprised 85% of global coal power investment, while N. America and Middle East, with robust infrastructure, favoured gas for new fossil fuel power
Infrastructure costs favour coal power over gas in Asian energy importers 2015 (USD) million Infrastructure investment cost for a 1 GW power plant in Asia 1 200 1 000 800 600 400 200 0 Gas Coal Asian markets comprised 85% of global coal power investment, while N. America and Middle East, with robust infrastructure, favoured gas for new fossil fuel power
Global nuclear investment remains robust due to China GW 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Nuclear construction starts, 2000-2015 20 18 16 14 12 10 8 6 4 2 0 Rest of world China Economics and public concerns remain a challenge to significant nuclear expansion
Conclusions Global energy investment in 2015 is 8% lower. The share of oil & gas declined, while that of renewables, efficiency and nuclear rose Massive cost deflation across the entire energy spectrum is reshaping competition between fuels and technologies Unprecedented cuts in upstream investment are shifting the geography of oil production Renewables investment accounts for more than two-thirds of power generation and more than covers global electricity demand growth The IEA will continue to measure investment flows and assess their implications for the global energy sector