DUBAI: Global investment in energy fell for a second consecutive year as higher spending on energy efficiency and electricity networks was more than offset by a continued fall in upstream oil and gas spending, the International Energy Agency (IEA) said on Tuesday.
IEA in its annual World Energy Investment report said that energy companies last year spent $1.7 trillion (SR6.37 trillion) – about 2.2 percent of the global domestic product but 12 percent lower than the 2015 level – for new power plants, grid network upgrades, fossil fuel exploration as well as clean electricity generation.
Clean energy investment reached a record 43 percent of the aggregate supply spending, the report added.
“Our analysis shows that smart investment decisions are more critical than ever for maintaining energy security and meeting environmental goals,” said Dr. Fatih Birol, the executive director of IEA.
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“As the oil and gas industry refocuses on shorter-cycle projects, the need for policymakers to keep an eye on the long-term adequacy of supply is more important. Even with ambitious climate-mitigation goals, current investment activity in oil and gas will have to rise from its current slump.”
“The good news is that in spite of low energy prices, energy efficiency spending is rising thanks to strong government policies in key markets,” he added.
The energy watchdog however warned that “falling investment points to a risk of market tightness and undercapacity at some point down the line,” though this may not happen in the short term with the world now experiencing an oil glut and some markets having excess electricity production.
Global electricity investment was nearly flat at $718 billion, while investment in renewable energy power capacity fell 3 percent to $297 billion.
IEA however said that while renewable investment is also 3 percent lower compared with five years ago, it would generate 35 percent more power on cost efficiencies and technology improvements in solar PV and wind.