Electricity overtakes fossil fuels in push for investment
Electricity drew in more investment than fossil fuel supply for the first time last year as the energy industry prepared for electrification of everything from cars to buildings and industrial processes.
Power generation and electricity grid expansions took in US$718 billion, 42 per cent of the US$1.7 trillion invested in energy last year, according to a report by the International Energy Agency released Tuesday. Oil, gas and coal supply by contrast reaped US$708 billion, a drop from last year reflecting lower prices and profits by major oil companies.
The findings are another milestone marking a shift in the world energy industry away from the most polluting fuels as governments respond to the threat of global warming and the cost of renewables such as wind and solar power plunges to compete with fossil fuels. “Oil and gas was the largest investment source for 100 years. This changed in 2016,” Laszlo Varro, chief economist of the IEA, said on a conference call. “With robust investment in renewable energy, increased investment into electricity networks, electricity is now the biggest area of capital investment.”
Renewable energy and networks made up 80 per cent of all electricity investment, according to the IEA’s calculations. New clean power projects attracted US$297 billion in 2016, a decline of three per cent from the previous year, caused by cheaper solar panels and wind turbines. Installations rose by five per cent during that period.
Energy projects are capital-intensive and take years to develop and construct, so decisions made and money spent today shine a light on what the energy system will look like in the decades to come. The shift of capital flows away from fossil fuels and towards electricity, particularly clean sources such as solar and wind, shows that the trend spurred by the Paris climate accord is seeping into the business of energy.
China received more than a fifth of global investment. The world’s most populous nation spent less on new coal-fired power stations as public pressure to limit smog reduced the appeal of the dirtiest fossil fuel. Firms spent their capital on low-carbon electricity generation and networks, making up 65 per cent of the global total at US$259 billion.
Investment into the U.S.’s energy system rose 16 per cent, mostly driven by renewable energy, the report said. The IEA doesn’t anticipate a revival of the coal industry, because of market forces that started under the last Republican president, George W. Bush.