While electricity production saw more investment than oil and gas in 2017 for the second year in a row, oil and gas supply still received an infusion of US$715 billion—and renewable power generation was down 7%, to $298 billion, according to figures released yesterday by the International Energy Agency (IEA). The upshot is that “more of the world will run on electricity in the future, but most of the power won’t be clean,” Bloomberg reports.
“Global investment in renewables and energy efficiency declined by about 3% last year, and more importantly it could slow down once again this year,” said IEA Executive Director Fatih Birol. “This is a worrying trend, especially when we think of our clean energy transition goals and the implications for energy security, climate change, and air pollution.”
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The root problem is that “running the economy on electricity is just one part of the energy transition,” Bloomberg explains. “The question of where the power comes from is also key. Electrifying transport will reduce air pollution in cities, which is largely attributed to nitrogen oxide emissions from vehicles, but the issue will not ultimately be solved if they are simply replaced by carbon dioxide and other pollution from fossil fuel power plants.”
Yet “the downturn in renewables spending is expected to continue this year, following recent policy changes in China linked to a reversal of support for subsidized PV,” PV Magazine writes .
“As China accounts for more than 40% of global investment in solar PV, its policy changes have global implications,” the IEA states  in a release. “This confirms past IEA reports that have highlighted the critical importance of policies in driving investment in renewable energy. “
“While some of the decline in renewables investment can be attributed to the ongoing plummet in equipment costs such as solar panels and wind turbines, growth in capacity additions was also lower,” Bloomberg notes. With state entities increasing  their share of energy investments to more than 40%, the drop-off “is mainly a result of the investors seeing political uncertainty,” Birol explained. “Therefore, there are hesitations from investors in part to put money in the renewables sector.”
The IEA release notes that more than 95% of power sector investment “is now based on regulation or contracts for remuneration, with a dwindling role for new projects based solely on revenues from variable pricing in competitive wholesale markets. Investment in energy efficiency is particularly linked to government policy, often through energy performance standards.”
While efficiency investments showed the strongest growth of any sector in 2017, at 3%, “it was not enough to offset the decline in renewables,” Wealth Professional Canada notes. “Moreover, efficiency investment growth has weakened in the past year as policy activity showed signs of slowing down.”
The IEA found that fossil fuels grew as a share of global energy supply for the first time since 2014, with industry investment on the rise and new plants being built in Asia. While coal generation declined overall, 30 gigawatts of new capacity were still under construction. And Birol said he saw the U.S. shale industry “at a turning point after a long period of operating on a fragile financial basis.” With its first year ever of positive cash flow expected in 2018, he predicted shale “turning into a more mature and financially solid industry, while production is growing at its fastest pace ever.”