Global energy investments totaled $1.8 trillion in 2017, a 2 percent decline in real terms from the previous year, according to the International Energy Agency (IEA) on Tuesday.
According to IEA's World Energy Investment 2018 report, more than $750 billion was spent on the electricity sector while $715 billion was assigned for oil and gas supplies globally.
'The electricity sector attracted the largest share of energy investments in 2017, sustained by robust spending on grids, exceeding the oil and gas industry for the second year in a row, as the energy sector moves toward greater electrification,' the report highlighted.
'Meanwhile, government policies are playing a growing role in driving private spending,' the report said, and added that across all power sector more than 95 percent of investments are now based on regulation or contracts for remuneration, with a dwindling role for new projects based solely on revenues from variable pricing in competitive wholesale markets.
'Investment in energy efficiency is particularly linked to government policy, often through energy performance standards,' the report read.
The report also finds that after several years of growth, combined global investment in renewables and energy efficiency declined by 3 percent in 2017 while risks remain of a further slowdown this year.
- China's policy to impact global investment
As China accounts for more than 40 percent of global investment in solar PV, its recent policy changes on PV subsidies have had global implications. This confirms past IEA reports that have highlighted the critical importance of policies in driving investment in renewable energy.
China's National Energy Administration, the National Development and Reform Commission and the Ministry of Finance released new guidance that terminates any approvals for new subsidized utility-scale PV power stations in 2018.
In addition, China will also reduce its feed-in tariff for projects by Ren Ming Bi (RMB) 0.05 ($0.15) per kilowatt-hour and projects connected to the grid past June 1 will not receive feed-in tariffs.
The report also finds prospects in the U.S. shale industry are improving. The industry has almost halved its breakeven price, providing a more sustainable basis for future expansion. This underpins a record increase in U.S. light tight oil production of 1.3 million barrels a day in 2018. Between 2010 and 2014, companies spent up to $1.80 for each dollar of revenue.
Dr. Fatih Birol, the IEA's executive director, however, said that such a decline in global renewable investments and in energy efficiency combined is worrying.
'This could threaten the expansion of clean energy needed to meet energy security, climate and clean-air goals. While we would need this investment to go up rapidly, it is disappointing to find that it might be falling this year,' he concluded.
By Gulsen Cagatay
Anadolu Agency
energy@aa.com.tr