It added that this would be the prevalent drop in global energy investment in history, with outlay expected to plunge in every major sector from fossil fuels to renewables, and efficiency
May 27, 2020. By News Bureau
Global energy investments are set to fall by 20 percent, or about $400 billion, as compared to last year due to the COVID-19 predicament, occasioning in serious repercussions for energy security and clean energy transitions, as per a latest report by the International Energy Agency (IEA).
It added that this would be the prevalent drop in global energy investment in history, with outlay expected to plunge in every major sector from fossil fuels to renewables, and efficiency.
“The historic plunge in global energy investment is deeply troubling for many reasons. It means lost jobs and economic opportunities today, as well as lost energy supply that we might well need tomorrow once the economy recovers. The slowdown in spending on key clean energy technologies also risks undermining the much-needed transition to more resilient and sustainable energy systems,” said Dr. Fatih Birol, executive director, IEA.
According to the report titled ‘World Energy Investment 2020’, at the start of this year, global energy investment was on track for growth of about 2 per cent, which would have been the largest annual rise in spending in six years.
“But, after the COVID-19 crisis brought large swathes of the world economy to a standstill in a matter of months, global investment is now expected to plummet by 20 per cent, or almost $400 billion, compared with last year,” it said.
The report further added that a combination of falling demand, lower prices and a rise in cases of non-payment of bills means that energy revenues going to governments and industry are set to fall by well over $1 trillion in 2020. In the longer-term, a post-crisis legacy of higher debt would present lasting risks to investment.
According to IEA, global investment in oil and gas is expected to fall by almost one-third in 2020, with investment in shale anticipated to fall by 50 per cent in 2020
“For oil markets, if investment stays at 2020 levels then this would reduce the previously-expected level of supply in 2025 by almost 9 million barrels a day, creating a clear risk of tighter markets if demand starts to move back towards its pre-crisis trajectory,” it added.
Concerning the power sector, IEA said that spending is on course to decrease by 10 per cent in 2020, with worrying signals for the development of more secure and sustainable power systems.
However, renewables investment has been more resilient during the crisis than fossil fuels, but spending on rooftop solar installations by households and businesses has been strongly affected and final investment decisions in the first quarter of 2020 for new utility-scale wind and solar projects fell back to the levels of three years ago.
“Electricity grids have been a vital underpinning of the emergency response to the health crisis – and of economic and social activities that have been able to continue under lockdown. These networks have to be resilient and smart to ward against future shocks but also to accommodate rising shares of wind and solar power. Today’s investment trends are clear warning signs for future electricity security,” said IEA’s Birol.
Estimated investment in energy efficiency and end-use applications is set to fall by an estimated 10-15 per cent as vehicle sales and construction activity weaken and spending on more efficient appliances and equipment is dialed back.
According to IEA, the overall share of global energy spending that goes to clean energy technologies would jump towards 40 per cent in 2020, but only because fossil fuels are taking such a heavy hit.
“The crisis has brought lower emissions but for all the wrong reasons. If we are to achieve a lasting reduction in global emissions, then we will need to see a rapid increase in clean energy investment,” said Birol.
On the impact of COVID-19 crisis on the coal sector, IEA said that the industry is hurting with investment in supply set to fall by one-quarter this year, although that does not pose an existential threat.
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