Solar

Global clean energy investment is growing, but some countries are being left behind

Global clean energy investment is growing, but some countries are being left behind
(Sunset over the Pacific as seen from the International Space Station. Credit: NASA)

Fossil fuels are taking a back seat to clean energy when it comes to global investment.

The International Energy Agency says that some $2.8 trillion likely will be invested in energy this year with more than $1.7 trillion of it going to clean technologies including renewables, electric vehicles, nuclear power, grids, storage, low-emissions fuels, efficiency improvements and heat pumps. The rest, around $1 trillion, is going to coal, gas and oil.

Annual clean energy investment is expected to rise by 24% between 2021 and 2023, driven by renewables and electric vehicles. That compares with a 15% rise in fossil fuel investment over the same period, IEA said in its world energy investment report.

More than 90% of this increase is expected to come from advanced economies and China, presenting a “serious risk of new dividing lines in global energy if clean energy transitions don’t pick up elsewhere,” the report cautioned.

“Clean energy is moving fast – faster than many people realize,” said IEA Executive Director Fatih Birol. He said that for every dollar invested in fossil fuels, about 1.7 dollars are now going into clean energy. Five years ago, the ratio was one-to-one. 

Birol pointed to solar energy investment, which he said is set to overtake the amount of investment going into oil production for the first time.

Low-emissions electricity technologies, led by solar, are expected to account for almost 90% of investment in power generation. Consumers are also investing in more electrified end-uses. Global heat pump sales have seen double-digit annual growth since 2021, the IEA report said. Electric vehicle sales are expected to grow by one-third this year.

Clean energy investments have been boosted by a variety of factors in recent years, including periods of strong economic growth and volatile fossil fuel prices that raised concerns about energy security, especially following Russia’s invasion of Ukraine. IEA said that enhanced policy support through major actions like the Inflation Reduction Act and initiatives in Europe, Japan, China and elsewhere have also played a role.

Spending on upstream oil and gas is expected to rise by 7% in 2023, taking it back to 2019 levels. The few oil companies that are investing more than before the Covid-19 pandemic are mostly large national oil companies in the Middle East, IEA said. 

The oil and gas industry’s capital spending on low-emissions alternatives such as clean electricity, clean fuels and carbon capture technologies was less than 5% of its upstream spending in 2022. That level was little changed from 2022, though the share was higher for some larger European companies.

The biggest clean energy investment shortfalls are in emerging and developing economies. IEA pointed to bright spots, such as “dynamic investments in solar” in India and in renewables in Brazil and parts of the Middle East. However, it said investment in many countries is being held back by factors including higher interest rates, unclear policy frameworks and market designs, weak grid infrastructure, financially strained utilities, and a high cost of capital. 

“Much more needs to be done by the international community,” IEA said, to drive investment in lower-income economies “where the private sector has been reluctant to venture.”

Tags