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World Energy Investment 2020
IEEJ Global Energy Webinar
23 June 2020

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Pre-crisis expectations of a return to growth…

USD (2019) billion

Total global energy investment based on pre-Covid-19 expectations
2%

2 000
1 500
1 000500

2017

2018

2019

2020

At the start of the year, expectations for 2020 pointed towards modest growth in renewables, upstream
oil & gas and efficiency, pushing global energy investment up for the first time in recent years
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IEEJ：June 2020 © IEEJ2020…have turned into an unparalleled decline in energy investment

USD (2019) billion

Total global energy investment

2 00020%

1 500

Rest of the world

1 000Europe
China

500

Russia & Caspian
Middle East & North Africa
United States

2017

2018

2019

2020

Disruption from Covid-19 is expected to push 2020 energy investment down by almost $400 billion.
All parts of the world are affected, but major producers of oil & gas have seen the largest falls
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Investment is hit by lockdowns & by demand & revenue uncertainties
Change in estimated 2020 investment versus 2019, by sector

54

USD (2019) billion

USD (2019) trillion

Global end-use spending on energy

Oil3Electricity

20

Oil and gas

Coal-15%-50-100

Power-10%

Energy end use& efficiency
-12%

-32%

-150

1

Natural gas

-200

Coal
2000

2005

2010

2015

2020

-250

Global consumer spending on electricity is set to be higher than oil for the first time in 2020. Lower demand& prices are squeezing the funds available for investment in new projects, especially in fuel supply
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The rollercoaster continues for oil and gas spending
USD (2019) billion

Global investment in oil and gas supply & the power sector
1 200

Oil and gas supply
Power sector

800

4002010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Investment in oil and gas supply has fallen by more than half since the high point of 2014. Power sector
spending has been more robust - although well short of what a more electrified future would require
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Upstream oil and gas spending has been slashed across the board
Change in announced oil and gas company spending for 2020 versus initial guidance for the year

USD billion

MajorsNational oil companies

Others50Initial

Revised

2500%-30%-60%

No company or resource type has been immune, although shale has been hit hardest. The scope for
additional cost reductions today is limited, so cuts in spending feed through directly into reduced activity
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A new boom-and-bust cycle for oil markets?
Effect of lower investment on 2025 oil balances
Resulting change in 2025 oil production

600mb/d

USD (2019) billion

2020 upstream spending

500
400
300
200
10000-2

Initialexpectation-4Newestimate-6

1 year oflower
investment

If investment
stays lower
to 2025-8-10Reduced investment in 2020 already brings down 2025 oil output by more than 2 mb/d, if investment stays
at 2020 levels, this would reduce the previously-expected level of supply in 2025 by almost 9 mb/d
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Investment in power is faltering when it needs to pick up
Global power investment

800
Batterystorage

600

Grids
Hydro &other renewables

400

Cumulative changes since 2015
USD 2019 (billion)

USD 2019 (billion)

Total investment in 2015 and 2020
400- 40

Solar PV & wind
- 80

2000

NuclearGas & oilCoal

2015

2020

- 120

2016

2017

2018

2019

2020

Investment in solar PV and wind has held up, even as costs have come down, but spending on otheraspects of a secure & sustainable system – grids, storage, flexibility – are lagging behind
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Approvals of new coal-fired power plants are down, but not out
Coal power final investment decisions

GW

1008060
40
20

2014

2015
China

2016
India

2017

2018

Southeast Asia

2019

1Q2020Rest of world

Decisions to move ahead with new coal plants have fallen by 80% since 2015, but approvals in Q1 2020
– mainly in Asia – were at twice the rate seen in 2019: overall, the global coal fleet continues to grow
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Clean energy investment has been resilient, and insufficient

USD 2019 (billion)

Global investment in clean energy and efficiency, and share in total investment
40%

800

CCUS
Battery storage

35%

600

Energy efficiency
Nuclear

30%

400

25%

200

2015

2016

2017

2018

2019

2020

Renewable power
Renewable transport & heat
Share of clean energy andefficiency in total (right axis)

20%

The uptick in the ‘clean’ share of total investment is not a breakthrough: absolute investment in energy
transitions remain far short of what would be required for a more sustainable pathway
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Renewables have outperformed fossil fuels during the crisis
Total equity return comparison of fossil fuel supply vs renewable power companies in Europe and the United States
12010080604020
Jan 20Feb 20
Renewable power

Mar 20Fossil fuel supply

Apr 20

May 20
S&P 500

An indicative fossil fuel portfolio has fallen sharply since the start of 2020, while a renewables-focused one
has tracked the market more closely, but financial investments in renewables still lack scale & liquidity
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Pathways out of the investment slump vary widely by country
The share of state-owned energy investments by sector in 2019
100%

Advanced
economies

80%

Developing
economies

60%
40%
20%

Total

Renewables/
energy efficiency

Electricity
networks

Oil and gas
supplyFossil fuelgeneration

Developing economies rely much more heavily on state-backed spending, while advanced economies
have a broader range of financing options, including from capital markets & institutional investors
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Conclusions• The Covid-19 pandemic has set in motion the largest drop in global energy investment in history, withspending expected to fall in every major sector this year
• The crisis has shaken the oil and gas industry, especially shale: a one-third drop in global oil & gas
investment could set the stage for a new boom-bust cycle if demand returns to its pre-crisis path
• Electricity grids have been the backbone of energy systems during lockdown, but a downturn in spendingon networks and flexible resources is a warning sign for the security of future power systems• Clean energy investment, especially for utility-scale renewables projects, has been relatively resilient in2020 but remains far below the levels required to achieve a lasting reduction in global emissions• There is no single pathway out of the investment slump, but the response of policy makers – and whether
energy and sustainability concerns are integrated into recovery strategies – will be critical

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Contact: report@tky.ieej.or.jp
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