Findings of a study released by the International Energy Agency indicate that solar energy is set to eclipse oil production for the first time.
Investment
in clean energy technologies is significantly outpacing spending on fossil
fuels.
A new
IEA report
says affordability and security concerns triggered by the global energy crisis
strengthened the momentum behind more sustainable options.
It says
about USD 2.8 trillion is set to be invested globally in energy in 2023, of
which more than USD 1.7 trillion is expected to go to clean technologies –
including renewables, electric vehicles, nuclear power, grids, storage,
low-emissions fuels, efficiency improvements, and heat pumps.
IEA’s latest
World Energy Investment report finds that slightly more
than USD 1 trillion, will be invested in coal, gas, and oil.
Annual clean energy investment is expected to rise by 24% between 2021 and
2023, driven by renewables and electric vehicles, compared with a 15% rise in
fossil fuel investment over the same period.
But more than 90% of this increase comes 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.
“Clean energy is moving fast – faster than many people realize. This is clear
in the investment trends, where clean technologies are pulling away from fossil
fuels,” 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. One shining
example is an investment in solar, which is set to overtake the amount of
investment going into oil production for the first time.”
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 already surging in 2022.
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. 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. 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.
Nonetheless, the expected rebound in fossil fuel investment means it is set to
rise in 2023 to more than double the levels needed in 2030 in the IEA’s Net
Zero Emissions by 2050 Scenario.
Global coal demand reached an all-time high in 2022, and coal investment this
year is on course to reach nearly six times the levels envisaged in 2030 in the
Net Zero Scenario.
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 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.
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.
