The International Energy Agency (IEA) is out with its final 2017 energy investment numbers and, for the second year in a row, more money was invested in electricity than oil and gas. Electrification spending was driven by investments in the grid. More than US $750 billion went to the electricity sector while US $715 billion was spent on oil and gas supply globally.  

IEA said that global energy investment totaled US $1.8 trillion in 2017.

Renewables Down

However, overall energy spending was down 2 percent over the previous year and renewables and energy efficiency investments combined fell 3 percent from 2016 numbers and the agency said that investments in energy efficiency and renewables could fall again this year.

For instance, investment in renewable power, which accounted for two-thirds of power generation spending, dropped 7 percent in 2017. Recent policy changes in China linked to support for the deployment of solar PV raise the risk of a slowdown in investment this year. As China accounts for more than 40 percent of global investment in solar PV, its policy changes have global implications, said IEA.

As Renewable Energy World has reported time and again, the renewable energy industry is largely driven by policy.

Europe PV Industry Growth 2005-2015. 

As countries launch feed-in tariff programs and then stop them, markets peak in response. 
Credit: Paula Mints, SPV Market Research

"Such a decline in global investment for renewables and energy efficiency combined is worrying," said Dr. Fatih Birol, the IEA's Executive Director.

"This could threaten the expansion of clean energy needed to meet energy security, climate and clean-air goals. While we would need this investment to go up rapidly, it is disappointing to find that it might be falling this year."

Electric Vehicles Enjoy Government Support

Though still a small part of the market, electric vehicles (EV) now account for much of the growth in global passenger vehicle sales, spurred by government purchase incentives. For electric cars, nearly one quarter of the global value of EV sales in 2017 came from the budgets of governments, who are allocating more capital to support the sector each year.

More Fossil Fuels, Less Nukes

The share of fossil fuels in energy supply investment rose last year for the first time since 2014, as spending in oil and gas increased modestly, found IEA. Meanwhile, retirements of nuclear power plants exceeded new construction starts as investment in the sector declined to its lowest level in five years in 2017.

The share of national oil companies in total oil and gas upstream investment remained near record highs, a trend expected to persist in 2018.

Plans to build coal power plants in the coming years declined for a second straight year, reaching a third of their 2010 level. However, despite declining global capacity additions, and an elevated level of retirements of existing plants, the global coal fleet continued to expand in 2017, mostly due to markets in Asia.

And while there was a shift towards more efficient plants, 60 percent of currently operating capacity uses inefficient subcritical technology, said IEA. 

The report finds that the prospects of the US shale industry are improving. Between 2010 and 2014, companies spent up to US $1.80 for each dollar of revenue. However, the industry has almost halved its breakeven price, providing a more sustainable basis for future expansion. This underpins a record increase in US light tight oil production of 1.3 million barrels a day in 2018.

"The United States shale industry is at turning point after a long period of operating on a fragile financial basis," said Birol.

"The industry appears on track to achieve positive free cash flow for the first time ever this year, turning into a more mature and financially solid industry while production is growing at its fastest pace ever."

The improved prospects for the US shale sector contrast with the rest of the upstream oil and gas industry. Investment in conventional oil projects, which are responsible for the bulk of global supply, remains subdued. Investment in new conventional capacity is set to plunge in 2018 to about one-third of the total, a multi-year low raising concerns about the long-term adequacy of supply.