Global energy investment this year is on track to exceed $3 trillion, around $2 trillion of which will be “clean energy” financing, twice the amount being spent on fossil fuels, energy watchdog the International Energy Agency (IEA) has said.
The IEA defines clean energy as renewables, electric vehicles, nuclear power, electricity grids, storage, heat pumps and “efficiency improvements”. It also includes “low-emissions fuels”, which it names as bioenergy, low-emissions hydrogen and carbon capture, use and storage (CCUS) associated with fossil fuels.
The remainder of energy investment, at just over $1 trillion, is set to go to coal, gas and oil, the IEA said. Investment in renewable power and grids overtook spending on fossil fuels in 2023, for the first time. The ratio of clean power to unabated fossil fuel power investments is set to reach 10:1 this year — in comparison to a ratio of 2:1 in 2015, the IEA said.
“Clean energy investment is setting new records even in challenging economic conditions, highlighting the momentum behind the new global energy economy,” IEA executive director Fatih Birol said.
“The rise in clean energy spending is underpinned by strong economics, by continued cost reductions and by considerations of energy security. But there is a strong element of industrial policy, too, as major economies compete for advantage in new clean energy supply chains,” he said.
Investment in solar photovoltaic (PV) power “now surpasses all other [electricity] generation technologies combined”, the IEA found. It forecasts spending on solar PV will hit $500bn this year, “as falling module prices spur new investments”.
Power sector investment rose by 15pc in the year to $1.3 trillion in 2023, but the IEA expects the growth rate to slow in 2024 owing to cost reductions for renewables. The watchdog noted that in 2023 “each dollar invested in wind and solar PV yielded 2.5 times more energy output than a dollar spent on the same technologies a decade prior”.
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Oil, gas investment matches demand
The IEA expects global upstream oil and gas investment to increase by 7pc to $570bn this year — following a similar year-on-year rise in 2023 of 9pc. The increase is driven mostly by Middle East and Asian national oil companies, it said.
Oil and gas investment this year “is broadly aligned with the demand levels implied in 2030 by today’s policy settings, but far higher than projected in scenarios that hit national or global climate goals”, the report found.
Reaching net zero emissions by 2050 would mean that annual investment in fossil fuels drops by more than half, from just over $1 trillion in 2024 to under $450bn in 2030, the IEA said. It would also mean spending on low-emissions fuels would increase tenfold, to around $200bn in 2030, it added.
“Clean energy investment” by oil and gas companies stood at $28bn in 2023, “less than 4pc of overall capital spending”, the report noted.
More than 120 countries pledged at the UN Cop 28 climate summit to treble renewable energy capacity and double energy efficiency by 2030. In order to hit these goals, clean energy investment should double by 2030 globally — and quadruple in emerging and developing economies outside China over the same timescale, the IEA said.
It noted that China, the EU and the US account for nearly 60pc of current global spending on clean energy. Europe and the US will account for clean energy spending of $370bn and $315bn this year, respectively, while “clean energy powerhouse” China is projected to spend $675bn on clean energy in 2024, the IEA said. But of the more than 50GW of unabated coal-fired power generation approved last year, almost all was in China, reflecting the country’s security priorities, especially in the face of underperforming hydropower capacity.
