When it comes to the energy sector and energy investment one can’t help but think of the big bucks. Projects can cost a minimum of a few billion dollars and reported company revenues can often be just as mind boggling to an average Joe like me. So, after reading and digesting the International Energy Agency’s (IEA) World Energy Investment Outlook 2014, I wasn’t really all that surprised by the figures that were involved. I especially wasn’t shocked by the fact that the IEA reported that due to the world’s growing need for energy, investments of US$ 48 trillion will be needed over the period to 2035.
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According to the IEA, annual investment in energy supply today is approximately US$ 1.6 trillion, with the largest share being US$ 1.1 billion/y spent on the extraction and transportation of fossil fuels, oil refining and the construction of fossil fuel fired power plants. Does this really surprise anyone, considering fossil fuel demand, for natural gas and oil in particular, is increasing rapidly, especially in emerging markets, which are in some instances becoming net importers? Also, considering the unavoidable shale phenomenon and the new investments that are being made as a result of this, such as LNG export terminals in the USA and conversions of refineries to process the sweet feedstocks, I wouldn’t be surprised to see the investment figures rise steadily over the report’s forecast period, comfortably hitting the US$ 2 trillion/y energy supply investment the IEA believes the world will require.
Of course, when looking at energy investment in the world at the moment, energy efficiency and the realm of alternative energy sources cannot be ignored. The IEA said that investment in energy efficiency is to increase to US$ 550 billion/y to 2035, totalling US$ 8 trillion. Unlike investment in energy supply, 90% of this is anticipated to be focused on transport and buildings. As we move towards the implementation of compressed natural gas (CNG) fuelled and electric cars and ever more ambitious policies for transport emissions levels and building efficiency, it makes sense for this to be the expected outcome. However, it’s not going to be easy sailing for all countries to invest in energy efficiency and alternative energy sources to fossil fuels. The lack of targeted and sufficient energy policies, limited access to funds and a fondness for fossil fuel subsidies will make these things unachievable. Why would money be spent and reallocated when fossil fuels are cheaper and easier to access under the current setup?
So, as I said at the beginning, I wasn’t at all shocked by the level of investment that is needed to ensure that the world’s energy supply is increased sufficiently, and I wasn’t surprised either to see the level of energy efficiency investment that is needed, especially if the 2 °C emissions path is to be followed. However, one can’t help but believe that big changes will have to be made in many areas for the energy efficiency and emissions targets to be achieved by 2035. Maybe, some new investors will have to be brought onboard to give the final push.