COVID-19 causing biggest fall in energy investment in history: IEA

THE International Energy Agency has described the “unparalleled” and “staggering” fall in energy investment due the COVID-19 pandemic in its yearly World Energy Investment report released overnight.
COVID-19 causing biggest fall in energy investment in history: IEA COVID-19 causing biggest fall in energy investment in history: IEA COVID-19 causing biggest fall in energy investment in history: IEA COVID-19 causing biggest fall in energy investment in history: IEA COVID-19 causing biggest fall in energy investment in history: IEA

Expects global investment to fall by 20% in 2020

Mark Tilly

Journalist

 

The report expects global investment to plunge by 20%, or almost US$400 billion as a result of the pandemic and the lockdowns imposed to ward it off.

Before the crisis, it estimated investment would grow by 2%, the largest annual rise in spending in six years - a bitter pill to swallow. 

"The historic plunge in global energy investment is deeply troubling for many reasons," IEA executive director Fatih Birol said. 

"It means jobs lost and economic opportunities today, as well as lost energy supply that we might well need tomorrow once the economy recovers." 

The report said a combination of falling demand, lower prices and a rise in cases of non-payment of bills mean that energy revenues going to governments and industry are set to fall by well over US$1 trillion in 2020. 

Oil has been the worst hit and accounts for most of the decline, the agency said, as global consumer spending on oil is set to fall below the amount spent on electricity. 

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% in 2020. 

It noted in the longer term, a post-crisis legacy of higher debt will present a long hangover of investment risk. 

"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 report said.

Power sector spending is expected to fall by 10% in 2020, but the IEA noted renewables investment has been more resilient during the crisis than fossil fuels. 

That said, it noted rooftop solar pv installations had 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.

Meanwhile investment in natural gas plants have stagnated and spending on battery storage is levelling off, the IEA said. 

"Today's investment trends are clear warning signs for future electricity security," Dr Birol said. 

The report said the overall share of global energy  spending on clean energy technologies, which the IEA defines as renewables, efficiency, nuclear and carbon capture and storage will jump to 40% in 2020 after being stuck  at roughly a third in recent years, but only because fossil fuels have taken such a hit. 

"The response of policy makers - and the extent to which energy and sustainability concerns are integrated into their recovery strategies - will be critical," Dr Birol said, who for months has been urging governments to integrate clean energy technology investment into their economic recovery packages. 

The agency plans to release a special report on the recovery, which will provide clear recommendations on how governments can spur job creation and economic activity by building cleaner, more resilient energy systems.  

In more optimistic news today for Australia however, Reserve Bank governor Philip Lowe told the federal government inquiry into COVID-19 that the impact of the pandemic was not as bad as first feared. 

He noted that unemployment figures weren't as worrisome as first thought and that economic recovery was now underway. 

 

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