Palihapitiya: Tesla’s Trillion Dollar Weapon Is On The Verge Of Disruption
Global energy investment is slashed by $ 400 billion this year, the biggest recession in the industry’s history as the Covid-19 pandemic leads to a downturn in energy demand.
The International Energy Agency (IEA) said the unprecedented downturn in investment followed the most severe drop in energy demand since World War II. Oil price was hit by historic market crash last month when US oil prices turned negative for the first time.
The IEA said that the reduction in investment «overwhelming in both scale and speed» and will affect all major industries, from fossil fuels such as oil, gas and coal, to renewable sources, including wind and solar energy.
IEA report says reduced investment in areas such as clean energy technologies could undermine the transition to renewable, sustainable energy.
«The crisis has led to lower emissions, but in the wrong way, – said Fatih Birol, Executive Director of the IEA. “If we want to achieve long-term reductions in global emissions, we will need to see rapid growth in investment in clean energy. Slowing spending on key clean energy technologies could also undermine a much-needed transition to more sustainable energy systems».
The IEA predicted at the beginning of the year that global energy investment would grow 2% in 2020, the largest annual growth in six years. Currently expected to fall 20% year on year.
Oil accounts for much of the downturn as travel restrictions around the globe destroy demand. Investments this year are expected to fall sharply by a third, which is about $ 250 billion. Shale investment, already under pressure from rising mining companies’ indebtedness, will halve this year.
The IEA said this decline in demand marks a historic moment when, for the first time, global consumer spending on oil will fall below the amount spent on electricity..
The IEA believes that falling energy demand, falling prices and rising bill defaults will mean that revenues from energy carriers and energy companies that fill government budgets will fall by more than $ 1 trillion this year..
To strengthen balance sheets, energy companies are cutting costs, including in new and existing energy projects.
Renewable energy investments have proven to be more sustainable than fossil fuels. However, the IEA said that in the first quarter, the number of projects in the field of wind and solar energy, taking into account financial progress, fell to a three-year low. Investments in solar panels on rooftops and businesses hit hard.
This year energy costs will be reduced by 9%, which is «alarm signal» to develop safer and more sustainable energy systems. The report also says that investments in gas plants are stagnating and storage costs for batteries are declining..
Birol said the long-term effect of reduced investment could jeopardize the ability of power grids to cope with future supply shocks.
«Electrical grids are a vital foundation for an emergency response to a health crisis, as well as economic and social activities that can continue in isolation, Birol said. “These networks must be resilient and smart to withstand future shocks. Today’s investment trends are clear warning signs for the future of electricity security».