World Energy Investment 218 Laszlo Varro, Chief Economist July 218 IEA OECD/IEA 217
Global energy investment was USD 1.8 trillion in 217, led by electricity Global energy investment, 217 (billion USD) Electricity generation and supply Oil and gas supply Energy efficiency Coal supply Renewable transport and heat 75 716 236 79 2-6% +2% +3% -13% -13% For the 3 rd consecutive year energy investment declined in 217, by 2%, due to less power generation investment, lower costs and continued prudence in the oil and gas sector. Energy efficiency was a lone growth area.
The share of private-led energy investment has declined 7% The share of private ownership in energy investment, 212-17 6% 5% 4% 3% 2% 212 Renewables & energy efficiency Electricity networks & storage Oil & gas Thermal generation 217 Despite a growing role for clean energy and electricity infrastructure led by private actors, the share of energy investment from NOCs and state-owned thermal power rose by more over the past five years. OECD/IEA 217
What balance between competitive and regulated power markets? Global power sector investment by main remuneration model 217: USD 75 billion Wholesale market pricing Distributed generation Regulated networks Regulated/contracted utility-scale generation Over 95% of power sector investments rely on regulation or contracts beyond short-term wholesale markets for their main remuneration, as regulators pursue adequacy and environmental aims. OECD/IEA 217
Tenders have facilitated economies of scale for renewables Average size of awarded projects in solar PV auctions in emerging economies 1 MW USD/MWh 15 8 12 6 9 4 6 2 3 213 215 217 Average size Average awarded price In emerging economies, the average size of awarded solar PV projects has grown more than quadrupled since 213 while that of onshore wind rose by half over 213-17.
Wind and solar only compensates for the slowdown of nuclear and hydro Expected generation from new construction starts as a percentage of global power demand 2.% 1.8% 1.6% 1.4% 1.2% 1.%.8%.6%.4%.2%.% 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 217 nuclear hydro wind solar In the past decade, output from new solar & wind grew 45% faster than investment. Yet, the generation impact of new clean power has declined the past 2 years due to slowing spending on nuclear and hydro.
Investment in lifetime extensions for nuclear plants have risen Global investment in lifetime extensions for nuclear vs solar PV + wind (213-217) USD (217) billion 1 2 Investment TWh 25 Expected new generation over lifetime 1 2 8 15 6 1 4 2 5 1-2 year extension Nuclear lifetime extension Solar PV + Wind Nuclear lifetime extension Solar PV + Wind In 217, half of nuclear investment was from spending on long-term operation for existing plants. Lifetime extensions can be a cost-effective transitional measure for maintaining low-carbon generation.
Thermal power FIDs continued to decline Thermal generation capacity subject to a FID by plant type GW Coal-fired generation GW Gas-fired generation 12 12 1 1 8 8 6 6 4 4 2 2 21 211 212 213 214 215 216 217 21 211 212 213 214 215 216 217 China India Southeast Asia Rest of world MENA US China Southeast Asia Rest of world In 217 newly sanctioned coal power fell 18% to a level one-third that of 21, driven by a slowdown in China, India & SE Asia. Sanctioned gas power fell nearly 23%, due to the MENA region & the US. OECD/IEA 217
The capital intensity of electricity is increasing USD (217) billion 12 1 TWh 8 7 6 8 6 4 5 4 3 2 2 1 22 27 212 217 23 SDS Networks Nuclear Renewables Coal, oil, gas Average demand growth (next five years) OECD/IEA 217
Utility business models are shifting Aggregate earnings of the top 2 European utilities by business segment USD billion 16.8 14.7 12.6 1.5 8.4 6.3 4.2 2.1 212 213 214 215 216 217. Regulated & contracted Merchant generation Other Capex/EBITDA (right axis) European utility earnings fell by one-third in the past five years. Three quarters of earnings now stem from grids and generation with contracted/regulated pricing as business grows more capital intensive. OECD/IEA 217
Electric vehicles still only slow down the growth of oil demand Oil displaced by new EV sales worldwide Global oil demand growth 4 kb/d 2 kb/d 3 1 5 2 1 1 5 211 212 213 214 215 216 217 Cars Buses 211 212 213 214 215 216 217 The electric cars and buses sold in 217 will permanently reduce oil demand by around 3kb/d, with a major contribution from buses in China; but oil demand is rising at fifty times this amount. OECD/IEA 218
Lower upstream spending could lead to tighter markets Global oil and gas upstream capital spending 212-218 Outside US shale, upstream investment continue to recovery very modestly with companies able to keep costs under control. OECD/IEA 217
Changing dynamics in the oil and gas industry Share of global upstream oil and gas investment by asset type 5% Onshore conventional 4% 3% Offshore conventional 2% 1% Shale/tight oil % 2-21 215 216 217 218E The shift of investment towards short cycle projects and assets with high production decline rates suggests more volatility ahead in the markets. OECD/IEA 217
The US LTO journey towards a financially sustainable business US LTO production, capital investment and free cash flow IEA estimates that US LTO sector is on track in 218 to generate positive free cash flow for the first time ever, but downside risks remain. OECD/IEA 217
25 26 27 28 29 21 211 212 213 214 215 216 217 218 219 22 221 222 Investment in new LNG plants keeps falling World LNG liquefaction investment by country/region 4 USD (217) billion bcm per year 7 Australia 35 6 Africa 3 5 Middle East 25 2 15 4 3 North America Russia 1 2 Europe 5 1 Others Capacity (right axis) Given buyers reluctance for new long-term contracts, companies adopt a wait-and-see approach, although some signs of renewed interest for new LNG plants emerges. OECD/IEA 217
Clean energy R&D investment is finally on the rise Total public spending on clean energy technology RD&D (in billion USD) 25 2 15 1 5 212 213 214 215 216 217E North America Europe Asia and Oceania Rest of World Public spending on R&D for low-carbon technologies rose 13% to USD 22 billion in 217 after several years of stagnation; however, this is just.1% of public spending in major countries. OECD/IEA 217
A record year for corporate investment in new energy tech firms Global deals by corporate investments in energy technology companies (excl. buy-outs) 7 USD (217) billion 6 5 4 3 2 1 27 28 29 21 211 212 213 214 215 216 217 Oil and gas Utilities Transport ICT Other energy Other Corporate investing in innovative energy start-ups is made a return in 217, but energy company spending is dwarfed by IT company investments, which drove the total to USD 6.1 billion. OECD/IEA 217
Investment in carbon capture, utilisation & storage needs policy Cost for CO 2 capture and storage or utilisation in industry 2 Million tonnes of CO2 15 1 5 Under $1 $1-2 $2-3 $3-4 CCUS is vital to tackling climate change, but sustainable deployment needs investment in low-hanging fruit today; 45 million tonnes of CO2 per year (equal to all emissions growth in 217) can be captured and stored for USD 4/tonne.