© OECD/IEA 2016 © OECD/IEA 2016

London 14 September 2016

© OECD/IEA 2016

The context

Investment is the lifeblood of the energy system, which determines long-term trends of supply, emissions and fuel demand

Investors face new challenges and opportunities from recent trends

Macroeconomic uncertainty and structural change affects demand patterns

The energy sector faces accelerated technological change

Lower energy prices and increasing inter-fuel competition reshape investment

Global energy investment declined in 2015, mainly due to lower oil and gas spending

Share of renewables in investment boosted by technology progress, strong policy support and growth in good resource markets

© OECD/IEA 2016

Power Generation

23% Biofuels and Solar

Heat 1%

USD 1.8 trillion

Investment flows signal a reorientation of the global energy system

An 8% reduction in 2015 global energy investment results from a $200 billion decline in fossil fuels, while the share of renewables, networks and efficiency expands

Oil & Gas 46%

Coal 4%

Electricity Networks

14%

Energy Efficiency

12%

Global Energy Investment, 2015

© OECD/IEA 2016

Renewables 17%

USD 1.8 trillion

Investment flows signal a reorientation of the global energy system

An 8% reduction in 2015 global energy investment results from a $200 billion decline in fossil fuels, while the share of renewables, networks and efficiency expands

Oil & Gas 46%

Coal 4%

Electricity Networks

14%

Energy Efficiency

12%

Global Energy Investment, 2015

Thermal Power

7%

© OECD/IEA 2016

USD (2015) billion

0 50 100 150 200 250 300 350

India

Russia

European Union

United States

China

Energy supply investment in 2015, selected markets

Top five markets comprised over half of global energy supply investment

Boosted by record power sector spending, China regains its position as top investment market, while the US declines due to sharply lower oil and gas investment

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Energy efficiency investment rose 6%, bucking the trend despite lower energy prices

Lower oil prices can reduce energy efficiency spending. But government policies remain the key driver, a warning against complacency

Annual improvements in average fuel economy of new vehicles

0%

1%

2%

3%

US W. Europe China

2008 to 2013 2014 to 2015

© OECD/IEA 2016

0

100

200

300

400

500

600

700

800

9002

01

0

20

11

20

12

20

13

20

14

20

15

20

16

20

17

USD

(2

01

5)

bill

ion

Unprecedented wave of investment cuts in the upstream oil and gas industry

Global upstream capital spending 2010-2017

Cost deflation, efficiency improvements and reduced activity levels might lead for the first time to three consecutive years of investment decline

-24%

-25%

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The share of NOCs in global upstream investment reaches an all time high

Share of upstream oil and gas investment, by company type

Upstream investment remains robust in the Middle East and Russia while North American shale and global offshore spending have been hit most severely

10% 16% 8%

27% 21% 24%

27% 27% 24%

36% 36% 44%

0%

20%

40%

60%

80%

100%

2007 2014 2016

Majors US Independents NOCs Other private

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Renewables investment buys much more electricity

Investment in renewables-based capacity more than covers 2015 global electricity growth. Wind leads, surging 35% in 2015 on economics and record offshore growth

0

50

100

150

200

250

300

350

2011 2013 2015

USD (2015) billion

Hydropower Solar PV Wind Other renewables

0

50

100

150

200

250

300

350

400

2011 2013 2015

TWh +33%

+0%

Global renewable power investment Generation from investment in capacity

© OECD/IEA 2016

0.0

0.2

0.4

0.6

0.8

1.0

1.2

2010 2011 2012 2013 2014 2015

USD

(2

01

5)

bill

ion

0

50

100

150

200

250

300

2015

USD

(2

01

5)

bill

ion

In electricity networks, batteries accelerate though grids comprise most investment growth

Global grid-scale battery storage investment Total networks investment

x10

0.4%

Grid-scale battery storage spending has expanded tenfold since 2010. Their value lies most in complementing grids that constitute the bulk of investment

© OECD/IEA 2016

0

10

20

30

40

50

60

70

Gas Coal

20

15

(U

SD)

bill

ion

Subcritical

High efficiency

Infrastructure investment cost for a 1 GW power plant in Asia Coal and gas-fired power investment in Asian markets (2015)

Infrastructure costs favour coal power over gas in Asian energy importers

Asian markets comprised 85% of global coal power investment, while N. America and Middle East, with robust infrastructure, favoured gas for new fossil fuel power

© OECD/IEA 2016

0

200

400

600

800

1 000

1 200

Gas Coal

20

15

(U

SD)

mill

ion

Infrastructure investment cost for a 1 GW power plant in Asia

Infrastructure costs favour coal power over gas in Asian energy importers

Asian markets comprised 85% of global coal power investment, while N. America and Middle East, with robust infrastructure, favoured gas for new fossil fuel power

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Global nuclear investment remains robust due to China

Economics and public concerns remain a challenge to significant nuclear expansion

Nuclear construction starts, 2000-2015

0

2

4

6

8

10

12

14

16

18

202

00

0

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

GW

Rest of world China

© OECD/IEA 2016

Conclusions

Global energy investment in 2015 is 8% lower. The share of oil & gas declined, while that of renewables, efficiency and nuclear rose

Massive cost deflation across the entire energy spectrum is reshaping competition between fuels and technologies

Unprecedented cuts in upstream investment are shifting the geography of oil production

Renewables investment accounts for more than two-thirds of power generation and more than covers global electricity demand growth

The IEA will continue to measure investment flows and assess their implications for the global energy sector