Terry Macalister Wednesday November 5, 2003 The Guardian
The world needs $16 trillion (£10 trillion) worth of investment in energy over the next 30 years if it is to meet growing demand for supplies, a leading agency warned yesterday.
But some investors are already being scared away from projects because liberalisation has made the levels of return much less certain, the International Energy Agency warned.
Recent power outages in the US and Britain have highlighted the problems of keeping electricity transmission networks up to scratch but investment in gas-fired plant has faltered.
"Without new policy actions, world energy demand will rise by two-thirds between now and 2030 and the world economy will falter if these energy supplies are not made available," said Claude Mandil, executive director of the Paris-based IEA.
Developing nations face the biggest energy challenge to attract some of the $5 trillion of new investment needed globally in the electricity sector.
Even if that cash was found it would still leave 1.4 billion people without access to electricity in 2030, only 200 mil lion fewer than today, argued the IEA which advises 26 industrialised nations on energy issues.
Boosting global electricity investment by 7% would be sufficient to bring a minimal level of supply to these marginalised people but that would mean raising a further $665bn in the poorest regions which are already struggling to raise capital, it said.
Energy reforms, more complex supply chains and the growing share of international trade in global supply are in many cases increasing risks to investors.
"They will need a commensurate increase in returns if a shortfall in investment is to be averted."
There will be a particular need for the Middle East, Africa and Russia to reform their tax conditions and lift impediments to foreign investment because that is where global gas reserves are concentrated.
There were a host of new technologies being developed that offered great opportunities in future - such as hydrogen and fuel cells - but their speed of development depended on changes in government fiscal incentives.
Mr Mandil was introducing a new global energy investment study which the IEA had drawn up in an unusual collaboration with the Organisation of Petroleum Exporting Countries, the World Bank and the corporate sector.
"To the best of my knowledge, no previous attempt has been made to build such a comprehensive picture of future energy investment, worldwide, in all parts of the supply chain," he said.
The bulk of the $16 trillion - would be needed in power generation, transmission and distribution with a further $4 trillion on upstream investment in oil and gas to keep output at existing levels.
Electricity networks in developed countries have found the cash for investment in the past but the IEA said the move to competitive markets had changed the picture.
"While liberalisation has resulted in many benefits, there are some increased risks to investors in power generation, especially peaking capacity.
"There are also obstacles such as public resistance to expansions in transmission networks which lag behind investment in generation capacity in some OECD countries," according to the IEA.