The International Energy Agency (IEA) World Energy Investment 2021 report, released on 1 June, global investment in energy is set to rebound by nearly 10% in 2021 to $1,900 billion reversing most of he adverse effects of the Covid-19 pandemic. However, spending on clean energy transitions are not sufficient to meet climate goals.
With energy investment returning to pre-crisis levels, its composition is continuing to shift towards electricity: 2021 is on course to be the sixth consecutive year where investment in the power sector exceeds investment in traditional oil and gas supply, the 64-page report says. Global power sector investment is set to increase by around 5% in 2021 to its highest ever level of more than $820 billion. Renewables dominate investment in new power generation capacity and are expected to account for 70% of the total this year. The report notes that a dollar spent on solar PV deployment today results in four times more electricity than 10 years ago, thanks to greatly improved technology and falling costs.
“The rebound in energy investment is a welcome sign, and I’m encouraged to see more of it flowing towards renewables,” said IEA Executive Director Fatih Birol. “But much greater resources have to be mobilised and directed to clean energy technologies to put the world on track to reach net-zero emissions by 2050. Based on our new Net Zero Roadmap, clean energy investment will need to triple by 2030.”
While renewables dominate new power investment, and approvals for coal-fired plants are some 80% below where they were five years ago, coal remains a factor with a slight increase in approvals for coal-fired plants in 2020, driven by China and some other Asian economies.
Upstream oil and gas investment is expected to rise by about 10% in 2021 as companies recover financially, but their spending remains well below pre-crisis levels. The report highlights diverging strategies among different oil and gas companies, with signs that spending by some global oil and gas companies is starting to diversify.
Birol says: “Clear policy signals from governments would reduce the uncertainties associated with clean energy investments and provide investors with the long-term visibility they need. Our Roadmap shows there are huge opportunities for companies, investors, workers and entire economies on the path to net zero. Governments have the power to unlock these broad-based benefits.”
The report has very little to say about nuclear, which is barely mentioned in the extensive Executive Summary, except in tables. The report notes that nuclear power, which represents around 5% of total global investment, was “quite resilient in 2020 and is set to increase in countries with well-defined nuclear expansion plans such as China, India and the Russian Federation”. It says final investment decisions (FIDs) “for the largest sources of low-carbon dispatchable generation – hydropower and nuclear – were more than 20 GW, 40% higher than the previous year, driven by FIDs of hydro power in India, to provide balancing for increased shares of variable renewable generation”. Elsewhere it notes that “spending by companies focused on renewables and nuclear equipment was more resilient and continued to increase”.