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New opportunities for investment due to lower cost of technological advances in new energy sources

New opportunities for investment due to lower cost of technological advances in new energy sources 

 A few days ago, the (iea) of the International Energy Agency published the World Energy Investment report 2017, which objectively commented on the trend of world energy investment, the trend of energy development, and the state of technological innovation, many of which mentioned China's transformation of traditional energy systems. The development of new energy sources and the achievements of energy-saving and efficiency-enhancing. To this end, on the margins of the Tokyo International Energy Forum, this reporter interviewed laszlo varro., the chief economic expert of the International Energy Agency. 
 World energy investment totaled $ one trillion six hundred and ninety nine billion nine hundred and ninety nine million nine hundred and ninety nine thousand nine hundred and ninety nine in 2016, or 2.2 percent of world gdp, down 12 percent from 2015, the report said. Among them, spending on energy conservation and efficiency increased by 9%, and grid investment increased by 6%. But investment in upstream energy, such as oil and natural gas, fell 25 percent, while investment in power generation fell 5 percent, leading to a downward trend in total investment. In particular, the decline in unit investment costs for upstream sectors, such as oil and natural gas, and photovoltaic power generation is the main reason for the decrease in investment volume, At the same time, the reduction of oil production and the decrease of new generation capacity based on fossil fuel also result in the decrease of total investment. In particular, investment in the electricity sector exceeded investment in fossil  fuels for the first time in 2016, with oil and natural gas accounting for 40 per cent of the world's total investment in energy, but total investment in this area decreased by 38 per cent between 2014 and 2016, As a result, investment in low-carbon energy, including power grid construction, rose 12 percentage points to 43 percent of total energy investment. 
 Among the economies, China remains the world's largest energy investor, accounting for 21 percent of total investment, Mr. varro said. Although China's new coal-fired power capacity has fallen by 25 percent, China's energy investment is driven by low-carbon power supplies, power grid construction and energy conservation. India's energy investment rose 7%, ranking third in the world after the United States. India is mainly committed to modernizing its power system and increasing its power supply. Fast-growing Southeast Asian countries also account for 4% of world energy investment. U.S. oil and gas investment has fallen, but its share of world energy investment has risen to 16 percent as a result of increased investment in renewable energy, compared with a 10 percent decline in energy investment in Europe, which is clearly lagging behind. 
 In response to energy investment trends in different sectors, the report noted that investments in upstream energy sectors, such as oil and natural gas, fell 44 percent between 2014 and 2016 and recovered slightly in 2017. U.S. shale gas investment rose 53 percent, while spending by major oil-producing countries such as the Middle East and Russia strengthened, so nominal investment in the sector is expected to increase by 6 percent in 2017 (a 3 percent increase in real terms). Mexico's successful tender for offshore oilfield projects in 2017 will lead to increased investment. However, the cost of investment in upstream sectors varies from country to country. From a worldwide perspective, the cost of investment in 2017 will fall for three consecutive years. The main reason is that investment in offshore oilfields has narrowed, but only by about 3 percent. The slowdown slowed significantly from 2015 to 2016. The U.S. shale gas industry, on the other hand, is expected to pick up about 16 percent in 2017 after halving its shale gas costs between 2014 and 2016. The oil and gas industry is changing its business model, seeking to recover investment in a shorter period of time and to rationalize its projects. World cost standards in the field have changed, and the cost model, which has fallen over the past two years, is expected to continue for some time to come. 
 Investment in the world's electricity sector fell 1 percent over the past year to $718 billion, the report said, partly offset by an increase in spending on power grids. Investment in new renewable energy generation at $297 billion, down 3 percent, is still a major pillar of power investment. Investment in renewable energy is down 3 percent from five years ago, but total power generation capacity is up 50 percent, forecasting an increase of more than 35 percent. These have benefited from technological advances and reduced unit costs for photovoltaic and wind power generation. By contrast, investment in coal-fired power plants has fallen sharply, by nearly 20 gigawatts of (gw). It reflects concerns about air pollution and over-supply in China. Investment in India has increased. Only 40 gigawatts of coal-fired power plants have been decided to invest in 2016, and investment in coal-fired power is expected to decline further after construction is completed. Investment in natural gas and thermal power was flat in 2016 from the previous year, with more than half of its investment concentrated in natural gas-rich regions such as North America, the Middle East and North Africa. As a result of investment decisions made a few years ago, Europe has already had 4 gigabytes of new power generation capacity in operation, but the cut in natural gas thermal power generation capacity exceeds the additional capacity. In 2016, the world's new nuclear power generation capacity increased by 10 gigawatts. It has reached its highest level in the past 15 years, but only 3 GWs are under construction, most of which are concentrated in China. This is 60% below the 10-year average so far. 
 Spending on power grids and energy storage facilities has been on the rise for five years, reaching a peak of $277 billion in 2016, Mr varro stressed. 30% of the increase comes from China's investment in distribution systems. China's spending on power grids accounts for 30 percent of spending on energy construction, and India and Southeast Asia account for 15 percent, as they continue to expand their power systems in response to rising aggregate social demand. Investment in old and new transmission networks in the United States and Europe has increased. Generally speaking, the electric power system has been modernized. From the simple power supply to the integrated platform of digital service combined with digital information communication, the investment in digital technology has accounted for more than 10% of the expenditure of the power system. Investment in batteries has grown rapidly, with investment exceeding $1 billion in 2016.
 Investment in energy-saving industries was further expanded, although energy prices continued to decline, but investment in this area reached $231 billion in 2016. The largest amount of expenditure in 2016 was in Europe, but the fastest growth rate was in China. While the Chinese government adjusted its economic structure, Energy consumption per unit gpd has been reduced by strengthening energy conservation and emission reduction policies. From the point of view of the world, most of the investment is in the construction of energy infrastructure. Emerging countries of machinery, household appliances and other energy efficiency standards need to be further improved. Air-conditioners sold in 2016, for example, have brought 90 Tarawatts of electricity to the world, with India alone reaching 10 tarawatts, greatly increasing the load on power plants. If all countries adopt the highest efficiency standards, they will reduce new electricity demand by 40 percent. The number of heat pumps sold in 2016 will increase by 28 percent, and electric vehicles will increase by 38 percent, if these technologies can improve overall energy efficiency. Combined with the popularization of renewable energy, it will promote the process of heating and decarbonization by means of transportation. At this stage, its impact on the demand for oil and gas is very small. In 2016, the number of electric vehicles sold in 2016 reached seven hundred and fifty thousand. The resulting cut in transport sector demand for oil is 0.02%. 
 With regard to science, technology, innovation and digital development in energy, the report notes that worldwide spending on research and development in the energy sector reached $65 billion in 2015. While awareness of the importance of science, technology and innovation in energy has been growing, investment in both energy technology and clean energy has not increased over the past four years. Europe and the United States spent the most, accounting for 25% of total investment. China overtook Japan as the largest contributor to energy R & D spending in 2014 as a share of gdp. From the sources of investment, the government and the public account for half of the funds, the private funds are mainly used for oil, natural gas, thermal power technology research and development, while the official and public investment is mainly used to improve clean energy technology. 
 The discussion of the future role of digital technology in the field of energy is notable for the collection, processing and communication of digital information. In 2016, 47 billion US dollars were invested in the construction of software and hardware for digital infrastructure in the power sector. These are not only helpful to improve the flexibility of system operation, management of demand, but also to improve the coordination of renewable energy and traditional energy. In the field of oil and natural gas, digital technology is also widely used in strengthening cost management, improving production efficiency and so on. 
  With regard to the impact of changes in energy investment, the report says world energy investment has fallen by 17 percent since 2014, a change that will not raise concerns about inadequate energy supplies in the short term. This is due to the world's view of excess capacity in fossil  fuel supplies and some markets, as well as falling costs in multiple sectors of the energy sector, easing that concern. But in the long run, reduced investment will bring the risk of market tension and insufficient supply capacity. Activity in upstream sectors, such as oil and gas, has fallen, with investment in traditional oilfields reaching their lowest level in 70 years, threatening to strain supply in the near future. Considering the depletion of the original oil fields, even if there is technological progress, the impact of climate change policies on oil demand and other optimistic factors, it is also necessary to improve the pace of investment in traditional oil fields and resist the risk of insufficient supply. Energy conversion has yet to begin in major sectors such as transport and industrial industries, which are still heavily dependent on oil, former gas and coal. 
 Mr. varro said the apparent lack of investment in electricity assets in dealing with the flexibility of the current business model raised concerns about the steady supply of electricity. While ensuring stable supply at peak demand, sustained investment in flexible assets is needed to increase the ratio of wind and photovoltaic power generation. So far, the flexibility of the power industry is mostly reflected in the existing equipment. In 2016, investment in high-tech power generation capacity and system-sized energy storage equipment totaled only 130 gigs of Gava, the lowest level in a decade, mainly to regulate the load capacity of thermal power generation and hydropower and coordinate the transfer of electricity. This is mainly due to the uncertainty of administrative restrictions and market planning caused by the imbalance of investment price-for-money ratio. As a result, for the first time in 2016, these aggregate investment capacities were the same as those for renewable energy (wind and photovoltaic) that went into production in the same year. Investment in the electricity grid increased by 6 percent in 2016. It is mainly the result of the increase of digital technology investment and the integration of the modernization of transmission system and the promotion of renewable energy. However, new policies and easing government restrictions are needed to improve the market price-effectiveness of all kinds of flexible investments. 
 According to the report, world carbon dioxide emissions were flat for three consecutive years by March 2016, mainly thanks to long-term energy-saving investments, the shift from coal to natural gas and the development of new low-carbon power supplies. Investment in new low-carbon power supplies has stalled recently. While the contribution of wind and photovoltaic to electricity demand has increased by 75% over the past five years, the increase in these new energy generation capacity has been offset by more than half the reduction in nuclear power and hydro power over the same period. In order to make the investment of new low-carbon power supply adapt to the development of new electricity demand, governments, especially non-governmental departments, should increase their investment in green energy science and technology innovation. 
 In particular, Mr. varro pointed out that China's investment in energy conservation, emission reduction, efficiency reduction and development of new energy sources has increased significantly and achieved remarkable results, which has provided a good example for the international community, especially for the vast number of developing countries. But at the same time, a country such as China, with a vast area and a large population, can achieve the maximum economic benefit only by persistently promoting energy conservation, efficiency and new energy development. (reporter Su Hai River) 
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