A new report from the International Energy Agency (IEA) outlines a major shortfall in investment in clean energy, energy efficiency and other decarbonisation measures at a critical moment for climate.
The head of the IEA, Faith Birol, says “much greater resources have to be mobilised and directed to clean energy technologies to put the world on track to reach net-zero emissions by 2050. Based on our new Net Zero Roadmap, clean energy investment will need to triple by 2030”, while noting that there had been a small increase in both total energy investment and investment in zero carbon sources in recent months.
Of total investment in new energy, renewable energy dominates, and the volume of approvals for new coal-fired power plants has fallen to levels 80% below that of just five years ago. While investment was flat in 2020, in 2021 the IEA predicts a record high of $US820 billion, with 70% of new capacity coming from renewable energy.
However, the report highlights that oil and gas companies have continued to spend most of their cash on expanding the extraction of oil and gas. “Upstream oil and gas investment is expected to rise by about 10% in 2021 as companies recover financially from the shock of 2020”, though that remains lower than pre-pandemic levels.
Concerningly, data from the IEA’s report show that oil and gas companies have only increased their spending on renewable energy from 1% of total capital expenditure in 2020 to 4% in the first five months of 2021.
“Emerging oil and gas company transition strategies have spanned project finance, mergers and acquisitions, venture capital, and R&D spending, and cast a wide net across clean energy businesses. Our project tracking for 2021 suggests that these commitments are already starting to have an impact. If maintained for the full year, this performance would mean that the share of capital investment going to clean energy investments could rise to more than 4%, from 1% in 2020”, write the IEA.
The report also highlights several key factors relevant to Australia’s fossil fuel exports. Australia’s LNG exports will likely never see the levels reached in 2010s, in terms of annual investment spending on sanctioned projects, according to the IEA’s predictions. The report also highlights that though Australia continues to invest in coal supply, this spending has to essentially shrink to a small fraction of 2021 levels globally, in a net zero by 2050 scenario.
The IEA report claims that “after a long wait, signs that [carbon capture, use and storage, CCUS] may be preparing for take-off”. But they also caution that even when the number of planned CCUS projects is high, only a minority of those projects end up going through to commencing operation.
The ‘State of Exploration 2021’ report by Westwood Energy recently found that the world’s oil and gas majors are not shifting to clean sources. “The State of Exploration report found no evidence of a systematic change in industry exploration strategy yet in response to the Energy Transition in the 2016-2020 period, nor in plans for 2021. There has, however, been an increasing focus on shorter cycle exploration set in train following the 2014 oil price crash”.