IEA © OECD/IEA 2017

World Energy Investment 2017

Economics and Investment Office

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Global energy investment fell 12% in 2016, a second consecutive year of decline

Electricity sector investment overtook oil and gas for the first time

Global energy investment 2016

-25% -1%

+9%

Networks

Renewable

Thermal

Oil & gas

Coal

Electricity Oil, gas & coal Renewables in

transport and heat Energy efficiency

-25%

Global R&D spending on clean energy plateaued at $26 billion/year, with much room for growth from

the private sector. As a share of GDP, China's leads spending on energy R&D, after overtaking Japan

Global clean energy R&D funding needs a strong boost

Global clean energy R&D spending Top 3 IT company R&D spenders

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Private Public

Job needs of power generation technologies

Residential solar PV and coal-fired generation are most labour-intensive while regional differences can

be significant.

Employment associated with 1TWh of new generation in 2016

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Solar PV (residential)

Onshore wind

Hydro Solar PV (utility)

Nuclear Gas-fired Coal-fired

Job

s/TW

h/Y

ear

Construction Manufacturing O&M Fuel supply

Indian coal vs

Domestic conventional gas

Australian LNG vs

Australian coal

Appliance standards lock in electricity end use efficiency

Electricity demand shows similar stagnation in the US and Europe despite very different end user prices

Competitive auctions combine technology incentives with ultra low cost of capital

Wind and solar PV average LCOEs and auction results by commissioning date

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2008 2010 2012 2014 2016 2018 2020 2022

USD 2016/MWh

Onshore wind average auction price

Solar PV average auction price

Solar PV - utility scale LCOE

Onshore wind LCOE

Wind and solar costs continue to plummet

The so called “decentralised” renewables

All of wind and the large majority of solar deployment relies on an interconnected network

Networks spending is dominated by lines and power equipment, but digital grid infrastructure now

accounts for over 10% of networks investment.

Smarter networks are the key to address flexibility gaps

Investment in digital grid infrastructure and total electricity networks spending

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Physical backbone Power equipment Smart meters

Smart grid infrastructure EV chargers

Digitalization unlocks flexibility to facilitate renewable integration and turn EVs into

flexible grid assets

Digitalization, decarbonisation and electrification

Curtailment of solar PV and wind

7%

2040

Digital flexibility

EVs standard vs smart charging Capacity requirement

150 million EVs

140 GW

75 GW

500 million EVs

300 GW

190 GW

Standard charging

Smart charging

The headwind of the hydro and nuclear slowdown

New low carbon investment covers only around half of the global electricity demand increase

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TWh

Wind and solar

Nuclear and hydro

Future production from capacity receiving FID

A wave of coal power investment is coming to a pause

In 2016 the sanctioning of new coal power fell to the lowest level in nearly 15 years, hampered by competition from renewables and environmental challenges. Gas power FIDs surpassed coal for only the second time in the past decade.

Average annual final investment decisions for new coal-fired power capacity

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2006-10 2011-15 2016

GW

China India Southeast Asia Rest of world

Gas capacity: coming back from the brink?

Compressed load factors, low wholesale prices and market design uncertainty disrupted the investment

model of gas plants

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- 5

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

GW

Retirements Final investment decisions

Electrification of transport and heat is progressing

Electric vehicle (EV) sales grew 38% in 2016 and, at $6 billion, now represent 10% of all transport

efficiency spending. Another $6 billion was spent globally on EV charging stations.

Global electric vehicle sales Electricity demand from new heat pumps sold

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Cheap oil shifts consumer preferences towards big cars

The three best selling vehicles in North America

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US independents Majors Other private NOCs

37%

12% 14% 14% 14% 16% 10% 13% 18% 19% 20% 21% 20%

19% 17%

28%

42%

29%

39%

28%

38%

27%

38%

27%

42%

26%

44% 45%

25%

12%

21%

25%

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Global Cost Index (Right axis) Shale Cost Index (Right axis)

Global upstream investment rebounds modestly in 2017

Ramp up of activities leads to cost inflation in US tight oil but elsewhere upstream costs decline further.

NOC’ share in total investment reaches another record high.

Global oil and gas upstream capital spending 2010-2017

+6%

-26%

25%

37%

US shale: a digitalization and technology success

Longer lateral

New chemical agents to reduce the use of sand

Tighter spacing

Walking rig

Multi-well pad drilling

3D seismic data for geologic modelling

Fracture design and evaluation software

Improved robotics

Sources: original image from the Texas Tribune

Russia: drivers of investment resilience

Russian oil production stabilized at a level 0.6 mB/day higher than 2014 expectations

West Siberia brownfield: domestic service capabilities, costs are in rouble

Power of Siberia: Strong project management expertise with pipelines, Made in Russia components

Yamal LNG: Chinese equity and project finance, EU and Japanese technology providers

Conventional oil and gas projects becoming faster and smaller

A shift in company strategies and technology developments leads to shorter project cycles across all

the oil and gas industry

Average size of conventional resources sanctioned and time-to-market

Deepwater offshore

Other offshore

Onshore

Global Average

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Average size of resources (Million Boe)

2010-2014

2016-2017

LNG investment: past the peak?

Lack of FIDs since 2015 indicate a rapid decline of investment

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Australia

Africa

Middle East

North America

Russia

Europe

Others

Capacity

Right axis:

Investment into LNG export facilities