2015-2016 saw a significant decline in investments in the fuel and energy sector as capital investments in oil and gas industry dropped as a result of falling oil prices. 2017 saw investments in all key regions resume growth as oil prices rallied and investors once more got interested in the sector, Analytical Center experts write in their new energy bulletin titled Investments in the Fuel and Energy Sector: Growth after a Crisis in the Oil Market.
According to the experts there is an emerging trend of investments growing faster in renewable energy and energy efficiency projects while investments in old fuel and energy sectors are falling. In Russia these trends are not as prominent yet.
"The transition to renewable energy is happening fast but not so fast as to completely wipe out coal from the fuel and energy balance of any one country in the short term. And it is not just that coal generation is very efficient and replacing all of it with renewable energy would cost an arm and a leg, what is more important is that the quality of electricity generated by solar and wind power plants is simply not yet good enough for use in industry," the analysts write. In Russia, in 2016 the fuel and energy sector made up 25% of all capital investments in the country (5 percentage points higher than in 2008). Meanwhile, the issue of allocating national investments across the sectors of the economy remains very much relevant, the experts note.
They also point out that July 1st 2018 will be the 10th anniversary since the liquidation of RAO UES of Russia. The analysts are of the opinion, that the tenth anniversary of the reorganization is a great opportunity to consider the results of the reform, whose main achievement is considered the market for electricity and power comprised of two elements: wholesale and retail. The experts note that in the past year the amount of available generating capacity has increased a lot as has the amount of generated power while the production of thermal energy has declined. This can be interpreted as a sign that the efficiency of heat and electricity consumption has been growing slowly but surely.
One positive outcome of the reform has been the growth of investments in the industry, which has made it possible to reduce the high degree of equipment wear and tear. However, the rate at which investments in the electric energy sector have been growing since 2011 has been lower than in the country's economy as a whole and the trend still remains negative. Other difficulties include: modernization of the generating capacity and the electric grids that must be carried out in a situations where there is a large number of unpaid bills.
The analysts devote special attention to the issue of boosting the fuel efficiency in transport, which over the past ten years has significantly held back the growth in demand for oil and reduced CO2 emissions. The experts believe that the projected reduction in the consumption of gasoline and diesel fuel to a large extent stems from the energy policy and the introduction of stricter standards.
For more information see the bulletin Investments in the Fuel and Energy Sector: Growth after a Crisis in the Oil Market.
For the other energy bulletins see Publications.