Five investment trends in world energy
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The share of low-carbon industries in global energy investment increased from 46% to 59% from 2015 to 2021 and is set to pick up 60% in 2022, as it follows from the annual report of the World Energy Investment published by the International Energy Agency.

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The growth in the share of clean energy

The absolute increase in clean energy investments in 2015-2022 amounted to $413 billion (from $1,026 billion to $1,439 billion), which is comparable to last year’s investment in oil production ($421 billion). The main contribution belongs to investment in development of renewable generation and improvement of the efficiency of the end-use of energy, which increased by $162 billion and $205 billion, respectively. A noticeable role also played the increase in investment in the construction of nuclear reactors (by $21 billion), production of clean fossil fuels (by $8 billion), the use of energy storage systems (by $16 billion) and expansion of the power grid infrastructure (by $1 billion).

Storage boom

The boom of investment activities in energy storage systems, from $2 billion in 2015 to $18 billion in 2022, directly relates to the multiple increase in the global installed capacity of solar and wind generators (644 gigawatts in 2015 to 1,674 gigawatts in 2021) highly dependent on weather conditions. For example, last year, the average wind turbine utilisation in the United States was 35% and solar panels – 21%, being inferior to gas power plants (62% – according to the Energy Information Administration of the US Department of Energy). The use of storage systems can reduce the risk of power outages and make possible industrial use of new types of batteries. For example, in Spain in 2022, the so-called non-flow zinc-bromine batteries with a zinc bromide gel solution as an electric current conductor were tested. Unlike lithium-ion batteries, they do not require special cooling and fire protection systems.

The clean power transmission projects have a similar purpose: in 2018, China commissioned the 3,324-kilometre Changji Guquan ultra-high voltage line to relieve the imbalance between China’s energy- surplus West and energy-deficient East. This year, the Sun Cable company, Australia, prepared a feasibility study for a mega project of power export from northern Australia to Singapore, using six submarine cable systems. However, the increase of raw materials prices might limit such initiatives. According to the IEA estimates, due to the price rise on copper and aluminum, the share of spending on these metals in the cost structure for the transmission facilities construction has increased to 30% (compared with 10% in the period from 2010 to 2020).

NPP renaissance

The transition to low-carbon power generation has sparked renaissance in nuclear energy: construction investment in nuclear power plants (NPPs) increased from $28 billion in 2015 to $49 billion in 2022, half of this increase – $10 billion out of $21 billion – was provided by the developed economies, including Finland, which in March 2022, connected the third 1.7 GW power unit of the Olkiluoto NPP to the general grid. Among the developing economies, China remains the leader in terms of investment ($13 billion in 2022), which last May, it completed concrete pouring at the world’s first land-based small 125 MW nuclear power plant, and in June, commissioned the Hongyanhe 1.1 GW NPP, the first for the northeast of China.

One of the nuclear energy drivers in the coming years may be the projects designed for cost reduction of building small modular reactors. The British Rolls Royce created a joint venture (JV) with Exelon Energy, an American electric power company, and the British BNF Resources in 2021 to develop small modular reactors, each to occupy the area of two football fields and able to supply one million households with electricity. In its turn, the Japanese Mitsubishi Heavy Industries is going to commercialise small-sized reactors (the weight – 40 tons, the height and the width – 3×4 metres), which can be truck-delivered to the regions isolated from the general power grid.

South America as a new oil production driver

The IEA report has noted another trend in the recent years: decline of global investment in oil production, from $474 bln in 2016 to $446 bln in 2022. This trend has affected not only Europe where capital investment over that period has declined by 34% (to $24 bln), but also Africa, where in 2022, the investment amount will be 42% less than in 2016 ($29 bln vs $51 bln). However, South America is slightly out of this trend as in 2022, the investment volume will remain at the 2016 level ($38 bln).

The reason is the boom in the offshore upstream projects using a floating production storage and offloading (FPSO) vessels. For example, due to their use, Guyana is going to increase production from the last year’s 120,000 barrels per day (bpd) to 480,000 bpd by 2024. Brazil will also increase production (from the current 3 million bpd to 5 million bpd), but the growth will peak in the second half of the 2020s. It is not a coincidence that in 2022, the two countries will get four out of eleven orders for new FPSOs, according to the Rystad Energy estimates.

Asia committed to coal

Regional differentiation is also characteristic for coal mining investment: in North America, within the period from 2016 to 2022, they decreased fivefold (from $5 billion to $1 billion), and in Europe, they halved (from $2 billion to $1 billion), while in the Asia-Pacific region (APR), their growth was 44% (from $72 billion to $103 billion). The key factor is the demand for coal in the regional power industry: according to BP, the share of coal plants in the power generation mix in the APR was 57%, while in North America – 19%, and in Europe – 16%. At the same time, coal is unlikely to start seriously losing its position in the region in the coming years, given that China and India accounted for 70% of the world’s coal power capacities under construction by the beginning of 2022 (124 GW out of 176 GW, according to Global Energy Monitor).

In general, the IEA report once again confirmed the trend observed in the recent years, where the growth of investment in clean and new energy is associated with the increase in investment in fossil industries made by the developing countries since having access to cheap energy is important for their economic growth.


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June 2022