Energy is an important industry that needs modernization and development. This requires major financial investments and comprehensive measures. Investments in the energy sector have been declining in recent years and the trend is observed in many large countries.
Investment in the energy sector: review of the changing dynamics
The International Energy Agency (IEA) has published a report on investment processes in the sector. Since 2015, the number of incoming funds has been declining, but now they are stably kept at $1.85 trillion, while investment in other areas has increased. Capital inflow was observed in coal and oil and gas industries. Interest in renewable energy sources has also decreased.
China is the leader in terms of investment in the energy segment, catching up with the US. In 2019, after 3 years of decline, the industry again began to gain momentum and receive large capital investments.
Investment in other important industries continues to grow. $477 billion has been allocated for oil and gas production, which is 3.7% more than last year. Experts attribute this trend to the increase in the cost of energy resources and active development of shale gas deposits. IEA analysts predict that cash injection into this sector will grow by another 5.9% to $505 bln.
The coal sector also arouses interest among investors. Here, financial inflow increased by 2.6% and reached the level of $80 bln. The growth dynamics in this segment has been noticed for the first time since 2012.
Last year, investment in electricity decreased by 1% to $775 bln. Despite the slight decline, this sector is the leader in terms of cash injections.
Despite the prospects of renewable energy sources, investment fell by 1% to $304 billion. This trend is associated with the stabilization of some processes. Capacity growth has slowed down a little, and due to optimization of operations it became possible to reduce costs on a number of technologies being implemented.
Changes in the global market and unstable political processes are hampering the growth of financial injections into the energy sector. This situation has affected both renewable and traditional energy sources. Active investment in alternative energy started in 2015, when the Paris Climate Accord was signed, but after a while the vector of attention shifted to other areas, which slows down development processes. As experts point out, this is due to the lack of interest in the sphere on the part of the state. Many countries do not have a clear strategy for the development of the energy sector, so the interest in investment is extremely low.