World Energy Investment 2017
World Energy Investment 2017 Economics and Investment Office
19 September 2017 IEA © OECD/IEA 2017
Global energy investment fell 12% in 2016, a second consecutive year of decline
Global energy investment 2016
USD (2016) billion
1 000
-1%
750 500
250 0
-25% Coal
Networks
Renewable
Oil & gas
+9%
Oil, gas & coal
Energy efficiency
-25%
Thermal Electricity
Renewables in transport and heat
Electricity sector investment overtook oil and gas for the first time
The role of state actors in energy investments has increased Sources of finance by financing mechanism and type of organisation for world energy investment in 2016
11%
7%
42%
47% 93% Project finance Balance sheet
Government/SOEs Private sector Households, communities and self-consumption
The share of state actors in total energy investment rose from 39% in 2011 to 42% in 2016, largely thanks to state-owned enterprises in electricity sector investment, notably in China, and NOCs in upstream oil & gas
Global clean energy R&D funding needs a strong boost
USD (2016) billion
Global clean energy R&D spending
Top 3 IT company R&D spenders
40
30 20 10 0 2012 Private
2015 Public
Global R&D spending on clean energy plateaued at $26 billion/year, with much room for growth from the private sector. As a share of GDP, China's leads spending on energy R&D, after overtaking Japan
Appliance standards lock in electricity end use efficiency
Electricity demand shows similar stagnation in the US and Europe despite very different end user prices
The so called “decentralised” renewables
All of wind and the large majority of solar deployment relies on an interconnected network
Investment in low-carbon electricity is not keeping pace with demand
TWh
Expected annual power generation from final investment decisions for new low-carbon generation 350 250 150 50 2012-13
-50
Nuclear
2014-15
Hydropower and other renewables
2016
Wind
Solar PV
While the annual contribution of new solar PV and wind has grown by three quarters, FIDs for nuclear and hydropower have sharply slowed, leaving expected low-carbon generation 35% short of average demand growth the past five years.
A wave of coal power investment is coming to a pause Average annual final investment decisions for new coal-fired power capacity GW
140 120 100 80 60 40 20 0
2006-10
China
2011-15
India
Southeast Asia
2016
Rest of world
In 2016 the sanctioning of new coal power fell to the lowest level in nearly 15 years, hampered by competition from renewables and environmental challenges. Gas power FIDs surpassed coal for only the second time in the past decade.
GW
Europe: gas retirements exceed FIDs by a wide margin 20
15
10
5
0
-5
- 10 2006
2007
2008
Retirements
2009
2010
2011
2012
2013
2014
2015
2016
Final investment decisions
Compressed load factors, low wholesale prices and market design uncertainty disrupt the investment model of gas plants
Policies play an important role in electricity sector business models Top 10 areas of generation investment and their main funding models, 2016 China solar PV
Contracted pricing - administrative mechanism
US solar PV*
China coal power China onshore wind
Contracted pricing - competitive mechanism
China hydropower Europe onshore wind
Wholesale pricing
India coal power Japan solar PV US onshore wind*
Distributed generation
China nuclear
USD (2016) billion
0
5
10
15
20
25
30
35
40 45 Thousands Generation investments mostly have contracted pricing that allows for long-term cost recovery of assets. Competitive mechanisms play growing role in setting renewables remuneration, at 36% of utility-scale investment vs 28% in 2011.
Electricity demand from new heat pumps sold 6 5 3
Global electric vehicle sales
Thousand units
TWh
Electrification of transport and heat is progressing
1 000 750 500
2
250
0
0 2010
2012
2014
2016
2010
2012
2014
2016
Electric vehicle (EV) sales grew 38% in 2016 and, at $6 billion, now represent 10% of all transport efficiency spending. Another $6 billion was spent globally on EV charging stations.
Cheap oil shifts consumer preferences towards big cars The three best selling vehicles in North America
Global upstream investment rebounds modestly in 2017
(nominal) billion (nominal) USD USD billion
37% Global oil and gas upstream capital spending 2010-2017 800 700
110
600
38%
500
400
42%
300 200
28%
100
18% 12% 2010
0
120
25% 38%
37%
+6% 42%
39% 29%
-26%
28%
27%
27%
44%
45%
26% 19% 10%
25% 17% 13%
2016
2017
25%
19% 14%
20%
21%
20%
14%
14%
16%
21% 12%
2011
2012
2013
2014
2015
Global Cost Index (Right Majors axis) US independents
100 90
80 70 60 50 40
Shaleprivate Cost Index (Right axis) Other NOCs
Ramp up of activities leads to cost inflation in US tight oil but elsewhere upstream costs decline further. NOC’ share in total investment reaches another record high.
Russia: drivers of investment resilience West Siberia brownfield: domestic service capabilities, costs are in rouble
Power of Siberia: Strong project management expertise with pipelines, Made in Russia components
Yamal LNG: Chinese equity and project finance, EU and Japanese technology providers Russian oil production stabilized at a level 0.6 mB/day higher than 2014 expectations
Conventional oil and gas projects becoming faster and smaller
Time to market (years)
Average size of conventional resources sanctioned and time-to-market 5.0
Other offshore
4.5
Global Average
4.0
Deepwater offshore
2010-2014 2016-2017
Onshore
3.5 3.0 2.5 2.0 1.5 0
100
200
300
400 500 600 700 Average size of resources (Million Boe)
A shift in company strategies and technology developments leads to shorter project cycles across all the oil and gas industry
19 September 2017 IEA © OECD/IEA 2017
Global energy investment fell 12% in 2016, a second consecutive year of decline
Global energy investment 2016
USD (2016) billion
1 000
-1%
750 500
250 0
-25% Coal
Networks
Renewable
Oil & gas
+9%
Oil, gas & coal
Energy efficiency
-25%
Thermal Electricity
Renewables in transport and heat
Electricity sector investment overtook oil and gas for the first time
The role of state actors in energy investments has increased Sources of finance by financing mechanism and type of organisation for world energy investment in 2016
11%
7%
42%
47% 93% Project finance Balance sheet
Government/SOEs Private sector Households, communities and self-consumption
The share of state actors in total energy investment rose from 39% in 2011 to 42% in 2016, largely thanks to state-owned enterprises in electricity sector investment, notably in China, and NOCs in upstream oil & gas
Global clean energy R&D funding needs a strong boost
USD (2016) billion
Global clean energy R&D spending
Top 3 IT company R&D spenders
40
30 20 10 0 2012 Private
2015 Public
Global R&D spending on clean energy plateaued at $26 billion/year, with much room for growth from the private sector. As a share of GDP, China's leads spending on energy R&D, after overtaking Japan
Appliance standards lock in electricity end use efficiency
Electricity demand shows similar stagnation in the US and Europe despite very different end user prices
The so called “decentralised” renewables
All of wind and the large majority of solar deployment relies on an interconnected network
Investment in low-carbon electricity is not keeping pace with demand
TWh
Expected annual power generation from final investment decisions for new low-carbon generation 350 250 150 50 2012-13
-50
Nuclear
2014-15
Hydropower and other renewables
2016
Wind
Solar PV
While the annual contribution of new solar PV and wind has grown by three quarters, FIDs for nuclear and hydropower have sharply slowed, leaving expected low-carbon generation 35% short of average demand growth the past five years.
A wave of coal power investment is coming to a pause Average annual final investment decisions for new coal-fired power capacity GW
140 120 100 80 60 40 20 0
2006-10
China
2011-15
India
Southeast Asia
2016
Rest of world
In 2016 the sanctioning of new coal power fell to the lowest level in nearly 15 years, hampered by competition from renewables and environmental challenges. Gas power FIDs surpassed coal for only the second time in the past decade.
GW
Europe: gas retirements exceed FIDs by a wide margin 20
15
10
5
0
-5
- 10 2006
2007
2008
Retirements
2009
2010
2011
2012
2013
2014
2015
2016
Final investment decisions
Compressed load factors, low wholesale prices and market design uncertainty disrupt the investment model of gas plants
Policies play an important role in electricity sector business models Top 10 areas of generation investment and their main funding models, 2016 China solar PV
Contracted pricing - administrative mechanism
US solar PV*
China coal power China onshore wind
Contracted pricing - competitive mechanism
China hydropower Europe onshore wind
Wholesale pricing
India coal power Japan solar PV US onshore wind*
Distributed generation
China nuclear
USD (2016) billion
0
5
10
15
20
25
30
35
40 45 Thousands Generation investments mostly have contracted pricing that allows for long-term cost recovery of assets. Competitive mechanisms play growing role in setting renewables remuneration, at 36% of utility-scale investment vs 28% in 2011.
Electricity demand from new heat pumps sold 6 5 3
Global electric vehicle sales
Thousand units
TWh
Electrification of transport and heat is progressing
1 000 750 500
2
250
0
0 2010
2012
2014
2016
2010
2012
2014
2016
Electric vehicle (EV) sales grew 38% in 2016 and, at $6 billion, now represent 10% of all transport efficiency spending. Another $6 billion was spent globally on EV charging stations.
Cheap oil shifts consumer preferences towards big cars The three best selling vehicles in North America
Global upstream investment rebounds modestly in 2017
(nominal) billion (nominal) USD USD billion
37% Global oil and gas upstream capital spending 2010-2017 800 700
110
600
38%
500
400
42%
300 200
28%
100
18% 12% 2010
0
120
25% 38%
37%
+6% 42%
39% 29%
-26%
28%
27%
27%
44%
45%
26% 19% 10%
25% 17% 13%
2016
2017
25%
19% 14%
20%
21%
20%
14%
14%
16%
21% 12%
2011
2012
2013
2014
2015
Global Cost Index (Right Majors axis) US independents
100 90
80 70 60 50 40
Shaleprivate Cost Index (Right axis) Other NOCs
Ramp up of activities leads to cost inflation in US tight oil but elsewhere upstream costs decline further. NOC’ share in total investment reaches another record high.
Russia: drivers of investment resilience West Siberia brownfield: domestic service capabilities, costs are in rouble
Power of Siberia: Strong project management expertise with pipelines, Made in Russia components
Yamal LNG: Chinese equity and project finance, EU and Japanese technology providers Russian oil production stabilized at a level 0.6 mB/day higher than 2014 expectations
Conventional oil and gas projects becoming faster and smaller
Time to market (years)
Average size of conventional resources sanctioned and time-to-market 5.0
Other offshore
4.5
Global Average
4.0
Deepwater offshore
2010-2014 2016-2017
Onshore
3.5 3.0 2.5 2.0 1.5 0
100
200
300
400 500 600 700 Average size of resources (Million Boe)
A shift in company strategies and technology developments leads to shorter project cycles across all the oil and gas industry
