IEA Investment Outlook 2014 Presented by Dr Fatih Birol at the Royal Society, London, 6 June 2014

This excellent presentation from Dr Fatih Birol provided an insight into the latest World Investment Outlook available from the IEA website now (see link below). A selection of the highlights taken from of the World Investment Outlook are as follows:

• More than $1 600 billion was invested in 2013 to provide the world’s consumers with energy, a figure that has more than doubled in real terms since 2000 and a further $130 billion to improve energy efficiency.

• Over the period to 2035, the investment required each year to supply the world’s energy needs rises steadily towards $2 000 billion, while annual spending on energy efficiency increases to $550 billion. This amounts to a massive $40 trillion, of which $23 trillion is for fossil fuel extraction, transport and refining, $10 trillion for power generation where low carbon accounts for ¾ of this investment.

• This investment is not just in non-OECD countries, the ageing infrastructure of OECD countries and climate policies require large investments also.

• Less than half of the $40 trillion investment in energy supply goes to meet growth in demand, the larger share is required to offset declining production from existing oil and gas fields and to replace power plants and other assets that reach the end of their production lives.

• Of the $8 trillion investment in energy efficiency to 2035, 90% is spent in the transport and buildings sectors, reflecting policy ambitions and remaining efficiency potential. yet access to funding is a major obstacle.

• Decisions to commit capital to the energy sector are increasingly shaped by government policy measures and incentives, rather than by signals coming from competitive markets. Governments in many non-OECD countries have direct influence over energy sector investments, retaining 70% of global oil and gas reserves or half the world’s power capacity. While OECD government have stepped back from direct influence, opening up markets to competition, many have taken a role in energy sector investments through low-carbon policies for electricity.

• Investment in natural gas supply rises almost everywhere, but meeting long-term growth in oil demand becomes steadily more reliant on investment in the Middle East.

• Investment in LNG exports creates new links between markets and improves the security of gas supply but high costs of gas transportation may dampen the hopes of LNG buyers in Europe and Asia for much cheaper gas supplies.

• The investment required to maintain the reliability of Europe’s electricity system is unlikely to materialise with the current design of power markets.Europe needs $2 trillion of power sector investments to 2035, and aside from low-carbon investment, some 100 GW of new thermal capacity needs to be added or reliability of Europe’s electricity supply will be put at risk. This will require a further rise in the wholesale price of electricity by 20%, at a time when Europe is already paying higher prices.

• The investment path falls short of reaching climate stabilisation goals, as today’s policies and market signals are too weak to switch to low-carbon sources and energy efficiency at sufficient speed and scale. A breakthrough at the Paris climate conference in 2015 is vital to redress these issues.

Details of the thinking behind these main points and others can be obtained from the IEA World Investment Outlook