World Energy Investment 2018

Investing in our energy future

"The decline in global investment for renewables and energy efficiency combined could threaten the expansion of clean energy needed to meet energy security, climate and clean-air goals. While we would need this investment to go up rapidly, it is disappointing to find that it might be falling this year.”
Fatih Birol, Executive Director, IEA


The IEA's World Energy Investment provides a wealth of data and analysis for decision making by governments, the energy industry and financial institutions to set policy frameworks, implement business strategies, finance new projects and develop new technologies. It highlights the ways in which investment decisions taken today are determining how energy supply and demand will unfold tomorrow.

This year's edition points to another year of falling investment in 2017, and that energy investment is failing to keep up with energy security and sustainability goals.

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Key findings from World Energy Investment 2018


Total energy investment has fallen again...

2017 was the third consecutive year of decline in global energy investment with energy efficiency the lone sector of growth. Despite a 6% decline in spending, the electricity sector again attracted the largest share of energy sector investments, exceeding the oil and gas industry for the second year in row, as the energy sector moves toward greater electrification.

... and is increasingly underpinned by governments

State-backed investments are accounting for a rising share of global energy investment, as state-owned enterprises have remained more resilient in oil and gas and thermal power compared with the private sector.

The share of global energy investment driven by state-owned enterprises increased over the past five years to over 40% in 2017.

	2012	2017
Total	39.2	41.8
Renewables and energy efficiency	14.4	16.6
Electricity networks and storage	62	62.5
Oil and gas	44.2	49.2
Thermal generation and coal	47.2	52.6
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	Total
Wholesale market pricing	20203
Distributed generation (retail/regulated tariff)	83589
Regulated networks	303121
Regulated/contracted utility-scale generation	343518
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The power sector is becoming more capital intensive

Electricity investment has shifted towards renewables, networks and flexibility. Yet, renewable power investment declined in 2017 by 7%, despite record levels of spending on solar PV. Moreover, the expected output from low-carbon power investments fell 10% in 2017 and did not keep pace with demand growth.

	Battery storage	Networks	Renewables	Nuclear	Coal, oil, gas
2007	0.00198	206.494	122	6.414	142.6
2008	0.0892	222.0059	150	0	139.9
2009	0.04621	211.994	205	5.746	151.8
2010	0.11001	236.663	226	12.058	176.4
2011	0.21939	244.42	295	18.013	168.1
2012	0.26806	236.065	291	9.026	171.78
2013	0.40291	243.824	283	17.559	150.4
2014	0.59288	267.725	279	22.422	164.28
2015	1.37531	287.023	307	33.031	174.51
2016	1.99978	297.562	318	30.796	146.23
2017	1.75419	301.364	298	17.369	132.433
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	Nuclear	Hydro and other renewables	Wind	Solar PV	Demand growth
2012	49.37	115.56	112.85	35.59	429.64
2013	92.29	154.56	72.35	46.63	620
2014	119.98	133.93	107.76	53.27	411.49
2015	167.48	121.33	153.14	63	381.29
2016	104.66	129.5	119.36	103.53	577.68
2017	82.35	85.3	110.54	135.3	642.13
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In emerging markets, auctions are supporting larger renewable projects

In emerging markets the average size of awarded solar PV projects in auctions rose by 4.5 times while that of onshore wind rose by half over 2013-17, helping to support economies of scale. In Europe, tendered large projects are mainly concentrated in offshore wind; auctions have generally not resulted in large, land-based renewables projects.

Emerging markets Europe Average awarded price (right axis)

Fewer decisions are being taken for investment in thermal generation

In 2017 newly sanctioned coal power fell 18%, driven by a slowdown in China, India and Southeast Asia. However, despite declining capacity additions - and a wave of retirements of existing plants - the global coal fleet continued to expand in 2017. And while investment decisions signal a continued shift towards more efficient plants, 60% of currently operating capacity uses inefficient subcritical technology. Meanwhile, sanctioned gas power fell nearly 23%, due mainly to the MENA region and the United States.

Thermal generation capacity subject to a final investment decision by plant type:

	China	India	Southeast Asia	Rest of world
2010	51.54	33.09	7.6	8.9
2011	42.82	18.7	3.4	12.69
2012	53.74	10	9	9
2013	57.93	8.79	3.4	6.4
2014	44.14	10.38	9.2	10.1
2015	59.91	10.33	7.52	10.38
2016	16.29	7.1	5.9	9.8
2017	16.42	5	4.8	5.9
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	MENA	US	China	Southeast Asia	Rest of world
2010	16.28	5.05	5	2.3	30.2
2011	22.3	7.1	15.77	8.54	40.84
2012	17.33	8.2	14.29	3.48	34.08
2013	28.58	8.1	11.52	6.06	23.58
2014	17.89	15.6	5.26	3.79	23.87
2015	21.75	14.4	8.22	3.68	28.5
2016	26.25	11.2	6.85	5.59	17.66
2017	10.27	7.7	8.51	6.17	19.24
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Oil and gas companies are doing more with less...

Following the peaks in oil and gas upstream investment reached in 2014, investment collapsed abruptly as a result of lower prices. 2017 investment rebounded by 2% in real terms, and we estimate the same level of growth for 2018.

One notable trend concerns the relationship between oil prices and upstream costs. In the past, there has been a roughly linear relationship between upstream costs and oil prices. When price spiked, so did costs, and vice versa. What we are noting now is a decoupling. While prices have more than doubled since 2016, global upstream costs have remained substantially flat and for 2018 we estimate those increasing very modestly, by just 3%. Companies appear to have learned to do more with less.

...and the dynamics of the oil and gas industry are evolving

The oil and gas industry has been traditionally characterised by long-lead times projects with predictable production profiles. Yet as a result of the shale revolution in the United States this trend is changing and the industry is re-thinking the way they choose, execute and manage projects. Furthermore, investment in conventional assets (responsible for the bulk of supply) remains focused on expansion of existing projects rather than developing new sources of production.

Moving forward, the overall balance of market supply will be given by combination of conventional activities (which respond slowly) and unconventional projects (which respond to market conditions in a much more rapid way) suggesting the possibility of more volatility ahead in the markets.

	Onshore conventional	Offshore conventional	Shale/tight oil
	47	36	5
	35	39	18
	38	41	13
	39	33	20
	39	29	24
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Meanwhile, US LTO is becoming a financially sustainable business

The prospects of the US shale industry are improving. Between 2010 and 2014, companies spent up to USD 1.8 for each dollar of revenue. However, the industry has almost halved its breakeven price, providing a more sustainable basis for future expansion. This underpins a record increase in US light tight oil production of 1.3 million barrels a day in 2018.

	Free cash flow	Capex	Production (right axis)
	-18207	28997	444
	-36877	61048	895
	-50786	91762	1736
	-45516	107502	2612
	-48871	131029	3632
	-17401	73380	4258
	-6299	37539	3929
	-2941	60063	4396
	7237	72075	5713
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	North America	Europe	Asia and Oceania	Rest of World
2012	7.296530441	5.404292	6.394819866	0.379157715
2013	6.878272327	5.221181	5.964687088	0.532621955
2014	6.865946104	6.584787	5.879336734	0.49667507
2015	6.635047229	6.795485568	5.632852182	0.587942398
2016	6.87596422	6.475207447	5.435000684	0.414820123
2017 est.	7.80689265	7.113363235	6.374249154	0.337817445
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ICT appears to be banking on the energy sector

Corporate investments in new energy technology companies are growing strongly, reaching their highest ever level of just over USD 6 billion in 2017 - strategic investments by companies to get a stake in potentially key new technology areas. While there is some increase in investments by utilities, the striking finding is that vast majority of the growth is coming from ICT companies, mostly investing in EV start-ups and digital solutions for smart grids and efficiency.

	Oil and gas	Utilities	Transport	ICT	Other energy	Other
2007	236	298	71	411	357	366
2008	234	259	102	600	482	576
2009	285	331	329	229	153	318
2010	616	238	343	556	146	489
2011	700	338	175	343	286	721
2012	738	186	654	206	158	849
2013	620	566	50	366	86	508
2014	305	424	113	304	363	490
2015	140	260	174	769	607	771
2016	238	355	180	1777	210	940
2017	311	744	374	3877	172	644
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