The coronavirus pandemic will result in the largest drop in global energy investment ever recorded, with spending expected to plummet across every major sector this year.
That is according to a new report from the International Energy Agency (IEA), which said that the “staggering“ decline could have serious implications for energy security and clean power transitions.
The report outlines how global energy investment for 2020 was on track for around 2% of growth prior to the coronavirus crisis, which would have been he largest annual rise in spending for six years.
However, with the pandemic bringing large swathes of the world economy to a standstill in a matter of months, investment is now expected to plummet by 20%, or almost $400bn (£324bn), compared with last year.
“The historic plunge in global energy investment is deeply troubling for many reasons,“ said IEA executive director Dr 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.“
The forecasts are based on the latest available investment data and announcements by governments and companies as of mid-May, tracking of progress on individual projects, and interviews with leading industry figures and investors.
Global investment in oil and gas is expected to fall by almost one-third in 2020, while investment in coal supply is set to fall by one-quarter, although this does not pose an existential threat for the industry.
Concerningly, the IEA found that approvals of new coal plants in the first quarter of 2020, mainly in China, were running at twice the rate observed over 2019 as a whole.
Renewables investment has been more resilient than fossil fuels, but spending on rooftop solar installations has been strongly affected, and final investment decisions in the first quarter of 2020 for new utility-scale wind and solar projects fell back to the levels of three years ago.
Spending on efficiency and end-use applications is set to fall by an estimated 10-15% as vehicle sales and construction activity weaken and investment in more efficient appliances and equipment is dialled back.
The overall share of clean energy technologies in global energy spending is expected to jump from around 33% to 40%, but only because fossil fuels are taking such a heavy hit, and the share remains far below levels needed to accelerate energy transitions.
“The crisis has brought lower emissions but for all the wrong reasons,“ Dr Birol continued. “If we are to achieve a lasting reduction in global emissions, then we will need to see a rapid increase in clean energy investment.
“The response of policy makers – and the extent to which energy and sustainability concerns are integrated into their recovery strategies – will be critical.“
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