Global energy investment is set to face a “staggering” decline this year as a result of the Covid-19 pandemic, the International Energy Agency (IEA) warned on Wednesday.
According to a new report released by the Paris-based agency, the current crisis is causing the largest drop in investment and poses “serious implications” for energy security and clean energy transitions.
At the beginning of the year, spending across all energy sectors were on track to grow by around 2%. But now investment is estimated to plummet by $400 billion, or 20%, compared to 2019 levels.
“The Covid-19 crisis brought large swathes of the world economy to a standstill in a matter of months,” it said. The combination of falling demand, lower prices and a rise in non-payment of bills will translate in revenue losses for both governments and industry of “well over $1 trillion in 2020,” the IEA added.
The oil sector accounts for most of the decline. Global consumer spending in this fossil fuel is set to fall below the amount spent on electricity, for the first time ever.
The analysis found that investment in O&G will drop by nearly one-third, but the shale industry will see spending shrink by 50% this year. The IEA estimates that the investment losses might result in a global supply reduction of nearly 9 million barrels per day in 2025.
In other sectors, cuts are estimated to be of 10% in the power sector; 9% in electricity networks;10-15% in energy efficiency and 25% in the coal sector.
Investment in renewables has been more resilient during the crisis than fossil fuels, but spending on rooftop solar installations has been “strongly affected,” the report said. During the first-quarter, final investment decisions for wind and solar projects have fallen back to the levels of three years ago.
“The historic plunge in global energy investment is deeply troubling for many reasons,” said IEA’s executive director Fatih Birol. “It means lost jobs and economic opportunities today, as well as lost energy supply that we might well need tomorrow once the economy recovers. The slowdown in spending on key clean energy technologies also risks undermining the much-needed transition to more resilient and sustainable energy systems.”
