© OECD/IEA 2016 © OECD/IEA 2016

Irish Renewable Energy Summit, Dublin

13 December 2016

Investment and Market Trends for a Low Carbon Transition

© 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

Heat1%

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 & Gas46%

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

EuropeanUnion

UnitedStates

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

© OECD/IEA 2016

0

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9002

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17

USD

(2

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bill

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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%

© OECD/IEA 2016

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

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2011 2013 2015

USD (2015) billion

Hydropower Solar PV Wind Other renewables

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2011 2013 2015

TWh+33%

+0%

Global renewable power investment Generation from investment in capacity

© OECD/IEA 2016

Capital cost developments across the energy spectrum

Massive cost deflation is reshaping competition between fuels and technologies

But some other technologies, such as nuclear power, carbon capture and storage and energy-efficient building renovations risk falling behind in the future

0

20

40

60

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120

2008 2009 2010 2011 2012 2013 2014 2015 2016

20

08

= 1

00

Upstream oiland gas

Onshorewind

Grid-scalebatteries

Solar PV -utility scale

LEDs

g

© OECD/IEA 2016

A diverse regional investment picture for renewables

China – the largest destination for investment

Renewables investment by country/region

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25

50

75

100

1252

00

0

20

01

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USD

(2

01

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bill

ion

China European Union United States Japan

India Rest of OECD Rest of non-OECD

© OECD/IEA 2016

0.0

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1.0

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2010 2011 2012 2013 2014 2015

USD

(2

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bill

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2015

USD

(2

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5)

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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

200

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800

1 000

1 200

Gas Coal

20

15

(U

SD)

mill

ion

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Gas Coal

20

15

(U

SD)

bill

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Subcritical

High efficiency

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Gas Coal

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15

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SD)

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Infrastructure investment cost for a 1 GW power plant in AsiaCoal 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

Global nuclear investment remains robust due to China

Economics and public concerns remain a challenge to significant nuclear expansion

Nuclear construction starts, 2000-2015

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4

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16

18

202

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GW

Rest of world China

© OECD/IEA 2016

Are we decarbonising the power sector fast enough?

At 420kg CO2/MWh in 2015, generation investments slowly reduce emissions intensity of existing power fleet, but remain well above 100kg/MWh to meet 2DS

0

100

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300

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2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

kgC

O2

per

MW

h

Global average CO2 emissions per MWh from new power generation capacity

© 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