The still uncontrolled COVID-19 pandemic has triggered the largest plunge in global energy investments in history, with spending in every major energy sector set to plummet to unheard of depths within the year.
The International Energy Agency (IEA) in its annual World Energy Investment report released Wednesday described the unparalleled decline in worldwide energy investments as "staggering in both its scale and swiftness."
The massive hit being taken by energy investments in the space of only three months springs from decisions by countries to control the spread of the pandemic by effectively shutting down their economies, and restricting travel and, hence, energy use.
The restrictions, while meant to protect public health, have brought world travel almost to a standstill. The global airline industry expects losses of $550 billion in 2020 as thousands of planes remain grounded.
At the start of the year and before the pandemic appeared in China in January, IEA predicted a 2% growth in global energy investments. This would have meant the largest annual increase in spending in six years. It was not to be.
COVID-19 swiftly and immediately brought the world economy to a screeching halt from February to April. IEA said it now expects global energy investments to plummet by 20% compared to 2019 -- the largest reduction in history. In real terms, IEA described this as a massive $400 billion plunge year-on-year.
Governments are also suffering mightily from the decline in energy investments and revenues. Energy revenues going to governments and industry is expected to drop by "well over" $1 trillion this year due to a combination of weak demand, lower energy prices and the non-payment of debts.
IEA said oil will account for most of this decline. It also said global spending on oil will fall below the amount spent on electricity for the very first time.
Renewable energy investments are also plummeting. The pandemic is placing massive strains on electricity grids fed by fossil fuels. These networks will also have to accommodate rising shares of wind and solar power to guard against any future pandemic. Future electricity security for both traditional and clean energy sources is being undermined by the mammoth drop in investments as revenues dry up.
Clean energy technologies such as renewables, nuclear power, and carbon capture have remained at around one-third of total investments in recent years, said the IEA. This lack of investments endangers future energy security as fossil fuels continue to fall out of favor.
Before the pandemic, IEA projected a 40% jump in investments in clean energy technologies. Even at this level, these investments remain far below the levels required to accelerate transitions to clean energy.
IEA ruefully noted the pandemic resulted in lower global pollution levels but for all the wrong reasons. A rapid increase in clean energy investments is necessary to achieve a lasting reduction in global emissions.
Fatih Birol, IEA executive director, said the IEA will provide clear recommendations as to how world governments can quickly create jobs and boost economic activity by building cleaner and more resilient energy systems.
