State of R&D investments in the energy sector

Global - May 23 2019
  • #carbon/climate change

State of R&D investments in the energy sector

In the fourth edition of the World Energy Investment Report of 2019, the IEA presents investment trends in the energy sector at both country and company level. Among the many notable trends presented in this report is that of reported corporate R&D spending by listed companies active in the energy technology sectors for which 2018 data were available.

Source: IEA (2019) World Energy Investment. All rights reserved.

As can be seen in the graph above, total annual corporate energy R&D spending increased by about 4% (including car manufacturers) over the last year to reach nearly $94 billion in 2018. It should be noted that car manufacturers have been the main contributors to the growth in business R&D spending on energy technologies since 2014. Initially, this trend is due to the fact that R&D budgets are historically much higher than energy companies in absolute terms and as a percentage of revenues. Secondly, the involvement of government policies and competitive pressures have increased spending on energy efficiency and development of electric vehicles.

Excluding transport, more than half of all business R&D activities in the energy sector have been in low-carbon sectors. However, business R&D spending in the oil and gas and other fossil fuels sectors increased by 1% in real terms in 2018 but remain at 45% below 2014 levels and has not increased significantly as a proportion of revenues since then.

It is important to remember that all these R&D investments remain small compared to overall investments in the sector. The IEA recalls that in 2018 about $1,300 billion was invested in the energy sector, 40% of which was for the supply of fossil fuels. According to the agency, one in ten dollars invested in energy worldwide goes to financing oil and gas in North America. Although investment in exploration for new oil and gas reserves has declined to record lows in 2018, partly due to the collapse of oil prices and the freezing of exploration for new reserves, the IEA expects a strong return of this industry (also on the back of higher oil barrel prices), with investment expected to increase by 18% in 2019.

Félix Fouret, Carbon/Climate Analyst
Source: Beyond Ratings, IEA (2019) World Energy Investment

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