Atomic plant Vogtle, is a 2-unit nuclear power plant located in Burke County, near Waynesboro, Georgia, U.S. Pallava Bagla | Corbis | Getty Images

The amount of money flowing into the energy sector fell for a third straight year in 2017, raising concerns about the world's ability to provide enough power and tackle climate change, the International Energy Agency reported Tuesday. On the whole, governments and businesses plowed $1.8 trillion into the infrastructure, equipment and resources that keep the world running. That means global energy investment fell by 2 percent from 2016 after adjusting for inflation, and the IEA warned the trend does not appear to be reversing. At the same time, governments are shouldering more of the burden of investing in the energy sector, the Paris-based advisor to energy-consuming nations said in its annual report. State-owned enterprises now account for 40 percent of all investments in energy, and about 95 percent of spending in the power sector is linked to regulation or relies on some form of subsidy.

Robust investment in renewable power is even more important for boosting low-carbon power generation in light of a sharp fall in investment in new nuclear power. International Energy Agency

"Despite this increased role of governments, the overall trend of energy investment remains insufficient for meeting energy security, climate and air quality goals, and is not spurring an acceleration in technologies needed for the clean energy transition," IEA Executive Director Fatih Birol said in the report. That investment includes spending on power plants, electric grids, new oil and gas wells, and systems to make buildings more energy efficient.

Power markets: Good news and bad news

The electricity sector attracted the most capital for the second year in a row, generating an estimated $750 billion. However, overall investment still slumped 5 percent from the previous year, as a sharp drop in spending on power plants offset an uptick in dollars flowing to the electric grid. Governments and investors spent an all-time high $300 billion on networks that deliver electricity from power plants to homes and businesses, up a modest 1 percent from last year. The spending is largely geared toward updating transmission and distribution lines and integrating smart technology to prepare for a world with more electric vehicles and renewable energy. Meanwhile, spending on the plants that generate power — especially from coal, hydropower and nuclear fuel — had the biggest drag on overall investment.

Spending on these generating stations fell by 10 percent last year. Half of the drop was due to declining investment in coal-fired plants in China and India, the two emerging economies that drive global economic growth. Investment in natural gas-fired plants rose 40 percent, and mostly came from the United States and the Middle East-North Africa region. However, final investment decisions — an indicator of future construction — dropped by 23 percent last year. Capital flows into renewable power fell by 7 percent, with growth in solar and wind power offset by declines in hydropower and nuclear energy. Nuclear power is not strictly considered renewable energy, but the two are linked because they both generate electricity without emitting planet-warming emissions like carbon dioxide. "Robust investment in renewable power is even more important for boosting low-carbon power generation in light of a sharp fall in investment in new nuclear power," the IEA said. In Europe alone, IEA estimates the retirement of nuclear power plants has offset 40 percent of the benefit from low-carbon power generation from renewables since 2010.

Energy efficiency and oil spending on the upswing

While spending to generate power is falling, investment to help buildings, vehicles and industry use energy more efficiently continues to rise. The world spent $236 billion on energy efficiency in 2017, up 3 percent from the previous year, largely on heating, cooling and lighting improvements in buildings. However, the IEA warns these investments are slowing down, partly due to lackluster implementation of energy efficiency policies. Investment also picked up in oil and gas exploration and production as the recovery in crude prices continued. Spending in the sector rose 4 percent to $450 billion last year, and IEA expects it to tick up another 5 percent this year to $472 billion.