PARIS: The International Energy Agency (IEA) says the world's growing need for energy will require more than US$48 trillion in investment to 2035.
According to an IEA report, today's annual US$1.6 trillion spend in energy supply needs to rise to US$2 trillion. And annual investment on energy efficiency, measured against a 2012 baseline, needs to rise from US$130 billion to more than $550 billion by 2035.
However, the IEA says US$53 trillion is needed by 2035 to get the world onto a 2 °C emissions path and reduce the reliance on fossil fuels. "Getting the world on to a path consistent with a 2 degree C climate objective is a steep hill to climb: at just under US$40 trillion, the amount needed for energy supply is quite similar to our main scenario but the composition is quite different, and there is a much larger requirement of US$14 trillion for investment in energy," says IEA executive director Maria van der Hoeven.
With or without a shift to renewables, the IEA says by 2035 at least US$40 trillion will need to be spent in energy supply and the remainder in energy efficiency. Of the investment in supply, US$23 trillion will be in fossil fuel extraction, transport and oil refining; almost US$10 trillion will be in power generation, of which low-carbon technologies – renewables (US$6 trillion) and nuclear (US$1 trillion) – is the majority; and a further $7 trillion in transmission and distribution.
The IEA report says that over US$1 trillion continues to be spent on fossil fuel extraction, refining, distribution or building coal and gas-fired power plants.
According to Mindy Lubbers, president of Sustainability advocacy group Ceres, recent research shows capital spending by the 11 largest publicly traded oil companies has increased five-fold in the past decade, while their production levels have remained essentially flat.
Meanwhile, despite historically high oil prices, their returns have fallen below a 30-year average of 11 percent, leading analysts to question whether companies can generate enough cash to meet their dividend and investment commitments without oil prices rising even higher.
"Policy makers face increasingly complex choices as they try to achieve progress towards energy security, competitiveness and environmental goals," adds IEA chief economist Fatih Birol. "These goals won't be achieved without mobilising private investors and capital, but if governments change the rules of the game in unpredictable ways, it becomes very difficult for investors to play."
With more than half of the energy-supply investment needed just to keep production at today's levels, Lubbers adds: "The fact is that the effects of the subprime mortgage meltdown on the global economy pales in comparison to what will happen if we do not change how we invest in energy. As major players in an industry the world relies on for so much, ExxonMobil, Statoil and Shell have not yet demonstrated the kind of leadership we need from them."