Global energy investment to plunge by $400bn - IEA

Global energy investment was set to plunge by a record $400bn this year due to the coronavirus pandemic, threatening the security of future supply and moves to cleaner alternatives, the International Energy Agency said on Wednesday.

Investment had been expected to rise by 2% this year but was now expected to plummet by 20%, making it the biggest drop in history, the IEA added.

“The unparalleled decline is staggering in both its scale and swiftness, with serious potential implications for energy security and clean energy transitions,” the organisation said in its annual report on global energy investment.

“The Covid-19 pandemic has set in motion the largest drop in global energy investment in history, with spending expected to plunge in every major sector this year — from fossil fuels to renewables and efficiency.”

A combination of falling demand, lower prices and a rise in cases of non-payment of bills meant energy revenues going to governments and industry were set to fall by more than $1trln in 2020, according to the report.

Oil accounted for most of this decline as global consumer spending on the commodity was set to fall below the amount spent on electricity for the first time.

Global investment in oil and gas was expected to fall by almost 30% with the shale industry already under pressure set for a halving of expenditure as investor confidence and access to capital dry up.

If oil market investment stayed at 2020 levels it would reduce the previously-expected level of supply in 2025 by almost 9m barrels a day, “creating a clear risk of tighter markets if demand starts to move back towards its pre-crisis trajectory”, the IEA said.

Power sector spending is on course to decrease by 10% in 2020, “with worrying signals for the development of more secure and sustainable power systems”.

Spending decisions on solar power installation and business had been hit as both looked to conserve cash with utility-scale wind and solar projects falling to 2017 levels.

“The crisis has brought lower emissions but for all the wrong reasons. If we are to achieve a lasting reduction in global emissions, then we will need to see a rapid increase in clean energy investment,” said IEA executive director Fatih Birol.

An expected 9% decline in investment in electricity networks compounded a large fall in 2019, and spending on important sources of power system flexibility had also stalled, with investment in natural gas plants stagnating and spending on battery storage levelling off, the IEA said.

“Electricity grids have been a vital underpinning of the emergency response to the health crisis – and of economic and social activities that have been able to continue under lockdown,” Birol said.

“These networks have to be resilient and smart to ward against future shocks but also to accommodate rising shares of wind and solar power. Today’s investment trends are clear warning signs for future electricity security.”