Guest essay by Eric Worrall
Although investment in coal plants has slowed to its lowest level this century, the coal fleet is still growing.
Global energy investment stabilised above USD 1.8 trillion in 2018, but security and sustainability concerns are growing
14 May 2019
Global energy investment stabilised in 2018, ending three consecutive years of decline, as capital spending on oil, gas and coal supply bounced back while investment stalled for energy efficiency and renewables, according to the International Energy Agency’s latest annual review.
The findings of the World Energy Investment 2019 report signal a growing mismatch between current trends and the paths to meeting the Paris Agreement and other sustainable development goals.
Still, even as investments stabilized, approvals for new conventional oil and gas projects fell short of what would be needed to meet continued robust growth in global energy demand. At the same time, there are few signs of the substantial reallocation of capital towards energy efficiency and cleaner supply sources that is needed to bring investments in line with the Paris Agreement and other sustainable development goals.
“Energy investments now face unprecedented uncertainties, with shifts in markets, policies and technologies,” said Dr Fatih Birol, the IEA’s Executive Director. “But the bottom line is that the world is not investing enough in traditional elements of supply to maintain today’s consumption patterns, nor is it investing enough in cleaner energy technologies to change course. Whichever way you look, we are storing up risks for the future.”
Even though decisions to invest in coal-fired power plants declined to their lowest level this century and retirements rose, the global coal power fleet continued to expand, particularly in developing Asian countries.
The continuing investments in coal plants, which have a long lifecycle, appear to be aimed at filling a growing gap between soaring demand for power and a levelling off of expected generation from low-carbon investments (renewables and nuclear). Without carbon capture technology or incentives for earlier retirements, coal power and the high CO2 emissions it produces would remain part of the global energy system for many years to come. At the same time, to meet sustainability goals, investment in energy efficiency would need to accelerate while spending on renewable power doubles by 2030.Read more: https://www.iea.org/newsroom/news/2019/may/global-energy-investment-stabilised-above-usd-18-trillion-in-2018-but-security-.html
Energy companies must be aware they are not building enough capacity, but given the political uncertainties around subsidies for renewables, regulatory hostility towards nuclear and the looming risk of carbon taxes being imposed on fossil fuel generators, their decision to withhold new investment is economically rational.
Whether power companies make money from new capacity, or cash in when shortages spike energy prices, either way they win. It is up to politicians to fix the horrendous mess their renewable policies have created, and restore a stable energy market which encourages investment in capacity.