IEA: Coronavirus to cause largest ever drop in global energy investment
The world is on course to witness the largest ever drop in investment in global energy, with the coronavirus pandemic set to restrict spending across renewables, gas, fossil fuels and cleantech.
The International Energy Agency’s (IEA) World Energy Investment 2020 report warns that 2020 will mark the largest ever drop in spending on global energy.
At the start of the year, the global energy spend was on course to grow by 2%, which would have been the largest annual increase in six years. However, the economic slump caused by the coronavirus pandemic and lockdown is expected to create a 20% fall in global energy investment, a fall of almost $400bn compared to 2019.
“The historic plunge in global energy investment is deeply troubling for many reasons,” Dr Fatih Birol, the IEA’s executive director said.
“It means lost jobs and economic opportunities today, as well as lost energy supply that we might well need tomorrow once the economy recovers. The slowdown in spending on key clean energy technologies also risks undermining the much-needed transition to more resilient and sustainable energy systems.”
The report findings are based on the latest investment data from governments and businesses as of mid-May, with estimates for the remainder of 2020 quantified by possible implications of full-year spending restrictions.
The report estimates that lower prices, falling energy demand and increased cases of non-payments of bills will set energy revenues falling by more than $1trn in 2020. Oil does account for most of the decline, with global consumer spending on oil set to fall below the amount spent on electricity for the first time.
The share of spending on clean energy technologies - covering renewables, efficiency, nuclear and carbon capture, utilisation and storage – is actually set to jump towards the 40% mark, up from 33%, this year. However, this is largely due to the massive decrease in fossil fuel spending and the levels still remain below what is required to spur decarbonisation across the global energy sector.
The report also suggests that global oil and gas investments will fall by one-third, with spending on shale gas falling 50%. The power sector spending is also set to fall by 10% in 2020.
Renewables have so far fared better during the pandemic, although solar demand is set to fall for the first time in 30 years. Separate analysis predicts investment in UK wind capacity to fall by 20%. The IEA anticipates that spending on domestic solar has been affected by the pandemic, while investment in new utility-scale wind and solar projects fell back to the levels of three years ago. The IEA expects a 9% decline in investment in electricity networks this year.
To build on the oil and gas woes, a new report from Carbon Tracker found that coal developers could be risking more than $600bn as it is already cheaper to generate electricity from new renewables than from new coal plants in all major markets.
Carbon Tracker found that more than 60% of global coal power plants are generating electricity at a higher cost the construction of new renewables. It warns that by 2030 at the latest, it will be cheaper to build new renewables than continue operating coal in all markets.