World Energy Investment 2020

The energy industry that emerges from the Covid-19 crisis will be significantly different from the one that came before
Data and numbers


The way investment is measured across the energy spectrum varies, largely because of differences in the availability of data and the nature of expenditures. This document explains in greater detail the methodology used to ensure that the estimates are consistent and comparable across sectors in World Energy Investment 2020 (WEI 2020). In WEI 2019, the definition of investment changed from the previous editions of WEI where investment was defined as overnight capital expenditure. In WEI 2020, investment is again measured as the ongoing capital spending on assets. For some sectors, such as power generation, this investment is spread out evenly from the year in which a new plant or upgrade of an existing one takes a final investment decision (i.e. when a project reaches financial close or begins construction) to the year in which it becomes operational. For other sources, such as upstream oil and gas and liquefied natural gas (LNG) projects, investment reflects the capital spending incurred over time as production from a new source ramps up, or to maintain output from an existing asset.

For energy efficiency, the measurement task is more complex and much of the expenditure is by consumers for whom purchases of more efficient goods are not investments per se. In WEI 2020, as in WEI 2019 and other recent IEA reports, investment in energy efficiency includes incremental spending by companies, governments and individuals to acquire equipment that consumes less energy than that which they would otherwise have bought. Due to the different possible methodologies available, this estimate of energy efficiency investment is not definitive but still included to provide a comparison with the scale of investment in energy supply. Fossil fuel and power sector investments are those that raise or replace energy supply, while energy efficiency investments are counted as those that reduce energy demand.

Investment estimates are derived from International Energy Agency (IEA) data for energy demand, supply and trade, and estimates of unit capacity costs, analysis of which benefits from extensive interaction with industry. By default, investment data are given in year 2019 US dollars, adjusted using country-level gross domestic product (GDP) deflators and 2019 exchange rates. Unless otherwise stated in WEI 2020, all time series and historical comparisons are presented in real 2019 US dollar terms, adjusted for inflation.

Overall, this approach to investment represents an approximation of real-world practice and is aligned with the concept of capital expenditure in financial reporting and accounting. In reality, varying time lags and spending patterns characterise the period between the final investment decision and the operation of an energy project. As such, where available, measures of financial performance, financial flows and physical energy changes are also provided to give a more complete picture of the turnover of the energy asset base as well as decisions to commit new capital. While other areas of spending – including operating and maintenance expenditures, research and development, financing costs, mergers and acquisitions or public markets transactions – remain important for energy sector development, and are analysed on a standalone basis, they are not included in the investment calculations of WEI 2020

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