IEA© OECD/IEA 2017

World Energy Investment 2017

Economics and Investment Office

14 June 2017

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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%

The role of state actors in energy investments has increased

The share of state actors in total energy investment rose from 39% in 2011 to 42% in 2016, largely thanks to

state-owned enterprises in electricity sector investment, notably in China, and NOCs in upstream oil & gas

Sources of finance by financing mechanism and type of organisation for world energy investment in 2016

7%

93%

Project finance

Balance sheet

42%

47%

11%

Government/SOEs Private sector Households, communities and self-consumption

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

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2012 2015

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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

The so called “decentralised” renewables

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

Investment in low-carbon electricity is not keeping pace with demand

While the annual contribution of new solar PV and wind has grown by three quarters, FIDs for nuclear and hydropower have sharply slowed, leaving expected low-carbon generation 35% short of average demand growth the past five years.

Expected annual power generation from final investment decisions for new low-carbon generation

-50

50

150

250

350

2012-13 2014-15 2016

TWh

Nuclear Hydropower and other renewables Wind Solar PV

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

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20

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60

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120

140

2006-10 2011-15 2016

GW

China India Southeast Asia Rest of world

Europe: gas retirements exceed FIDs by a wide margin

Compressed load factors, low wholesale prices and market design uncertainty disrupt the investment

model of gas plants

- 10

- 5

0

5

10

15

20

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

GW

Retirements Final investment decisions

Policies play an important role in electricity sector business models

Generation investments mostly have contracted pricing that allows for long-term cost recovery of assets. Competitive mechanisms play growing role in setting renewables remuneration, at 36% of utility-scale investment vs 28% in 2011.

Top 10 areas of generation investment and their main funding models, 2016

0 5 10 15 20 25 30 35 40 45

China nuclear

US onshore wind*

Japan solar PV

India coal power

Europe onshore wind

China hydropower

China onshore wind

China coal power

US solar PV*

China solar PV

Thousands

USD (2016) billion

Contracted pricing - administrativemechanism

Contracted pricing - competitivemechanism

Wholesale pricing

Distributed generation

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

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2010 2012 2014 2016

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2010 2012 2014 2016

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Cheap oil shifts consumer preferences towards big cars

The three best selling vehicles in North America

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2010 2011 2012 2013 2014 2015 2016 2017

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2010 2011 2012 2013 2014 2015 2016 2017

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US independents Majors Other private NOCs

37%

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% 45%

25%

12%

21%

25%

40

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60

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80

90

100

110

120

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2010 2011 2012 2013 2014 2015 2016 2017

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Global Cost Index (Right axis) Shale Cost Index (Right axis)

Global upstream investment rebounds modestly in 2017

Ramp up of activities leads to cost inflation in US tight oil but elsewhere upstream costs decline further.

NOC’ share in total investment reaches another record high.

Global oil and gas upstream capital spending 2010-2017

+6%

-26%

25%

37%

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

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