IEA© OECD/IEA 2017

World Energy Investment 2017

Economics and Investment Office

Laszlo Varro

0

250

500

750

1 000

USD

(2

01

6)

bill

ion

Global energy investment fell 12% in 2016, a second consecutive year of decline

Electricity sector investment overtook oil and gas for the first time

Global energy investment 2016

-25%-1%

+9%

Networks

Renewable

Thermal

Oil & gas

Coal

Electricity Oil, gas & coalRenewables in

transport and heatEnergy efficiency

-25%

Global R&D spending on clean energy plateaued at $26 billion/year, with much room for growth from

the private sector. As a share of GDP, China's leads spending on energy R&D, after overtaking Japan

Global clean energy R&D funding needs a strong boost

Global clean energy R&D spending Top 3 IT company R&D spenders

0

10

20

30

40

2012 2015

USD

(2

01

6)

bill

ion

Private Public

Appliance standards lock in electricity end use efficiency

Electricity demand shows similar stagnation in the US and Europe despite very different end user prices

Competitive auctions combine technology incentives with ultra low cost of capital

Wind and solar PV average LCOEs and auction results by commissioning date

0

50

100

150

200

250

2008 2010 2012 2014 2016 2018 2020 2022

USD 2016/MWh

Onshore wind averageauction price

Solar PV average auctionprice

Solar PV - utility scale LCOE

Onshore wind LCOE

Wind and solar costs continue to plummet

The so called “decentralised” renewables

All of wind and the large majority of solar deployment relies on an interconnected network

Networks spending is dominated by lines and power equipment, but digital grid infrastructure now

accounts for over 10% of networks investment.

Smarter networks are the key to address flexibility gaps

Investment in digital grid infrastructure and total electricity networks spending

0

50

100

150

200

250

300

2014 2015 2016

USD

(2

01

6)

bill

ion

Physical backbone Power equipment Smart meters

Smart grid infrastructure EV chargers

Digitalization unlocks flexibility to facilitate renewable integration and turn EVs into

flexible grid assets

Digitalization, decarbonisation and electrification

Curtailment of solar PV and wind

7%

2040

Digital flexibility

EVs standard vs smart chargingCapacity requirement

150 million EVs

140 GW

75 GW

500 million EVs

300 GW

190 GW

Standard charging

Smart charging

The headwind of the hydro and nuclear slowdown

New low carbon investment covers only around half of the global electricity demand increase

0

100

200

2012-13 2014-15 2016

TWh

Wind and solar

Nuclear and hydro

Future production from capacity receiving FID

A wave of coal power investment is coming to a pause

In 2016 the sanctioning of new coal power fell to the lowest level in nearly 15 years, hampered by competition from renewables and environmental challenges. Gas power FIDs surpassed coal for only the second time in the past decade.

Average annual final investment decisions for new coal-fired power capacity

0

20

40

60

80

100

120

140

2006-10 2011-15 2016

GW

China India Southeast Asia Rest of world

Gas turbine orders the lowest since the financial crisis – but this time with a booming global economy

Weak electricity demand, competition from renewables and inadequate electricity market design

weights on gas plant investment.

0

10

20

30

40

50

60

70

80

90

100

2011 2012 2013 2014 2015 2016 2017

GW

North America Europe Middle East China Other developing Asia Other

LNG investment: past the peak?

Lack of FIDs since 2015 indicate a rapid decline of investment

50

125

200

275

350

425

500

575

650

0

5

10

15

20

25

30

35

40

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

bcm

per

yea

r

USD

(2

01

5)

bill

ion Australia

Africa

Middle East

North America

Russia

Europe

Others

Capacity

Right axis:

Investment into LNG export facilities

Electrification of transport and heat is progressing

Electric vehicle (EV) sales grew 38% in 2016 and, at $6 billion, now represent 10% of all transport

efficiency spending. Another $6 billion was spent globally on EV charging stations.

Global electric vehicle salesElectricity demand from new heat pumps sold

0

2

3

5

6

2010 2012 2014 2016

TWh

0

250

500

750

1 000

2010 2012 2014 2016

Tho

usa

nd

un

its

Cheap oil shifts consumer preferences towards big cars

The three best selling vehicles in North America

North American shale: a digitalization and technology success

Longer lateral

New chemical agents to reduce the use of sand

Tighter spacing

Walking rig

Multi-well pad drilling

3D seismic data for geologic modelling

Fracture design and evaluation software

Improved robotics

Sources: original image from the Texas Tribune

Russia: drivers of investment resilience

Russian oil production stabilized at a level 0.6 mB/day higher than 2014 expectations

West Siberia brownfield: domestic service capabilities, costs are in rouble

Power of Siberia: Strong project management expertise with pipelines, Made in Russia components

Yamal LNG: Chinese equity and project finance, EU and Japanese technology providers

12% 14% 14% 14% 16% 10% 13%18% 19% 20% 21% 20%

19% 17%

28%

42%

29%

39%

28%

38%

27%

38%

27%

42%

26%

44%

25%

12%

21%

25%

Upstream investment stabilizes at half the peak

A two speed recovery unfolded driven by shale and from 2017 deep offshore

Global oil and gas upstream capital spending 2010-201737%

0

100

200

300

400

500

600

700

800

900

2011 2012 2013 2014 2015 2016 2017 2018E

USD

bill

ion

(n

om

inal

)

Oil and gas industry returns capital to equity markets

US independents rely on equity funding, but have a hedged, short cycle business model with very low

stranded asset risk

-30000

-25000

-20000

-15000

-10000

-5000

0

5000

10000

Q12013

Q22013

Q32013

Q42013

Q12014

Q22014

Q32014

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017

Listed Oil Companies' dividend and share-buy-back (USD m)

Majors Other Private US Independent

Conventional oil and gas projects becoming faster and smaller

A shift in company strategies and technology developments leads to shorter project cycles across all

the oil and gas industry

Average size of conventional resources sanctioned and time-to-market

Deepwater offshore

Otheroffshore

Onshore

Global Average

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

0 100 200 300 400 500 600 700

Tim

e to

mar

ket

(yea

rs)

Average size of resources (Million Boe)

2010-2014

2016-2017