According to the World Energy Investment Outlook, global energy demand will rise by two thirds in the next 30 years, requiring US$16,000 billion in investment to keep the world economy from faltering. Can such financing be found? Market liberalisation has increasingly exposed vulnerable areas in the provision of electricity. Private investment in particular has been declining since 1977.
The International Energy Agency (IEA), which represents the world’s largest energy-consuming countries, points out that 60% of future investments in energy will need to go to electricity instead of oil and gas. Furthermore, recent grid failures underline the point that future funding should not only go into new power plants, but even more into building transmission and distribution grids.
Further investment will also trickle down to the world’s poor. The World Energy Investment Outlook predicts that with the rate of projected growth in investment and supply, the number of people without electricity will be reduced, from 1.6 billion today to 1.4 billion in 2030. While this is good news for those 200 million getting powered up, the authors make the point that if governments could boost electricity funding by just another 7%, it could bring a minimal level of power to the remaining 1.4 billion. But that would mean raising another $665 billion in regions that are already struggling to raise capital.
In an alternative scenario, World Energy Investment Outlook shows that if environmental policies now under consideration in OECD countries were implemented, it could shift investment patterns dramatically and reduce overall energy needs. In this scenario, investment in electricity transmission and distribution would be reduced by almost 40%, and renewables would capture one half of the investment going toward power generation, resulting, however, in relatively higher electricity prices. Furthermore, technological advances in, for instance, carbon-sequestration technologies and hydrogen fuel cells, could also alter the longterm investment outlook. And that may be energy worth betting on.
©OECD Observer No 240/241, December 2003