- Spending boost insufficient to reverse energy crisis
- Oil and gas investment remains well below 2019 levels
- Cost inflation to absorb half of additional energy spending in 2022
Global investment growth in clean energy is set to outpace fossil fuel spending this year as uncertainties over future energy demand scenarios keep oil, gas and coal capital expenditures below the levels seen prior to the pandemic in 2019, reports Platts quoting the International Energy Agency.
Rise in average growth rate in clean energy investment
Led by power sector spending on renewables, grids, and storage, clean energy investment is expected to exceed $1.4 trillion in 2022, accounting for almost three-quarters of the growth in overall energy investment, the IEA said in its World Energy Investment 2022 report. As a result, the annual average growth rate in clean energy investment has now risen to 12%, up from 2% in the wake of the 2015 Paris Agreement, the IEA said.
At the same time, while oil and gas investment is up 10% from last year, it remains well below 2019 levels, the IEA said, noting that surging energy prices this year have done little to spur additional spending plans for fossil fuels.
“The cyclical incentive to invest in times of high prices is being reinforced in some areas by policy drive to diversify away from Russian Federation supply and address near-term market tensions, but there are constraints on this price responsiveness,” the IEA said.
“Policy uncertainty is high, financing can be difficult to secure and companies are generally shying away from large commitments of capital that may take many years to pay back,” it said.
Overall, world energy investment is set to rise more than 8% in 2022 to reach a total of $2.4 trillion, well above pre-COVID levels, but almost half of the additional spending is likely to be absorbed up by higher costs, rather than bringing additional energy supply capacity to the market, the IEA said.
Growing concerns about inflation are a “brake on the willingness of companies to increase spending, despite the strong price signals,” it said.
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