Despite high interest rates, the global economic slowdown, the war in Ukraine and its destabilising impact and continuing tensions between China, the US, Europe and Japan, investment in clean energy continues to boom.
According the latest energy investment report from the International Energy Agency this week the pace of spending will see more money spend on renewables than on fossil fuels for another year.
And the IEA said the highlight this boom will be that investment in solar projects will outpace investment in oil production for the first time.
Annual investment in renewable energy is up by nearly a quarter since 2021 compared to a 15% rise for fossil fuels, the Agency said in its latest World Energy Investment report.
About $US2.8 trillion is set to be invested globally in energy in 2023, of which more than $US1.7 trillion is expected to go to clean technologies – including renewables, electric vehicles, nuclear power, grids, storage, low-emissions fuels, efficiency improvements and heat pumps – according to the IEA.
The remainder, slightly more than $US1 trillion, will go to coal, gas and oil.
Around 90% of that clean energy spending comes from advanced economies and China, however, highlighting the global divide between rich and poor countries as fossil fuel investment is still double the levels needed to reach net-zero emissions by mid-century.
“Clean energy is moving fast – faster than many people realise,” said IEA Executive Director Fatih Birol. “For every dollar invested in fossil fuels, about 1.7 dollars are now going into clean energy. Five years ago, this ratio was one-to-one.”
Around $2.8 trillion is set to be invested in energy worldwide in 2023, of which more than $1.7 trillion is expected to go to renewables, nuclear power, electric vehicles, and efficiency improvements.
In 2023, solar power spending is due to hit more than $US1 billion a day or around $US380 billion on a yearly basis.
“This crowns solar as a true energy superpower. It is emerging as the biggest tool we have for rapid decarbonisation of the entire economy,” energy think tank Ember’s head of data insights, Dave Jones, said in a statement.
“The irony remains that some of the sunniest places in the world have the lowest levels of solar investment.”
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, the IEA said.
“Many fossil fuel producers made record profits last year because of higher fuel prices, but the majority of this cash flow has gone to dividends, share buybacks and debt repayment – rather than back into traditional supply,” the Agency noted.
Led by solar, low-emissions electricity technologies 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.
Electric vehicle sales are expected to leap by a third this year after surging in 2022.
The IEA sees a rise of nearly 20% to more than 14 million new EVs on the road in 2023, with China again accounting for more than half – around 65%, according to the agency.
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.
Enhanced policy support through major actions like the US Inflation Reduction Act and initiatives in Europe, Japan, China and elsewhere have also played a role.
Reuters reported that the IEA did not expressly reiterate its dramatic forecast of 2021 that investors should not fund new oil, gas and coal supply projects if the world wants to reach net-zero emissions by mid-century.
The fossil fuel – oil and gas – 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, according to the IEA.
“That level was little changed from last year – though the share is higher for some of the larger European companies.
“The biggest shortfalls in clean energy investment are in emerging and developing economies. There are some bright spots, such as dynamic investments in solar in India and in renewables in Brazil and parts of the Middle East.
“However, 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, especially to drive investment in lower-income economies, where the private sector has been reluctant to venture,” the Agency said.
