Energy spend to surge 8% to £1.9tn in 2022: IEA

Global energy investment is set to increase by 8% in 2022 to reach a record £1.9 trillion, with the anticipated rise coming mainly in clean energy, according to a new report by the International Energy Agency (IEA).

The growth investment is still far from enough to tackle the multiple dimensions of today’s energy crisis and pave the way towards a cleaner and more secure energy future, the IEA’s World Energy Investment 2022 report noted.

Zawya reports that the fastest growth in energy investment is coming from the power sector – mainly in renewables and grids – and from energy efficiency, according to the report. The rise in clean energy spending is not evenly spread, however, with most of it taking place in advanced economies and China. And in some markets, energy security concerns and high prices are prompting higher investment in fossil fuel supplies, most notably on coal.

“We cannot afford to ignore either today’s global energy crisis or the climate crisis, but the good news is that we do not need to choose between them – we can tackle both at the same time,” said IEA Executive Director Fatih Birol.

“A massive surge in investment to accelerate clean energy transitions is the only lasting solution. This kind of investment is rising, but we need a much faster increase to ease the pressure on consumers from high fossil fuel prices, make our energy systems more secure, and get the world on track to reach our climate goals.”

Clean energy investment

Clean energy investment grew by only 2% a year in the five years after the Paris Agreement was signed in 2015. But since 2020, the pace of growth has accelerated significantly to 12%. Spending has been underpinned by fiscal support from governments and aided by the rise of sustainable finance, especially in advanced economies. Renewables, grids and storage now account for more than 80% of total power sector investment. Spending on solar PV, batteries and electric vehicles is now growing at rates consistent with reaching global net zero emissions by 2050.

Russia’s invasion of Ukraine has pushed up energy prices for many consumers and businesses around the world, hurting households, industries and entire economies – most severely in the developing world where people can least afford it. Some of the immediate shortfalls in exports from Russia need to be met by production elsewhere, notably for natural gas, and new LNG infrastructure may also be required to facilitate the diversification of supply away from Russia. While oil and gas investment is up 10% from last year, it remains well below 2019 levels.

Fuel prices

Today’s high fossil fuel prices are generating pain for many economies but are also generating an unprecedented windfall for oil and gas producers. Global oil and gas sector income is set to jump to £3.3 trillion in 2022, more than twice its five-year average, with the bulk of it going to major oil and gas exporting states.

These windfalls gains provide a once-in-a-generation opportunity for oil and gas producing economies to fund the much needed transformation of their economies, and for major oil and gas companies to do more to diversify their spending.

The share of spending by oil and gas companies on clean energy is rising slowly, with what progress there is driven mainly by the European majors and a handful of other companies. Overall, clean energy investment accounts for around 5% of oil and gas company capital expenditure worldwide, up from 1% in 2019.

Find out more

For more information, visit Northern Gas and Power‘s Daily Market Report here.

Below, our Head of Flexible Purchasing and Energy Strategy, Latif Faiyaz, breaks down the key drivers affecting market behaviour this year.

Latif provides analysis of UK, European and global factors and provides a forecast for the remainder of the year.

Here’s the video 👇

 

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