Global financiers are in the midst of a “spectacular shift” in their investment patterns, Climate News Network reports, with fossils receiving 25% less capital over the last year and renewables seeing an increase of more than 30%.
“Anyone who does not understand what is going on—governments, companies, markets—is not in the right place,” declared International Energy Agency Executive Director Fatih Birol. “We have never seen such a decline” in fossil investment, in what the IEA interprets as a “very important message for climate change and for the Paris Agreement.”
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Birol’s remarks in London, UK marked the launch of the agency’s first report on global energy investment. “A major shift in investment towards low-carbon sources of power generation is under way,” the report states. “Fossil fuels continue to dominate energy supply, but the composition of investment flows points to a reordering of the system.”
The report concludes that investment across the energy sector was down 8% in 2015, to a still-astounding US$1.8 trillion, partly due to lower prices for fossil fuels.
But IEA renewable energy specialist Lazlo Varro also pointed to dramatic drops in renewable energy prices over the last five years—solar by 80%, wind by one-third. “The sector needed less and less in government subsidies as costs come down,” Climate News Network reports, citing Varro. “Offshore wind power—traditionally seen as expensive—was becoming more price-competitive as turbine sizes increase and more efficient construction methods are used. Low interest rates were also encouraging more investment in renewables.”
The IEA also tracked $60 billion invested in new coal plants, most of them in Asia and Australia. “Many of the coal plants constructed are described as sub-critical—severely polluting, and using only basic technology,” writes Climate News Network correspondent Kieran Cooke. “The continued investment in coal was often due to the lack of the necessary infrastructure to support other, cleaner energy systems in countries such as India and Indonesia, and to the failure of governments to back renewables.”
The IEA “welcomes the shift in investment to renewable forms of energy, but says new oil production needs to come onstream in order to meet international energy demand,” Cooke reports. But Bloomberg’s coverage of the agency’s release highlighted the likelihood that fossils will cut their spending in 2017 for the third year in a row.
Oil and gas field investment is set to fall 24% this year, to US$450 billion, after dropping 25% in 2015, with international fossil majors like BP and Royal Dutch Shell preparing for the price crash to continue through late 2017.
“There are no signs that companies plan to increase their upstream capital spending in 2017,” the report stated. “Many operators have revised downwards their 2016 capital spending guidance throughout the year and, as of September 2016, they plan to maintain 2017 investment at 2016 levels” or even cut it back further.
