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Windmills in Maharashtra. Copyright Ankit Agrawal

~ Soumya Dutta*

The year 2015 was called a landmark year in terms of global environmental action. Two global agreements were reached and sealed – both critically concerned with the future environmental health of the earth and the sustainability of nature and human society. The adoption of the 17 Sustainable Development Goals (SDGs) in September 2015, followed by the Paris Agreement on limiting climate threatening temperature rise, in December 2015 – though not considered ‘revolutionary’ by many as they failed to turn the destructive run of human extraction and consumption – were at least successful at bringing global focus on urgent actions along with identifying what are actions needed.

As energy production and consumption is a major contributor to the GHG emissions and many other environmental and social impacts undermining sustainability, the 2015 global agreements should also have started a major and quick shift away from highly threatening sources and modes of energy operations to much cleaner ones. That also means a shift away from fossil fuels, and from the clearly dangerous nuclear fission process. New financing of energy projects should reflect whether that has started to happen, so let’s take a ‘brief look at energy financing trends globally’, in 2015.

  1. The first clear trend, though not as pronounced as it was envisaged, is the percentage reduction in global fossil fuel funding in 2015. At just about USD 1000 billion, it was 55% of the total global energy financing of all sorts, amounting to USD 1830, down from 61% of the total in 2014. This includes everything from mining extraction to supply to consumption, and was before the two global agreements officially came into being (2016 data will be available a little later).
  2. The total energy financing also came down by about 8% from about USD 2000 billion to about USD 1830 billion. This was for several reasons, including the continued economic downturn in Europe, a slowdown in coal in China (the biggest player by far), the continued fall in prices of renewables – particularly solar photo-voltaic panels etc.
  3. The other big fossil fuels, oil and gas saw the biggest drops in investments, by about 25% from the 2014 levels, and the 2016 preliminary data indicates another 20%+ fall in 2016. Despite these, this sector remains the biggest recipient of financing at about USD 583 billion in 2015. If 2017 also see a drop, that will be a first for this sector, a welcome one.
  4. The renewable energy sector also saw an absolute fall in terms of investments, to about USD 312 billion, but in terms of new RE installed capacity, it was an increase from 2014. That continued in 2016 too. One reason is – again – the drastic fall in prices per unit capacity.
  5. Energy efficiency investments also saw a healthy rise in its percentage share, reaching about USD 220 billion, from under USD 200 billion in 2014, taking about 12% share of total energy investments. 2016 is continuing this trend. The building sector, including more efficient lighting and appliances, received a hefty investment of about USD 118 billion. This has a much larger effect than investing the same amount in new renewable power.
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    Source: maxpixel.freegreatpicture.com

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  6. The biggest threat to global climate and sustainability – in the energy sector – comes from coal, and though global coal use fell nearly 5% in 2015, nearly a third of all new power plants in the global pipeline, roughly 1161 GW out of 3165 GW, is still coal based.
  7. Acting as a counter measure to the continued major presence of coal power, the renewable energy sector saw an investment of around USD 314 billion (including bio-fuels, solar thermal applications etc). Though this was not a big increase in dollar terms from 2014, the capacity addition was much larger due to falling unit cost. A larger increase in investment is indicated in 2016.
  8. The total investment in the electricity generation sector was about USD 420 billion, with renewable electricity receiving about USD 288, or roughly 70% of the total.
  9. Unfortunately, driven largely by Chinese investments, coal power financing increased to nearly USD 78 billion, a jump of well over 20%, while the comparatively cleaner fossil fuel, natural gas based power, saw a decline of nearly 40%, to about USD 31 billion. In 2015, China created new coal power capacity of about 52 GW by investing over USD 45 billion.
  10. China and the USA remained the two big energy investment countries, despite a steep fall in investment in the USA. Chinese investment in the total energy supply chain touched USD 315 billion, a significant part of it in overseas coal and oil.
  11. US investment in the entire energy supply chain dropped to about USD 280 billion – largely because of a sharp drop in investment in oil and gas sectors. At the same time, the US investment in new power capacity was almost 90% towards renewable power, accounting for about USD 40 billion.
  12. China remained the world’s largest investor and installer of renewable energy based power, reaching over USD 90 billion, or about 60% out of its total power generation investment of about USD 146 billion. Wind energy in China received a big boost, and solar thermal reached a healthy figure of USD 15 billion.
  13. Another big energy player, the European Union, invested over USD 85 billion in power generation, with renewables accounting for about USD 55 billion, or 85%. New wind power received about USD 30 billion of these.
  14. Nuclear power capacity rose by over 10 GW, receiving about USD 21 billion in new investments. This is the highest investment in nuclear power in the last 20 years or so, with China alone accounting for about 32%.  In the new nuclear construction also, China is investing over 50% of global total.
  15. The networks to supply power or electricity, the grids, also received a big boost in financing, with USD 260 billion coming their way, a near 15% increase from 2014. With the rapid addition of variable renewable power, over USD 30 billion was invested in making grids compatible. Out of this USD 260 billion, about USD 90 billion or 35% was invested in upgrading old networks, as these are creating problems in integrating the renewable loads. The largest investors in grids/networks were China, USA, EU and India.
  16. The newest kid in the network horizon is battery storage for variable renewable power, and at over USD 1 billion, it comprised of about 10% of total investments in electricity storage, the rest mostly going to pump storage projects. With the emergence of Tesla’s PowerWall, it is expected that this sector will grow fast, and help balance out some of the variations of renewable power, along with smart grids.
  17. As a result of the shift to less carbon-intensive power capacity addition, the new power capacity that came online is projected to have a carbon dioxide emission of less than 450 Kg CO2 /KWHr generated, a significant improvement over the existing overall power capacity with the CO2 emission of close to 550 Kg/ KWHr. This need to be compared with about 800 Kg/KWHr from coal power plants, and close to 900 Kg/ KWHr from Indian coal plants.  If anyone feels elated by this slow improvement, a sobering thought is that, for achieving the Paris Agreements climate target of even the 2 C limit, the global power fleet need to emit no more than 100 KG CO2/KWHr! A very long way to go indeed.

Sources – Multiple, WEI, Banktrack report, OilChange report ++

* Soumya Dutta is a researcher, author of over eight books, convenor of Beyond Copenhagen Collective’s Climate and Energy Group, national convenor of Bharat Jan Vigyan Jatha (India people’s science campaign), and founding member of India-Climate Justice.

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