Global energy investment is set to exceed $3 trillion for the first time in 2024, with clean energy taking the lion’s share at $2 trillion.
In its annual World Energy Investment report for 2024, the International Energy Agency (IEA). highlighted the rapid acceleration of clean energy investment since 2020, with spending on renewable power, grids, and storage now outstripping that on oil, gas, and coal.
The IEA noted that while higher financing costs are slowing down certain investments due to the end of cheap borrowing, this has been somewhat mitigated by falling supply chain pressures and lower prices.
For instance, the price of solar panels has dropped by 30 percent in the last two years, and the cost of metals crucial to energy transitions has also fallen sharply.
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“The end of cheap borrowing has created new challenges for investment, but the easing of supply chain pressures and price declines are helping offset some of the negative impacts,” the IEA said.
The report expressed concern about imbalances in energy investment flows, particularly the lack of sufficient clean energy investment in emerging markets and developing economies (EMDE) outside China.
However, the IEA pointed out signs of improvement, with clean energy investment in these regions expected to reach $320 billion in 2024, a 50 percent increase since 2020.
“This growth is promising, yet still falls far short of what is required to ensure sustainable development,” the IEA noted, adding that Africa’s clean energy investment is projected to hit $40 billion in 2024, nearly double the 2020 level.
The report adds that solar power is leading the charge, with investments in solar photovoltaic (PV) expected to top $500 billion in 2024.
Although growth in solar may slow slightly due to falling PV module prices, the technology remains central to transforming the power sector.
“Solar PV is reshaping the power landscape,” the IEA stated. “In 2023, each dollar invested in wind and solar yielded 2.5 times more energy output than it did a decade ago.”
The shift towards clean energy has been dramatic: in 2015, the ratio of clean power to unabated fossil fuel investment was 2:1, and by 2024, this is expected to reach 10:1.
The rise in solar and wind deployment has also reduced wholesale prices in some countries, occasionally even pushing prices below zero during peak generation periods. However, the IEA notes that this highlights the need for further investments in energy flexibility and storage to ensure system stability.
Nuclear power is also poised for a resurgence, with its share of clean energy investments set to rise to 9% in 2024 after two years of decline.
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“Nuclear investment is gaining momentum, with total spending set to reach $80 billion, nearly double the level seen in 2018,” the IEA reported.
Grids, long a bottleneck for energy transitions, are also finally seeing more investment. After years of stagnation, grid spending is projected to rise to $400 billion in 2024, driven by new policies in Europe, the United States, China, and parts of Latin America. However, the IEA warns that grid investment remains critically low in many regions, creating barriers for renewable energy expansion.
Battery storage investment is also rising rapidly, expected to surpass $50 billion in 2024. However, spending is highly concentrated, with only a fraction of this investment going to developing economies.
“For every dollar invested in battery storage in advanced economies and China, only one cent is spent in other developing economies,” the IEA emphasised.
The transportation sector is driving much of the dynamism in end-use sectors, with investment in electric vehicles (EVs) expected to reach new heights in 2024.
The rise in clean energy spending, according to the IEA, is supported by emissions reduction goals, technological advancements, and a focus on energy security, particularly in the European Union.
However, the report cautioned that major economies must carefully balance the costs and benefits of new industrial strategies designed to promote clean energy manufacturing.
The IEA singled out Africa as a region requiring urgent attention.
For Africa, renewable energy projects are key to meeting rising electricity demand, but grid inefficiencies and insufficient interconnections remain significant obstacles.
Achieving Africa’s energy and climate-related goals by 2030 will require over $200 billion in annual investments. Yet, according to the IEA, Africa is set to invest just $110 billion in energy in 2024, of which $70 billion will go to fossil fuel projects.
The report further notes that clean energy investment, while rising, still accounts for only 2 percent of global spending, and the IEA warned that current levels are far from sufficient to meet the continent’s growing energy needs sustainably.
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Debt repayments and low sovereign debt ratings are exacerbating the problem, making it difficult for many African nations to secure the funds necessary for capital-intensive clean energy projects.
The IEA emphasised that concessional finance and grants will be essential to ensuring energy access for the most vulnerable populations, especially in a continent where 600 million people still live without electricity and 1 billion lack access to clean cooking.
“Reducing the high cost of capital is critical for scaling up clean energy investment in Africa,” the IEA stressed, calling for more international financial support and clear strategies from national policymakers.
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