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2 July 2014 | Will Green
Investment of more than $48 trillion (£28 trillion) will be needed to meet the world’s energy needs to 2035, according to a report.
The International Energy Agency (IEA) said the current global annual investment of $1.6 trillion (£932 billion) needed to rise “over the coming decades towards $2 trillion” (£1.2 trillion) otherwise there is a “real risk of shortfalls”.
Of the total, $23 trillion (£13.4 trillion) is needed for fossil fuel extraction, transport and refining and $10 trillion (£5.8 trillion) is required for power generation, including renewables – $6 trillion (£3.5 trillion) and nuclear – $1 trillion (£583 billion). A further $8 trillion (£4.7 trillion) is required for energy efficiency, mainly around transport and buildings; and $7 trillion (£4.1 trillion) for transmission and distribution.
The IEA warns policymakers face “complex choices” to balance energy security, competitiveness and environmental goals, while also “mobilising private investors and capital”.
In a report the IEA said the investment required to maintain the reliability of Europe’s electricity system, particularly around thermal generation, is “unlikely to materialise with the current design of power markets”.
“Despite public and political concern about high prices to end-users, the wholesale price for electricity is too low at present, by more than 20 per cent, to incentivise the investment required in new thermal plants,” said the report. “If this situation persists, the reliability of European electricity supply will be put at risk.”
Maria van der Hoeven, IEA executive director, said: “The reliability and sustainability of our future energy system depends on investment. But this won’t materialise 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.”