IEA Report: Fall in Renewables and New Nuclear Spending
Figures from the International Energy Agency (IEA) show that global energy investment totalled $1.8 trillion in 2017, a 2% decline in real terms from the previous year. In its World Energy Investment 2018 report, the electricity sector attracted the largest share of energy investments in 2017 at $750 billion, sustained by robust spending on grids. This was the second year in a row that it attracted more spending than the oil and gas sector, which accounted for $715 billion.
Despite falling by 7%, investment in renewable power stood at nearly $300 billion, accounting for two-thirds of power generation spending in 2017. There was record spending for solar PV, of which nearly 45% was in China, while offshore wind investment also reached record levels, with the commissioning of nearly 4 gigawatts (GW), mostly in Europe. Recent policy changes in China seeking to promote more cost-effective solar PV development raise the prospect of a continued slowdown in renewables investment, despite strong spending in other global regions. Onshore wind investment fell by nearly 15%, largely due to the U.S., China, Europe and Brazil, but a third of that decline can be attributed to falling investment costs. Hydropower investment fell to its lowest level in over a decade, with a slowdown in China, Brazil and Southeast Asia.
"Such a decline in global investment for renewables and energy efficiency combined is worrying," said Dr Faith Birol, the IEA's executive director. "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."
The IEA also noted "a sharp fall in investment in new nuclear power," which declined to its lowest level in five years. Global investment declined by nearly 45% to $17 billion in 2017, due to a 70% fall in spending on new plants coming online during the year to $9 billion. This more than offset an increase in spending on existing plants. Construction starts for new nuclear plants "remain muted", while in some regions, retirements of existing plants are reducing the impact of the growth in renewables, the IEA noted. In Europe, the decline in nuclear generation since 2010 has offset over 40% of the growth in solar PV and wind output there. On a brighter note, global spending on lifetime extensions for existing nuclear plants rose in 2017, potentially providing a "cost-effective transitional measure for supporting low-carbon generation". Four new reactors were commissioned last year, three in China. More than 5 GW of capacity was retired in 2017, leading to a net reduction of about 2 GW in total nuclear capacity worldwide.
The sharp fall in global investment in coal-fired power plants in 2017 was accompanied by a continuing high rate of retirement of existing plants. A total of 24 GW of coal capacity was retired, compared with 25 GW in 2016. Gross additions amounted to about 52 GW, resulting in net additions of 28 GW of new capacity in 2017--down from more than 60 GW in 2016. More than half of the coal capacity that was retired in 2017 was more than 40 years old. Nearly 70% of retired plants were in the U.S. and Europe (primarily Germany and U.K.) and were retired on environmental and economic grounds.
The shift in investment based on government policies continues to dominate spending. Across all power sector investments, more than 95% of investment is 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", the IEA found.
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