Global investment in the electricity sector reached a record-breaking $690 billion in 2015, according to new figures from the International Energy Agency (IEA), and there is a “major shift in investment towards low-carbon sources of power generation”. Low carbon capacity grew faster than power demand in 2015, so the global carbon intensity of electricity is falling.
Investment in electricity – 37% of the total – is still outweighed by investment in oil and gas, which represented 45% of total energy investment in 2015. But there is “a reorientation” in energy investment, said IEA, with falling investment not only in upstream oil and gas but also in gas-fired electricity generation.
It said renewables investment had been stable since 2011, and was heavily skewed towards wind, solar and hydropower, where the consistent investment level now meant much higher levels of installation because of the falling cost of the technologies. The cost of storage was also falling.
The IEA said nuclear power, carbon capture and storage (CCS) and energy-efficient building renovations may fall behind in the future, because their costs “are benefiting less from modularity and learning by doing“, especially if project management risks affect financing. Nevertheless, investment in energy efficiency has grown by 6% and reached $220 billion globally in 2015.
Global carbon intensity was 420kgCO2/MWh, lower than the previous year but not on track to limit global temperature increases to 2 degrees; the IEA said stronger policy support was needed. It noted that “Around 95% of power generation investments rely on vertical integration, long-term contracts or price regulation to manage risks. The role of wholesale price signals in driving investment in power generation is declining.”
The IEA also said “conventional power generation investment has essentially come to a halt in Europe, where the effect of low wholesale prices is being reinforced by the financial weakness of many utilities” and security of supply concerns were rising. Meanwhile decentralised energy did not remove the need for an electricity network: “In fact, renewables investment often requires additional network investments in order for it to be integrated effectively into the system.”