CCXG Global Forum March 2018 Shifting to low-carbon investment flows in the energy sector by Dave Turk

1. © OECD/IEA 2017
Shifting to low-carbon investment
flows in the energy sector
Dave Turk – Director (Acting), Sustainability, Technology and Outlooks
CCXG Global Forum on the Environment, 7-8 March 2018
IEA

2. © OECD/IEA 2017
Context: Article 2 of the Paris Agreement
• “This Agreement, in enhancing the implementation of the
Convention, including its objective, aims to strengthen the
global response to the threat of climate change, in the context
of sustainable development and efforts to eradicate poverty,
including by:
- […]Making finance flows consistent with a pathway towards
low greenhouse gas emissions and climate-resilient
development.”
• How are we doing?

3. IEA work on investment in context of climate change mitigation
o Since 2016, the IEA has published an annual World Energy Investment report
o Covers all aspects of the energy system, including energy efficiency
o Puts trends in fossil fuels alongside trends in low carbon
o Policy makers and industry can benchmark objectives against reality
o Next edition: July 2018
o Tracking Clean Energy Progress covers annual trends in clean energy sectors
o This year will improve the coverage of investments in energy innovation
o Next edition: May 2018
o World Energy Outlook estimates investment needs of scenarios to 2040
o Covers end-use and supply-side investments
o Has a scenario consistent with a 2°C trajectory and has also looked at “below
2°C” scenarios
o Next edition: November 2018
The following analysis draws mostly on World Energy Investment 2017
and World Energy Outlook 2017

4. 0
250
500
750
1 000
USD(2016)billion
Overall global energy investment fell 12%, a second consecutive year of decline
Total energy investment was $1.7 trillion in 2016. Electricity sector investment overtook oil and gas for
the first time, while energy efficiency was the biggest growth sector.
Global energy investment 2016
-25%-1%
+9%
Networks
Renewable
Thermal
Oil & gas
Coal
Electricity Oil, gas & coal
Renewables in
transport and heat
Energy efficiency
-25%

5. Coal power investment
In 2016, sanctioning of new coal power fell to the lowest level in nearly 15 years, hampered by competition
from renewables and environmental challenges. Gas power FIDs exceeded those for coal by over 1.5 times.
Average annual final investment decisions for new coal-fired power capacity
0
20
40
60
80
100
120
140
2001-2005 2006-10 2011-15 2016
GW
China
India
Southeast Asia
Rest of world
Global average actual
additions

6. Investment in clean power is not keeping pace with demand
The contribution of new solar PV and wind has grown nearly three-quarters in the past five years, but FIDs for
nuclear and hydropower have slowed. Clean power FIDs in 2016 generate at only two-thirds of demand growth.
Expected annual power generation from final investment decisions
0
100
200
300
400
500
2012-13 2014-15 2016
TWh
Nuclear Hydropower & other renewables Wind Solar PV Average power demand growth (2012-16)

7. Networks spending is dominated by lines and power equipment, but digital grid infrastructure now
accounts for over 10% of networks investment.
Smarter networks can be key enablers to address flexibility
Investment in digital grid infrastructure and total electricity networks spending
0
50
100
150
200
250
300
2014 2015 2016
USD(2016)billion
Physical backbone Power equipment Smart meters Smart grid infrastructure EV chargers

8. Average emissions from new power plants need to reach 100 kg/MWh by 2030 to be "on track".
On average, power plants are becoming cleaner, but….
Estimated average CO2 intensity of new power plants coming online
0
200
400
600
800
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
kg CO2 per MWh

9. Despite investors’ climate commitments, oil majors still attract cash
Investment in oil majors remains attractive given high dividend yields. The stakes of the top 20 shareholders in
the oil majors increased 24% to 27% 2014-17. Some of these companies have climate commitments.
0%
1%
2%
3%
4%
5%
6%
BLACKROCK
VANGUARD
STATESTREET
CAPITALGROUP
CASSADEPOSITI
BANKOFAMERICA
NORGESBANK
NORTHERNTRUST
FMRLLC
WELLINGTON
BNYMELLON
STATEFARMMUTUAL
UBS
LEGAL&GENERAL
GEODECAPITAL
DEUTSCHEBANK
FRANKLINRESOURCES
DIMENSIONALFUND
WELLSFARGO
JPMORGANCHASE
Stakesinmajors
2014 Increase 2014-17 Decrease 2014-17
Oil majors’ top 20 shareholders

10. © OECD/IEA 2017
To meet climate goals, renewables and efficiency investments rise
Energy supply investment shifts towards renewables in the SDS; the total plateaus due to lower
costs and energy efficiency. By 2040 demand-side investment needs rival the supply-side in magnitude.
Estimated annual average investment in energy supply in World Energy Outlook scenarios
0.0
0.5
1.0
1.5
2.0
2.5
2017-20 2021-30 2031-40 2017-20 2021-30 2031-40
New Policies Scenario . Sustainable Development Scenario
USD (2016) trillion
Biofuels
Nuclear
Renewable power
Electricity networks
Fossil power plants
Coal
Oil & gas

11. © OECD/IEA 2017
0
10
20
30
40
2012 2015
USD(2016)billion
Private Public
0
10
20
30
40
2012 2015
USD(2016)billion
R&D investment in clean energy technologies has remained steady since 2012,
leaving significant room for growth.
Global clean energy R&D investment needs a strong boost
Global R&D spending
on clean energy
Top 3 IT company R&D spenders

12. © OECD/IEA 2017
Types of R&D investment have shifted over time…
Enhancements to reporting of clean energy R&D investment are needed,
especially for the private sector.
IEA member countries total public energy RD&D (left) and by technology (right)

13. © OECD/IEA 2017
Thank you
http://www.iea.org/publications/wei2017/