Global energy trends and gas in a decarbonising energy system€¦ · the global energy system An 8% reduction in 2015 global energy investment results from a $200 billion decline

Global energy trends and gas in a decarbonising energy system Tomi Motoi, Economics and Investment Office

12 October 2016

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The context

• Investment is the lifeblood of the energy system, which determines long-term trends of supply, emissions and fuel demand

• Investors face new challenges and opportunities from recent trends

• Macroeconomic uncertainty and structural change affects demand patterns

• The energy sector faces accelerated technological change

• Lower energy prices and increasing inter-fuel competition reshape investment

• Global energy investment declined in 2015, mainly due to lower oil and gas spending

• Share of renewables in investment boosted by technology progress, strong policy support and growth in good resource markets

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Power Generation

23% Biofuels and Solar

Heat 1%

Renewables 17%

USD 1.8 trillion

Investment flows signal a reorientation of the global energy system

An 8% reduction in 2015 global energy investment results from a $200 billion decline in fossil fuels, while the share of renewables, networks and efficiency expands

Oil & Gas 46%

Coal 4%

Electricity Networks

14%

Energy Efficiency

12%

Global Energy Investment, 2015

Thermal Power

7%

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USD (2015) billion

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India

Russia

European Union

United States

China

Energy supply investment in 2015, selected markets

Top five markets comprised over half of global energy supply investment

Boosted by record power sector spending, China regains its position as top investment market, while the US declines due to sharply lower oil and gas investment

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Unprecedented wave of investment cuts in the upstream oil and gas industry

Global upstream capital spending 2010-2017

Cost deflation, efficiency improvements and reduced activity levels might lead for the first time to three consecutive years of investment decline

-24%

-25%

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Renewables investment buys much more electricity

Investment in renewables-based capacity more than covers 2015 global electricity growth. Wind leads, surging 35% in 2015 on economics and record offshore growth

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USD (2015) billion

Hydropower Solar PV Wind Other renewables

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TWh +33%

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Global renewable power investment Expected generation from investment

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2015U

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In electricity networks, batteries accelerate though grids comprise most investment growth

Global grid-scale battery storage investment Total networks investment

x10

0.4%

Grid-scale battery storage spending has expanded tenfold since 2010. Their value lies most in complementing grids that constitute the bulk of investment

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Gas Coal

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Subcritical

High efficiency

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Infrastructure investment cost for a 1 GW power plant in Asia Coal and gas-fired power investment in Asian markets (2015)

Infrastructure costs favour coal power over gas in Asian energy importers

Asian markets comprised 85% of global coal power investment, while N. America and Middle East, with robust infrastructure, favoured gas for new fossil fuel power

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Decarbonisation post-Paris

We made it to the base camp...

... but there’s a tough climb still ahead

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Growth in gas demand slows as it faces greater competition in the power sector; yet it is the only fossil fuel that does not suffer a decline in its share of the energy mix

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2009-15 2015-21

bcm

Change in world natural gas demand

2.5 % 1.5 %

Annual average growth

Growth in global gas demand slows

Change in total gas demand

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Growth of renewables: a taste of things to come

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5%

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45%

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Share of non-hydro renewables in Europe’s power generation

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Capacity to burn cheap coal is slowly disappearing

Coal capacity in Europe to 2040

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Coal capacity that survives in IEA’S NPS but closes in 450ppm

GW

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Gas is needed for around 1,000 hours a year in a 450ppm system … but then it is really needed!

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capacity, GW generation, twhCapacity (GW) Generation (TWh)

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Thank you for your attention