Based on the analysis of the report of the “International Energy Agency” (IEA), entitled the World Energy Investment 2019, an assessment of global energy investments was made according to the results of 2018. The document assesses the compliance of investments with the requirements of international energy security and sustainable development, interaction between governments, financial institutions and energy companies, sectoral development strategies and other.
Global energy investment established themselves at USD 1.8 trillion in 2018 after three years of decline. Investment in oil, natural gas and coal production and supply projects have increased. Instead, the share of electricity and RES decreased, while investment in energy efficiency remained at approximately the same level as in previous years.
On a regional scale, more than 20% of global energy investment has come from the Asia-Pacific economies, while 10% has gone into North American oil and gas projects. China remains the largest energy investor, but the fall in investment continued, while the US and India have shown steady growth for the third consecutive year.
Investor preferences have shifted in favor of short-term projects, leading to increased risks amid uncertainty about future global energy development trends. The report draws attention to the weakness of political support for the global Sustainable Development Goals and climate commitments under the Paris Climate Agreement, in particular the development of low carbon energy sectors. The IEA emphasizes the widening gap between energy demand and the volume of new energy projects, which puts additional pressure on prices, especially for fossil fuels. However, only certain regions, in particular Europe, are preparing the legislative and regulatory framework to further reduce energy consumption through energy efficiency measures.
In 2018, investments were made to build about 20 GWt capacities of coal-fired power, mainly in developing countries in the Asia-Pacific region. The reasons for choosing this technology are fuel availability, the need for balancing capacity for RES and the increasing demand for electricity locally.
However, in May 2019, a number of large financial corporations, including the largest banks in Hong Kong (DBS Group Holdings, United Overseas Bank (UOB), one of the largest banks in Japan (Mitsubishi UFJ Financial Group (MUFG)) and China (Oversea-Chinese Banking Corporation (OCBC), State Development & Investment Corporation (SDIC) have announced that they will not invest in coal generation. This could lead to a significant revision of investment plans in many countries in the region and a significant reduction in coal generation over the next 5 years.
The IEA identifies regional disproportionate investment in energy, in particular, a critically low level in most African countries (15% of capital investment per 40% of the Earth’s population) among the biggest challenges, as well as lack of research, technology and pilot costs, with only the US and China allocate substantial state support. The IEA estimates that global energy needs to redistribute investments and invest at least 2/3 into low carbon projects, but this requires the political will of key countries in the world and greater coordination of investment activities based on sustainable development goals.
In the coming months, the IEA plans to pay particular attention to the above issues. Currently, comprehensive studies are being conducted on possible formats of cooperation at the Asian, European and US levels. In the short term, due to the regulations adopted by the so-called “Clean Energy Package for All Europeans” and against the backdrop of stabilization of political life, the EU is likely to become one of the largest drivers of R&D potential for the development of low-carbon technologies. It is expected that the 2020 US presidential elections will be decisive in the degree to which the United States participates in global efforts to combat climate change.
Thus, a surge in demand for energy in 2018 has led to increased investment in hydrocarbon projects in many countries around the world. This trend threatens to fail to meet the Sustainable Development Goals and the Paris Climate Agreement, despite the political statements of the leaders of the most developed countries in the world.
The IEA seeks to strengthen the coordination of investments in energy projects and to demonstrate political will in promotion of low carbon industries, energy efficiency measures, increase of access to clean energy in all regions of the world, and funding of new research. The greatest contribution is provided by the US and China, which will allow them to maintain technological leadership and expand their influence on global energy.
The EU has a chance to accelerate the development of a new package of legislation for the energy sector if consensus is reached on the budget program for the coming years after the elections to the European Parliament and the formation of a new European Commission.
