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IEA says $48 trillion needed by 2035 to meet world’s energy needs

03 June 2014

More than $48 trillion must be invested by 2035 to meet global energy needs as current technologies go offline and demand rises in emerging nations, the International Energy Agency (IEA) said in a report published on June 3. It warned that the expansion of the global gas market was unlikely to reduce prices significantly due to high transportation and infrastructure costs.

Dungeness NPP in the UK, one of many power plants needing replacing
Dungeness NPP in the UK, one of many power plants needing replacing

The Paris-based body predicted that $2 trillion per year will need to be invested by 2035, a rise of $400 billion from 2013, while annual spending on energy efficiency will have to increase to $550 billion. This amounts to a cumulative global investment bill of more than $48 trillion, consisting of around $40 trillion in energy supply, it claimed.

Most of the $40 trillion is needed to offset declining production from existing oil and gas fields and to replace power plants and other assets that will reach the end of their productive life.

The main components of energy supply investment would be $23 trillion in fossil fuel extraction, transport and oil refining; almost $10 trillion in power generation, of which low-carbon technologies account for almost three-quarters, and a further $7 trillion in transmission and distribution, it added.

The autonomous agency, responsible for promoting energy security, warned policymakers that they faced conflicting needs.

Demands for stronger action on climate change could cause a backlash against the cost of subsidies to renewables and calls for lower energy prices could come up against public opposition to cheaper extraction techniques such as fracking.

The IEA urged for new forms of investment to be exploited, and suggested that institutional investors, such as pension funds and insurers, could be vital as a source of long-term funds.

It also predicted that oil investment would shift towards the Middle East as non-OPEC supplies run out, and that gas prices around the world should converge given the boom in investment, but high costs of gas transportation could dampen the hopes of LNG buyers in Europe and Asia for much cheaper gas supplies.

Europe was singled out as a particular concern, requiring $2 trillion in power sector investment by 2035, while India will need $1.5 trillion in power sector investment over the same period to support its growing economy.

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