For a fundamental course correction in climate change, the world would need to invest approximately $5 trillion a year for the next seven years, Francesco La Camera, director-general of the International Renewable Energy Agency (IRENA), has said.
At the recent Berlin Energy Transition Dialogue (BETD), IRENA introduced ‘The World Energy Transition Outlook 2023 Preview’ which called for investment and comprehensive policies for a renewable-based energy transition.
Already, progress has been made, notably in the power sector, where renewables account for 40 percent of installed power generation globally, contributing to an unprecedented 83 percent of global power additions in 2022.
To keep 1.5°C alive, deployment levels must grow from some 3,000 gigawatt (GW) today to over 10,000 GW in 2030, an average of 1,000 GW annually. Deployment is also limited to certain parts of the world.
China,the European Union and the United States accounted for two-thirds of all additions last year, leaving developing nations further behind.
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“The stakes could not be higher. A profound and systemic transformation of the global energy system must occur in under 30 years, underscoring the need for a new approach to accelerate the energy transition. Pursuing fossil fuel and sectoral mitigation measures is necessary but insufficient to shift to an energy system fit for the dominance of renewables.” La Camera said.
He said the emphasis must shift from supply to demand, toward overcoming the structural obstacles impeding progress.
IRENA outlines three priority pillars of the energy transition: the physical infrastructure, policy and regulatory enablers, and a well-skilled workforce, requiring significant investment and new ways of cooperating in which all actors can engage in the transition and play an optimal role.
It warns that a lack of progress further increases investment needs and calls for a systematic change in the volume and type of investments to prioritise the energy transition.
The global investment in energy transition technologies reached a new record of USD 1.3 trillion in 2022, yearly investments must more than quadruple to over USD 5 trillion to stay on the 1.5°C pathway.
By 2030, cumulative investments must amount to $44 trillion, with transition technologies representing 80 percent of the total, or $35 trillion, prioritising efficiency, electrification, grid expansion, and flexibility.
Any new investment decisions should be carefully assessed to simultaneously drive the transition and reduce the risk of stranded assets. Some 41 percent of planned investment by 2050 remains targeted at fossil fuels. Around USD 1 trillion of planned annual fossil fuel investment by 2030 must be redirected towards transition technologies and infrastructure to keep the 1.5°C target within reach.
Furthermore, public sector intervention is required to channel investments toward countries in a more equitable way. In 2022, 85 percent of global renewable energy investment benefited less than 50 percent of the world’s population. Africa accounted for only 1 percent of additional capacity in 2022.
IRENA’s Global Landscape of Renewable Energy Finance 2023 confirms that regions that are home to about 120 developing and emerging markets continue to receive comparatively little investment.
La Camera said, “We must rewrite the way international cooperation works. Achieving the energy transition requires stronger international collaboration, including collective efforts to channel more funds to developing countries.
A fundamental shift in the support given to developing nations must put more focus on energy access and climate adaptation. Multilateral financial institutions need to direct more funds, on better terms, towards energy transition projects and build the physical infrastructure that is needed to sustain the development of a new energy system, he said.
