ISLAMABAD: The global energy investment fell by 8 per cent in 2015, with a drop in oil and gas upstream spending outweighing continued robust investment in renewables, electricity networks and energy efficiency.

The International Energy Agency (IEA) in a first-ever detailed analysis of investment across the global energy system, the ‘World Energy Investment 2016 Report’, release on Wednesday, says that the electricity sector is leading a broad reorientation of energy investment but warns more is needed to meet climate targets and address energy security concerns.

Total investment in the energy sector reached $1.8 trillion in 2015, down from $2.0 trillion in 2014, according to energy investment report.

The new annual report provides a comprehensive and detailed picture of the current investment landscape across fuels, technologies and countries. It shows that the energy system is undergoing a broad reorientation toward low-carbon energy and efficiency but investment in key clean energy technologies needs to be further ramped up to put the world economy on track for climate stabilisation.

With energy supply spending of $315 billion, China was once again the world’s largest energy investor last year thanks to robust efforts in building up low-carbon generation and electricity networks, as well as implementing energy efficiency policies.

Investment in the United States’ energy supply declined to about $280bn in 2015, falling nearly $75bn, due to low oil prices and cost deflation, representing half of the total decline in global energy spending.

The Middle East and Russia emerged as the most resilient regions to spending cuts, thanks respectively to lower production costs and currency movements. As a result, national oil companies accounted for 44pc of overall upstream investments, an all-time high.

Renewable energy investments of $313bn accounted for nearly a fifth of total energy spending last year, establishing renewables as the largest source of power investment.

While spending on renewable power capacity was flat between 2011 and 2015, electricity generation from the new capacity rose by one third, reflecting the steep cost declines in wind turbines and solar photo voltic. The investment in renewable power capacity in 2015 generates more than enough to cover global electricity demand growth.

Technology innovations boosted investment in smart grids and storage, which are expected to play a crucial role in integrating large shares of wind and solar. While grid-scale battery storage investment expanded tenfold since 2010, their value is predominantly to complement the grid, which continues to absorb much larger investment.

Global gas-fired power generation investment declined by nearly 40pc. Asian markets continued to favour investment in coal power. Investment activity in European gas power remained muted despite large retirements anticipated in the next decade.

With investment rising 6pc, energy efficiency spending was robust in 2015 due to government policies such as minimum standards that cover a rising share of new buildings, appliances and motor vehicles. In certain countries, lower prices slowed the trend towards more fuel-efficient vehicles, most notably in the United States where the rate of improvement in efficiency was two-thirds lower than that in recent years.

Published in Dawn, September 16th, 2016