World needs $48tn investment in energy needs by 2035

The International Energy Agency has published a specialist report settings out the worlds increasing need for energy. The report describes how more than $48 trillion in investment will be required to keep up with demand to 2035.

Today’s annual investment in energy supply of $1.6 trillion needs to increase over the next couple of decades to $2 trillion. Annual spending on energy efficiency, measured against a 2012 baseline, needs to rise from $130 billion today to more than $550 billion by 2035.

IEA Executive Director Maria van der Hoeven said:

“The reliability and sustainability of our future energy system depends on investment. But this will not materialize unless there are credible policy frameworks in place as well as stable access to long-term sources of finance. Neither of these conditions should be taken for granted. There is a real risk of shortfalls, with knock-on effects on regional or global energy security, as well as the risk that investments are misdirected because environmental impacts are not properly reflected in prices.” To date, complimentary government policies have resulted in annual investment in new fuel and electricity supply increasing two-times since 2000. Over the same period, investment in renewable sources has increased four-times. Renewables, biofuel and nuclear power make up 15% of annual investment flows. Power transmissions and distribution networks make a similar contribution.

Investment decisions are shaped by Government policies and supporting incentives. IEA Chief Economist, Faith Birol said:

“Policy makers face increasingly complex choices as they try to achieve progress towards energy security, competitiveness and environmental goals. “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.” The report describes of the $48 trillion investment by 2035, they would recommend this be apportioned as follows:

1. $40 trillion in energy supply. This should be $23 trillion in fossil fuel extraction, transport and oil refining, $10 trillion in power generation and low-carbon technologies, $6 trillion in renewables and $1 trillion in nuclear.

2. The balance towards energy efficiency being $7 trillion in transmission and distribution