The amount of money spent in the energy sector fell for a third straight year in 2017, raising concerns about the world’s ability to provide enough power and tackle climate change, the International Energy Agency reported Tuesday.
Governments and businesses put $1.8 trillion into energy infrastructure, equipment and resources. That means global energy investment fell by 2% from 2016, after adjusting for inflation, and the IEA warned the trend will continue, CNBC reported.
At the same time, governments are shouldering more of the burden of investing in the energy sector, the Paris-based agency said in its annual report. State-owned entities now account for 40% of all investments in energy, and roughly 95% of spending in the power sector is linked to regulation or relies on some form of subsidy, Kallanish Energy learns.
“Despite this increased role of governments, the overall trend of energy investment remains insufficient for meeting energy security, climate and air quality goals, and is not spurring an acceleration in technologies needed for the clean energy transition,” IEA executive director Fatih Birol said, in the report.
That investment includes spending on power plants, power grids, new oil and gas wells, and systems to make buildings more energy efficient, CNBC reported. The electricity sector attracted the most capital for the second year in a row, generating an estimated $750 billion.
However, overall investment still slumped 5% from the previous year, as a sharp drop in spending on power plants offset an uptick in dollars flowing to the electric grid.
Governments and investors spent an all-time high $300 billion on networks that deliver electricity from power plants to homes and businesses, up a modest 1% from last year. The spending is largely geared toward updating transmission and distribution lines and integrating smart technology to prepare for a world with more electric vehicles and renewable energy.
Meanwhile, spending on the plants that generate power — especially from coal, hydro power and nuclear fuel — was the biggest drag on overall investment, CNBC reported.
Spending on these generating plants fell by 10% last year. Half of the drop was due to declining investment in coal-fired plants in China and India, the two emerging economies that drive global economic growth.
Investment in natural gas-fired plants rose 40%, and mostly came from the U.S. and the Middle East-North Africa region. However, final investment decisions dropped by 23% last year.
Investment also picked up in oil and gas exploration and production as the recovery in crude prices continued. Spending in the sector rose 4%, to $450 billion last year, and IEA expects it to rise another 5% this year, to $472 billion.
Capital flows into renewables fell by 7%, with growth in solar and wind power offset by declines in hydropower and nuclear energy.
Nuclear power is not strictly considered renewable energy, but the two are linked because they both generate electricity without releasing emissions like carbon dioxide.
“Robust investment in renewable power is even more important for boosting low-carbon power generation in light of a sharp fall in investment in new nuclear power,” the IEA said.
In Europe alone, IEA estimates the retirement of nuclear power plants has offset 40% of the benefit from low-carbon power generation from renewables since 2010.
While spending to generate power is falling, investment to help buildings, vehicles and industry use energy more efficiently continues to rise.
The world spent $236 billion on energy efficiency in 2017, up 3% from the previous year, largely on heating, cooling and lighting improvements in buildings.
However, the IEA warns these investments are slowing down, partly due to lackluster implementation of energy efficiency policies.
