By July 11, 2017 Read More →

Electricity investments surpass oil, gas for the first time ever: IEA

Electricity investments

A report by the International Energy Agency shows electricity investments overtook oil, gas and coal investments combined in 2016. Alta Energy photo.

2016 Electricity investments down overall, but still higher than oil and gas

A report by the International Energy Agency shows that for the first time ever last year, electricity investments outpaced those in oil and gas on increased backing of renewable energy and power grid projects.

According to the IEA, total energy investment dropped for the second straight year by 12 per cent to $1.7 trillion compared to 2015.  Oil and gas investments were down 26 per cent to $650 billion and electricity generation backing fell by 5 per cent.

cftaLaszlo Varro, IEA chief economist said the drop is attributed to two factors.

“The reaction of the oil and gas industry to the prolonged period of low oil prices which was a period of harsh investment cuts; and technological progress which is reducing investment costs in both renewable power and in oil and gas,” he said.

The IEA says investments in oil and gas are expected to increase by 3 per cent in 2017, mostly driven by the booming US shale industry, spending in Russia and the Middle East.

“The rapid ramp up of U.S. shale activities has triggered an increase of U.S. shale costs of 16 per cent in 2017 after having almost halved from 2014-16,” the report said.

The IEA report showed the big winner in 2016 was the worldwide electricity sector as it overtook oil, gas and coal combined.

“Robust investments in renewable energy and increased spending in electricity networks, made electricity the biggest area of capital investments,” Varro said.

Global electricity investment was $718 billion on higher spending on power grids, offsetting the fall in power generation investments.

“Investment in new renewables-based power capacity, at $297 billion, remained the largest area of electricity spending, despite falling back by 3 per cent,” the report said.

The report showed that despite a drop in investments in renewables, capacity additions were 50 per cent higher and expected output from this capacity is about 35 per cent higher.  The IEA credits a decrease in unit costs and improvements in solar PV and wind generation technology for the successes.

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The rise of renewables and resulting drop in prices has all but left coal in the dust.  Investments in coal-fired electricity plants dropped sharply and sanctioning of new coal power plants dropped to its lowest level in nearly 15 years.  Coal investments did grow in India, however.

“Coal investment is coming to an end. At the very least, it is coming to a pause,” Varro said.

Energy efficiency investments increased in 2016 and reached $231 billion.  Most of the spending was by the building sector globally.

Sales of electric vehicles rose by 38 per cent in 2016 to 750,000 vehicles and accounted for 10 per cent of all transport efficiency spending.  About $6 billion was spent worldwide on EV charging stations.

Electricity networks and storage spending has continued to steadily rise in the past five year and reached an all-time high of $277 billion in 2016.  The IEA report says 30 per cent of the growth was driven by China’s investment in its distribution system.

China led the world in energy investments at 21 per cent of the global total share, and was driven by low-carbon electricity and networks projects.

In the US, oil and gas investments fell last year, total energy investments rose by 16 per cent.  The IEA says the increase was powered by spending on renewables projects.

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