IEA: Renewables set to attract 70% of global energy investment in 2021
Global energy investment is likely to rebound to pre-pandemic levels this year, with most finance going towards renewables - but, ultimately, the new generation capacity financed will not be compatible with long-term climate goals.
That is according to the 2021 edition of the International Energy Agency’s (IEA) World Energy Investment report. Published today (2 June), the report forecasts a 10% year-on-year increase in global energy investments, bringing levels to almost pre-pandemic proportions.
Of the energy-related sectors, power generation will attract the largest sum, accounting for half of investment growth, after investment levels plateaued between 2019 and 2020.
Promisingly, the IEA believes that 70% of the total amount that will go towards generation this year will go towards renewables. Solar and onshore wind are likely to be the most attractive options in most geographies, with average installation costs down by 10% and 5% respectively.
The report states: “Renewables are dominating inflows of capital to new power generation capacity, and these investments remained robust in 2020 given the disruption caused by Covid-19.
“The share of renewables in total power sector spending (including network infrastructure) was above 45% in 2020. A further increase in renewable investment is expected in 2021 as economies recover.”
Nonetheless, the IEA is urging readers to be aware that the global energy sector is still off-track to deliver net-zero by 2050, and that if the investment patterns seen between 2017 and 2021 continue, the goal will not be met.
The report highlights how, in many emerging market and developing economies (EMDEs), investment in renewables was hit harder by Covid-19 than in developed nations – and how many EMDEs have prioritised coal and oil in recovery plans. “The anticipated recovery is not enough to bring spending back to pre-pandemic levels, in large part because the twin public health and economic crises are more prolonged,” the report explains.
Aside from generation, there has also been a lack of investment in related infrastructure in many EMDEs, particularly across Southeast Asia and Africa, while these geographies continue to plan a “considerable amount” of coal expansion. Vietnam, for example, could double its coal generation capacity by 2045. Overall, coal-fired power plant applications are 80% below where they were in 2016.
Moreover, the IEA is concerned that many developing nations’ supporting policy and regulatory frameworks are not yet aligned with long-term net-zero goals. The report outlines trade bodies’ concerns about a “bottleneck” in Europe, where permits for developers take a long time to obtain and where decisions are routinely challenged in court. Concerns are also raised about the fact that some European oil and gas companies are still spending just 1-4% of their capital on clean energy, with the leaders only allocating some 10% in this manner.
Tripling clean energy investment and ending coal and oil
The IEA’s summary of the report states: “The anticipated $750bn to be spent on clean energy technologies and efficiency in 2021 is encouraging but remains far below what’s required to put the energy system on a sustainable path. Clean energy investment would need to triple in the 2020s to put the world on track to reach net-zero emissions by 2050, thereby keeping the door open for a 1.5C stabilisation of the rise in global temperatures.”
The comment about tripling investment alludes to the findings of the IEA’s recent ‘Roadmap to Net-Zero by 2050’ report. Described as a world first, the report states that the window to deliver on net-zero by 2050 is “narrow” but that the transition can be managed to bring “huge benefits” in terms of job creation, economic growth and wellbeing.
It sets out more than 400 milestones for the coming decades. Some of the immediate actions recommended include ceasing investment for new coal plants without measures to abate emissions and stopping plans for future fossil fuel supply projects – especially more aggressive projects such as tar sands and arctic drilling.
Citing this IEA report, a coalition of 50 campaign groups and NGOs have this week written to UK Prime Minister Boris Johnson demanding that the Government immediately stops issuing new licences for oil and gas projects in UK waters.
The authors of the letter, including Greenpeace UK, Oxfam, Oil Change International and the UK Student Climate Network, are also making the case for setting a new net-zero mandate for industry regulator the Oil & Gas Authority (OGA).
Responding to today's IEA report, Wartsila Energy's president Sushil Purohit said: “It is encouraging to see an increase in clean energy investment this year, but make no mistake, we are miles away from where we need to be in order to rapidly decarbonise our systems and avoid catastrophic climate change.
“The narrative over the past year has been focused on how we can build back better following Covid-19, but so far the opportunity has been missed, as clean energy investment needs to more than triple in order to keep the door open for a 1.5°C stabilisation.
“World leaders must grasp this crucial advice from the IEA and rally around the COP26 summit to enable a huge increase in renewable energy deployment, matched with the flexible generation technology and battery storage that is required to support it.”
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