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Record-breaking clean energy investment overtakes fossil fuel spending

As capital spending across the fossil fuel industry continues to fall, investment in low carbon energy is thriving, helping to push electricity sector capex to record levels, according to the International Energy Agency (IEA)

Last year spending in the electricity sector overtook investment in the fossil fuel industry for the first time ever, according to the IEA's recently-released World Energy Investment 2017 report—a barometer for spending across the entire energy industry.

Capital investment in global oil and gas supply fell by 38% between 2014 and 2016, the IEA said, but still comprises around 40% of the total. This drop has allowed spending on low-carbon energy supply, including electricity networks, to reach a record 43% of the global, total spend last year. This is a rise of 12% from 2014 levels.

Global electricity investment was down just 1% at $718bn, with growing network spending mostly offset by fewer coal-fired power plant additions.

Investment in renewable-based power capacity was the largest area of electricity spending. According to the report, progress in technology and project management is driving down solar and wind costs, which has led to investment in renewables falling 3% to $297bn. The IEA notes, however, that renewables will generate 35% more power as they become cheaper and technology in solar PV and wind develops.

"The biggest area of power generation investment is renewable, low-carbon generation," said IEA chief economist Laszlo Varro. "Wind and solar power have been doing very, very well and 2016 was a record year. We can expect 200 TWh of electricity from the wind and solar investment [made] in 2016."

Notably, China, the world's largest energy investor, saw a 25% decline in coal-fired power investment last year, as it is increasingly driven by clean electricity generation and networks, as well as energy efficiency investment.

In 2016, total global investment across the entire energy sector fell by 12%, from a year earlier, to $1.7 trillion—or 2.2% of global GDP.

It was the second, consecutive year of declining overall investment. This was because higher spending on energy efficiency and electricity networks failed to offset a 44% drop in upstream oil and gas spending between 2014 and 2016, the IEA said.

A prolonged period of depressed oil prices and advances in technology, which have helped to reduce costs for both producing electricity from renewable energy and oil and gas drilling, have also helped to slash overall investment levels.

However, so far in 2017 there has been a modest rebound. A 53% rise in US shale oil and gas investment, combined with resilient spending in large oil and gas producing regions such as the Middle East and Russia has driven nominal upstream investment 6% higher in 2017 (a 3% increase in real terms). Notably, it says the oil and gas sector is getting better at cutting costs.

"The oil and gas industry is undertaking a major transformation in the way it operates, with an increased focus on activities delivering paybacks in a shorter period of time and the sanctioning of simplified and streamlined projects," the report says.

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