The energy industry that emerges from the Covid-19 crisis will be significantly different from the one that came before.
The worldwide economic shock caused by the Covid-19 pandemic is having widespread and often dramatic effects on investments in the energy sector. Based on the latest available data, the International Energy Agency's World Energy Investment 2020 provides a unique and comprehensive perspective on how energy capital flows are being reshaped by the crisis, including full-year estimates for global energy investment in 2020.
Now in its fifth edition, the World Energy Investment report is the annual IEA benchmark analysis of investment and financing across all areas of fuel and electricity supply, efficiency, and research and development. In addition to a full review of the 2019 trends that preceded the crisis, this year’s analysis highlights how companies are now reassessing strategies – and investors repricing risks – in response to today’s profound uncertainties and financial strains.
The energy industry that emerges from this crisis will be significantly different from the one that came before. The vulnerabilities and implications vary among companies, depending on whether they are investing in fossil fuels or low-carbon technologies, as well as across different countries. The new report assesses which areas are most exposed and which are proving to be more resilient. The analysis also provides crucial insights for governments, investors and other stakeholders on new risks to energy security and sustainability, and what can be done to mitigate them.
The effects on energy investment in this scenario come from two directions. First, spending cuts due to lower aggregate demand and reduced earnings; these cuts have been particularly severe in the oil industry, where prices have collapsed. Second, the practical disruption to investment activity caused by lockdowns and restrictions on the movement of people and goods.
Our assessment of 2020 trends is based the latest available investment data and announcements by governments and companies, as of mid-May (including first-quarter company reporting), tracking of progress with individual projects, interviews with leading industry figures, and incorporates also the latest insights and analysis from across IEA work. Our estimates for 2020 then quantify the possible implications for full-year spending, based on assumptions about the duration of lockdowns and the shape of the eventual recovery.