IEA: Spend $6trn on RE to 2035
Renewables should account for $6trn of the total $48trn investment needed by 2035 if the world’s energy needs are to be met, says a new report from the International Energy Agency (IEA).
In its latest global outlook the IEA warns that annual energy supply investments will need to grow from $1.6trn to $2trn in the coming decades in order to ensure the reliability and sustainability of future energy systems.
The Paris-based agency highlights the huge challenges facing Europe in particular.
IEA chief economist Fatih Birol says Europe needs to make more than $2trn in power industry investments by 2035, and about 150GW of new European power will be needed in the next 20 years. “Europe is facing the real risk of the lights going out sometime soon,” he says.
Birol says Europe’s power sector was under threat from the current energy market design and needs to be looked at very carefully. “Renewables are very good, but you still need to add about 100GW of new thermal generating capacity, probably gas, within the next ten years.
“The problem is at the moment we don’t see an appetite to make such investments in Europe. If this situation persists, the reliability of European electricity supply will be put at risk,” he warns. “Prices in Europe need to go up by at least 20% to encourage these thermal investments.”
Birol says renewables investments in the EU over the last decade have been about three times higher than the investments made in shale gas production in the US. “In Europe around half the total energy investments in the last ten years have been in renewables.”
However, the IEA’s executive director Maria van der Hoeven, warns that such investments will not materialise unless there are credible policy frameworks in place as well as stable access to long-term sources of finance. “Neither of these conditions should be taken for granted.
“There is a real risk of shortfalls, with knock-on effects on regional or global energy security, as well as the risk that investments are misdirected because environmental impacts are not properly reflected in prices,” she warns.
Meeting the world’s growing energy needs will require more than $48trn in investment over the period from 2014 to 2035, according to the IEA’s special report on investment, released as part of its World Energy Outlook series.
Birol says of the $48trn, around $40.2trn will need to be invested in energy supply and the remainder in energy efficiency. Of the investment in energy supply, some $23trn will be for fossil fuel extraction, transport and oil refining; and almost $10trn for power generation, out of which low-carbon technologies – renewables ($6trn) and nuclear ($1trn) – make up the lion’s share.
More than half the energy supply investment is needed just to keep production at today’s levels, so as to compensate for declining oil and gas production and to replace power plants that have reached the end of their productive lives.
The IEA data shows how investments in new fuel and electricity supply has more than doubled in real terms since 2000, with spending on renewable sources quadrupling over the same period, thanks largely to supportive government policies.
Birol warns the investment path traced by the report falls well short of reaching the UN’s climate goals, as today’s policies and market signals are not strong enough to switch investments to low-carbon sources and energy efficiency at the necessary scale and speed.
“If world leaders meeting in Paris next year want to limit global temperature rises to a maximum 2 degrees Celsius, then you will have to have much greater investments in renewables, nuclear and carbon capture and storage,” he adds.