The unparalleled decline is staggering in both its scale and swiftness, with serious potential implications for energy security and clean energy transitions. At the start of 2020, global energy investment was on track for growth of around 2 per cent, which would have been the largest annual rise in spending in six years.
The COVID-19 pandemic has set in motion the largest drop in global
energy investment in history, with spending expected to plunge in every
major sector this year – from fossil fuels to renewables and efficiency –
the International Energy Agency said in a new report released today.
The unparalleled decline is staggering in both its scale and
swiftness, with serious potential implications for energy security and
clean energy transitions. At the start of 2020, global energy investment
was on track for growth of around 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 USD 400 billion, compared with last year, according to the IEA’s World Energy Investment 2020
report’s assessment of trends this year is based on the latest
available investment data and announcements by governments and companies
as of mid-May, tracking of progress on individual projects, interviews
with leading industry figures and investors, and the most recent
analysis from across the IEA.
“The historic plunge in global energy investment is deeply
troubling for many reasons,” said Dr Fatih Birol, the IEA’s Executive
The estimates for 2020 quantify the
possible implications for full-year spending, based on assumptions about
the duration of lockdowns and the shape of the eventual recovery.
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 USD 1 trillion in 2020, according
to the report.
Oil accounts for most of this decline as, for the first
time, global consumer spending on oil is set to fall below the amount
spent on electricity. Companies with weakened balance sheets and more uncertain demand
outlooks are cutting back on investment while projects are also being
hampered by lockdowns and disrupted supply chains.
“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.”
In the longer-term, a
post-crisis legacy of higher debt will present lasting risks to investment. This could be particularly detrimental to the outlook in
some developing countries, where financing options and the range of
investors can be more limited. New analysis in this year’s report highlights that state-owned enterprises account for well over half of
energy investments in developing economies.
Global investment in oil and gas is expected to fall by almost one-third in 2020. The shale industry was already under pressure, and investor confidence and access to capital have now dried up: investment in shale is anticipated to fall by 50 per cent in 2020. At the same time, many national oil companies are now desperately short of funding.
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.
The power sector spending is on course to decrease by 10 per cent in 2020, with
worrying signals for the development of more secure and sustainable
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.
expected 9 per cent decline in investment in electricity networks this year
compounds a large fall in 2019, and spending on important sources of
power system flexibility has also stalled, with investment in natural
gas plants stagnating and spending on battery storage levelling off.
“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,” Dr Birol said.
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
Energy efficiency, another central pillar of clean energy
transitions, is suffering too. Estimated investment in efficiency and
end-use applications is set to fall by an estimated 10-15% as vehicle
sales and construction activity weaken and spending on more efficient
appliances and equipment is dialled back.
The overall share of global energy spending that goes to clean energy technologies – including renewables, efficiency, nuclear and carbon capture, utilisation and storage – has been stuck at around
one-third in recent years. In 2020, it will jump towards 40 per cent, but only because fossil fuels are taking such a heavy hit. In absolute terms, it
remains far below the levels that would be required to accelerate energy
“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 Dr Birol.
“The response of policymakers – and the extent to which
energy and sustainability concerns are integrated into their recovery
strategies – will be critical. The IEA’s upcoming World Energy Outlook Special Report on Sustainable Recovery
will provide clear recommendations for how governments can quickly
create jobs and spur economic activity by building cleaner and more
resilient energy systems that will benefit their countries for decades
The COVID-19 crisis is hurting the coal industry – with investment
in coal supply set to fall by one-quarter this year – but does not pose
an existential threat.
Although decisions to go ahead with new
coal-fired plants have come down by more than 80 per cent since 2015, the global
coal fleet continues to grow. Based on available data and announced
projects, approvals of new coal plants in the first quarter of 2020,
mainly in China, were running at twice the rate observed over 2019 as a