Global energy investments set to recover in 2021 but remain far from a net zero pathway - News - IEA (2024)

Press release
02 June 2021

Global investment in energy is set to rebound by nearly 10% in 2021 to USD 1.9 trillion, reversing most of last year’s drop caused the Covid-19 pandemic, but spending on clean energy transitions needs to accelerate much more rapidly to meet climate goals, according to a new report from the International Energy Agency.

With energy investment returning to pre-crisis levels, its composition is continuing to shift towards electricity: 2021 is on course to be the sixth year in a row that investment in the power sector exceeds that in traditional oil and gas supply, according to the World Energy Investment 2021 report.

Global power sector investment is set to increase by around 5% in 2021 to more than USD820billion, its highest ever level, after staying flat in 2020. Renewables are dominating investment in new power generation capacity and are expected to account for 70% of the total this year. And that money now goes further than ever in financing clean electricity, with a dollar spent on solar PV deployment today resulting in four times more electricity than ten years ago, thanks to greatly improved technology and falling costs.

“The rebound in energy investment is a welcome sign, and I’m encouraged to see more of it flowing towards renewables,” said Fatih Birol, the IEA’s Executive Director. “But much greater resources have to be mobilised and directed to clean energy technologies to put the world on track to reach net-zero emissions by 2050. Based on our new Net Zero Roadmap, clean energy investment will need to triple by 2030.”

While renewables dominate new power investment, and approvals for coal-fired plants are some 80% below where they were five years ago, coal is not out of the picture. There was even a slight increase in go-aheads for coal-fired plants in 2020, driven by China and some other Asian economies.

Upstream oil and gas investment is expected to rise by about 10% in 2021 as companies recover financially from the shock of 2020, but their spending remains well below pre-crisis levels. The new report highlights the diverging strategies among different oil and gas companies. The majors are holding oil and gas spending flat on aggregate in 2021, despite recovering prices. Meanwhile, some national oil companies are stepping up investment, raising the possibility of increased market share if demand continues to grow. Qatar’s decision to move ahead with the world’s largest liquefied natural gas (LNG) expansion, and to include carbon capture technologies in this investment, is a strong signal of its intent to maintain a leadership position in LNG.

There are signs in the latest data that spending by some global oil and gas companies is starting to diversify. IEA analysis last year highlighted that only around 1% of capital spending by the industry was going to clean energy investments. But project tracking to date in 2021 suggests that this could rise to 4% this year for the industry as a whole, and well above 10% for some of the leading European companies.

The influence of recovery packages and new climate policy measures comes through in expectations of rising expenditure in 2021 on renewable power, electricity grids, energy efficiency – notably in the buildings sector in Europe – and emerging technologies such as carbon capture, utilisation and storage and low-carbon hydrogen. The United States may provide further momentum if the infrastructure plan proposed by the administration of President Joe Biden is enacted.

Financial markets are also providing encouraging signs for clean energy investment. Sustainable debt issuance reached a record level in 2020, and renewable power companies have outperformed fossil fuel companies on international equity markets. But even though spending on clean energy is set to rise in 2021 by around 7%, the report notes that growth in these capital expenditures has lagged changes in financial markets, in part due to a shortage of high-quality clean energy investment opportunities and appropriate channels for allocating capital into projects.

The anticipated USD750 billion to be spent on clean energy technologies and efficiency in 2021 is encouraging but remains far below what’s required to put the energy system on a sustainable path. Clean energy investment would need to triple in the 2020s to put the world on track to reach net-zero emissions by 2050, thereby keeping the door open for a 1.5 °C stabilisation of the rise in global temperatures.

“As set out in detail in our recent Roadmap to Net Zero by 2050, governments need to go beyond making pledges to cut emissions and take concrete steps to accelerate investments in market-ready clean energy solutions and promote innovation in early-stage technologies,” said Dr Birol. “Clear policy signals from governments would reduce the uncertainties associated with clean energy investments and provide investors with the long-term visibility they need. Our Roadmap shows there are huge opportunities for companies, investors, workers and entire economies on the path to net zero. Governments have the power to unlock these broad-based benefits.”

The gap between today’s investment trends and the needs of climate-driven scenarios is particularly large in emerging market and developing economies. This is emerging as a critical fault line in clean energy transitions in advance of the crucial COP26 meeting in Glasgow later this year, and will be the subject of a major new report from IEA on Financing Clean Energy Transitions in Emerging Market and Developing Economies, to be released on 9 June.

Read the report

This year’s edition of the World Energy Investment report presents the latest data and analysis of how energy investment flows are recovering from the shock of the Covid-19 pandemic, including full-year estimates of the outlook for 2021.

Explore report

Flagship report World Energy Investment 2021 June 2021

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I am an energy enthusiast with a deep understanding of the global energy landscape. My expertise is rooted in extensive research and analysis of the energy sector, including investments, transitions, and climate goals. I've closely followed reports and developments from authoritative sources like the International Energy Agency (IEA) to stay abreast of the latest trends and future projections.

Now, let's delve into the concepts highlighted in the article from June 2, 2021:

  1. Global Energy Investment Rebound:

    • The article mentions a nearly 10% rebound in global energy investment in 2021, reaching USD 1.9 trillion. This recovery is attributed to the easing of the Covid-19 pandemic's impact.
  2. Shift Towards Electricity:

    • The composition of energy investment is shifting towards electricity, with 2021 projected to be the sixth consecutive year where power sector investment surpasses traditional oil and gas supply.
  3. Renewables Dominating Investment:

    • Global power sector investment is expected to reach over USD 820 billion, its highest level ever, with renewables accounting for 70% of new power generation capacity investment in 2021.
  4. Improved Efficiency of Clean Electricity Financing:

    • Investments in solar PV deployment are highlighted, showcasing that a dollar spent today results in four times more electricity than a decade ago due to improved technology and reduced costs.
  5. Clean Energy Investment Tripling by 2030:

    • Despite the rebound in energy investment, the IEA's Executive Director, Fatih Birol, emphasizes the need for a much greater mobilization of resources towards clean energy technologies to achieve net-zero emissions by 2050. Clean energy investment must triple by 2030.
  6. Diverging Strategies in Oil and Gas Industry:

    • The report points out diverging strategies among oil and gas companies, with major companies holding spending flat while some national oil companies increase investment, potentially gaining market share.
  7. Influence of Recovery Packages and Climate Policy:

    • Expectations for rising expenditure in 2021 on renewable power, electricity grids, energy efficiency (especially in European buildings), and emerging technologies such as carbon capture, utilization, and storage, and low-carbon hydrogen are highlighted.
  8. Financial Markets and Clean Energy Investment:

    • Financial markets show positive signs for clean energy investment, with sustainable debt issuance reaching a record level in 2020. Clean energy companies outperformed fossil fuel companies on international equity markets.
  9. Clean Energy Investment Opportunities:

    • While spending on clean energy is projected to rise by around 7% in 2021, the report notes that growth lags behind changes in financial markets due to a shortage of high-quality clean energy investment opportunities and appropriate channels for capital allocation.
  10. Gap in Climate-Driven Scenarios:

    • There is a significant gap between current investment trends and the needs of climate-driven scenarios, particularly in emerging market and developing economies. The IEA plans to release a major report on Financing Clean Energy Transitions in these economies on June 9.

This comprehensive overview demonstrates the complex interplay of factors influencing global energy investments, from the resurgence in renewables to the challenges in the oil and gas sector and the crucial role of policy and financial markets in shaping the future energy landscape.

Global energy investments set to recover in 2021 but remain far from a net zero pathway - News - IEA (2024)
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