Presentation from Research Collaborative Tracking Finance for Climate Action Workshop, 1-2 October 2019

1. IEA 2019. All rights reserved.
Towards international-level tracking and assessments
Insights from IEA World Energy Investment report
Research Collaborative Workshop, OECD, Paris, 28 October
Michael Waldron and Yoko Nobuoka

2. IEA 2019. All rights reserved.
Global energy investment today
Global energy investment in 2018 and change compared to 2017
Energy investment was over USD 1.8 trillion in 2018. A rise in fossil fuel supply investment offset lower
power and stable efficiency spend. Power was the largest sector for the third year in a row.
0
100
200
300
400
500
600
700
800
900
1 000
Power sector Oil & gas supply Energy efficiency Coal supply Renewables for
transport and heat
USD(2018)billion
Networks
Renewable
power
Fossil-fuel
power
Upstream
Downstream
midstream &
refining
Buildings
Industry
Transport
Nuclear
Battery
storage
-1%
+1%
+2%
-1%
Stable

3. IEA 2019. All rights reserved.
Recent investment growth has been led by US and India
Energy investment in the United States has been catching up with China, mainly due to oil and gas
supply and electricity networks, while China’s power sector spending has fallen.
Energy investment by sector in selected markets, 2015 and 2018
0
50
100
150
200
250
300
350
400
450USD(2018)billion
Renewables for
transport/heat
Coal supply
Oil and gas
Energy Efficiency
Electricity networks
and battery storage
Renewable power
Thermal power2015 2018 2015 2018 2015 2018 2015 2018 2015 2018 2015 2018
China
United
States
Europe India
Southeast
Asia
Sub-Saharan
Africa

4. IEA 2019. All rights reserved.
How can we change the emissions trajectory?
Energy efficiency and renewables account for over 70% of the cumulative CO2 and CH4 emissions
savings in the SDS as the share of low-carbon investment rises to nearly two-thirds.
Global CO2 and CH4 emissions in the New Policies and Sustainable Development scenarios
15
20
25
30
35
40
2015 2020 2025 2030 2035 2040
GtCO2-eq New Policies Scenario
Sustainable
Development
Scenario
37% End-use efficiency and
fossil fuel subsidies reform
9% Reducing upstream oil
and gas methane
36% Renewables and reducing
least-efficient coal-fired power
20% Other: nuclear, CCUS,
fuel-switching

5. IEA 2019. All rights reserved.
Energy supply investment needs to rise, whatever the scenario
Global energy supply investment compared with annual average investment needs 2025-30 by IEA scenario
Today’s capital allocation would need to shift rapidly towards cleaner supply sources and grids to align
with the goals of the Sustainable Development Scenario and the Paris Agreement.
Networks
Renewable
power
Fossil-fuel
power
Upstream
Downstream
midstream &
refining
Buildings
Industry
Transport
Nuclear
Battery
storage
Fuel supply = 50% Power = 50%
Fuel supply = 50% Power = 50%
Fuel supply = 35% Power = 65%
0 500 1 000 1 500 2 000
Annual
average
2025-30
(SDS)
Annual
average
2025-30
(NPS)
2018
USD (2018) billion
Oil supply
Gas supply
Coal supply
Biofuels for transport
Fossil fuel power
Nuclear
Renewable power
Electricity networks
& battery storage

6. IEA 2019. All rights reserved.
Investment growth in energy efficiency has stalled
Energy efficiency spending was stable a second year in a row, with limited progress in expanding policy
coverage. Despite soaring EV sales transport efficiency has stagnated, while spending in buildings fell.
Global investment in energy efficiency by region
0
50
100
150
200
250
300
2015 2016 2017 2018
USD(2018)billion
Other
Other Asia Pacific
China
Europe
North America

7. IEA 2019. All rights reserved.
Instruments and financing structures
Framework to track financing of new investments in energy assets
Sources and intermediaries
•State budget
•Company internal sources
•Household savings
•Commercial banks (domestic,
international)
•Public finance institutions (domestic,
international)
•Capital markets (e.g. equity, corporate
bonds, green bonds)
Project developers
•Government agencies
•State-owned enterprises
•Energy companies (investor owned)
•Households
•Non-energy companies
•Equipment suppliers
•ESCOs
•Special Purpose Vehicles (project
companies)
Sectors (recipient of
investment)
•Energy end-use and efficiency
•Fuel supply and infrastructure
(oil and gas, coal)
•Power generation and
infrastructure
Financing
Capital
expenditure
Internal sources Equity Debt Grants Credit enhancement (e.g. guarantee, insurance)
Revenue/
Income
Returns
Corporate finance Project finance
1. Project developers
Corporate finance Project finance
Internal sources Equity Debt Grants Credit enhancement (e.g. guarantee, insurance)
3. Sources and intermediaries
2. Instruments and financing structures

8. IEA 2019. All rights reserved.
State-backed capital has played a larger role in fossil fuels
The share of government/SOEs ownership in energy investment by sector, 2012-17
In the SDGs, a growing role for clean energy & efficiency points to a needed mobilisation of more
private capital. There is also an opportunity for engagement with SOEs on energy investment strategy.
0%
20%
40%
60%
80%
Total Renewables and
energy efficiency
Electricity networks
and storage
Oil & gas Thermal generation
and coal
2012 2017

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Power sector: renewables drives change in power sector financing
Most investments are made on company balance sheets but project finance has grown in importance
for renewables.
Global power sector investment by primary source of finance and project finance for renewable power
Primary sources of finance for power, 2018
Thermal power Utility-scale renewables
Distributed power Grids & battery storage
Thermal power Utility-scale renewables
0
10
20
30
40
50
60
70
2013 2018
USD2018billion
United States Europe Asia
Africa Latin America Other
Renewable power project finance
USD 775 billion
Balance sheet
finance:
Project
finance:

10. IEA 2019. All rights reserved.
Green bonds support refinancing of energy efficiency and
renewable investments
New financial mechanisms such as green bonds are required to scale up low-carbon investment at
both consumer and bulk power levels.
*as of mid-October
Green bond issuance in energy by intended use of proceeds
0
20
40
60
80
100
120
140
160
180
200
2014 2015 2016 2017 2018 2019 YTD*
USDbillion
Energy efficiency Mixed-use bonds Renewables Other

11. IEA 2019. All rights reserved.
Oil and gas sector: Sources of finance are evolving
Aside from internal sources, oil and gas industry is traditionally funded more by debt, while companies
have focused on capital discipline and reducing leverage since the recent oil market downturn.
Indicative sources of financing in oil and gas companies
7 oil majors cash flows 40 US independent oil companies cash flows
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
-40
-20
0
20
40
60
80
2010
2011
2012
2013
2014
2015
2016
2017
2018
USDbillion
Change in equity Change in debt Asset sales CFFO/Capex (right axis)
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
-40
-20
0
20
40
60
80
2010
2011
2012
2013
2014
2015
2016
2017
2018
USDbillion

12. IEA 2019. All rights reserved.
Conclusions
• Energy investment stabilised in 2018 due to a bounce back in spending on oil, gas & coal supply while
low-carbon (supply & demand) investment stalled
• Governments and other public entities are playing a growing role in shaping energy investments
• To meet SDGs, investment needs to rise and shift towards capital-intensive low-carbon power,
including a doubling of spending in renewables and increases in networks and energy efficiency.
• The WEI tracks financing at a bottom-up level, at project/company level and across aspects such as
type of project developers, financing structures, type of capital providers and debt/equity split.
• We are exploring how to enhance coverage of the sources of finance for a more comprehensive look
across key energy sectors and geographies, subject to data and resource availability.
• Challenges and opportunities to comprehensive investment and financing tracking include
- Availability of data at project level e.g. on capital provider and debt/equity split, and reversely at
capital provider level on sector/geography/instrument split
- Making appropriate assumptions in case these data points are unavailable
- Distinction between new asset financing and refinancing
- Measuring energy efficiency investment and matching up the financing