For every dollar invested in fossil fuels, $1.7 is invested in clean technology. Five years ago, it was a one-to-one ratio, said the International Energy Agency.
Annual The world’s energy investment A report by the International Energy Agency IEA shows that for every dollar invested in fossil fuels, $1.70 is invested in clean energy technology. This marks a rapid departure from five years ago, when investments in fossil fuels and clean energy were mostly equal.
The torch is now being carried by the sun, which will soon overtake oil production, said the IEA. Nearly 90 percent of new power generation investments are now tied to solar and other low-carbon technologies, according to the report.
About $2.8 trillion is expected to be invested in energy worldwide in 2023, of which $1.7 trillion will go to clean technology, with solar power leading the way as the largest producer of energy production. The remaining approximately $1 trillion is expected to be invested in fossil fuels. Annual clean energy investment is expected to grow 24 percent between 2021 and 2023, driven by renewables and electric vehicles, while fossil fuel investment will grow 15 percent over the same period.
Investments of almost 700 billion dollars are expected in the production of renewable energy. Solar is the star performer, with more than $1 billion a day expected to be invested in solar investment in 2023. The IEA expects solar investment to total $380 billion for the full year, surpassing oil upstream costs for the first time.
With wholesale, the transition to clean production means a global transition towards electrification. Global heat pump sales have grown at double-digit annual growth rates since 2021, and electric vehicles are expected to jump by a third this year after already experiencing a significant year of growth in 2021.
China is expected to continue to lead the world in clean energy investment with more than $170 billion. The nation is followed by the European Union with an additional investment of approximately $150 billion and the United States with an additional investment of approximately $100 billion. Clean energy costs rose in 2022, but pressures will ease in 2023, and mature clean technologies remain highly cost-competitive in the current fuel price environment, the IEA said.
China alone added more than 100 GW of solar capacity in 2022, up nearly 70 percent from 2021, and annual installations increased by 40 percent or more in Europe, India and Brazil, despite inflation and supply chain issues.
“While the use of solar energy has increased year over year, the project pipeline for some other technologies has been less reliable,” the report states. “Wind power investments have fluctuated annually in key markets as politics have changed. Nuclear investments are increasing, but hydropower, which is a key low-emission source of electricity market flexibility, has been on a downward trend.”
This investment is gaining momentum due to the strong alignment of costs, climate and energy security objectives and industrial strategies. The recovery from the recession caused by the Covid-19 pandemic and the response to the global energy crisis have provided a significant boost to clean energy investment, the IEA said.
While clean technology investment is increasing globally, work needs to be done especially in developing economies, the IEA said. Many countries are held back by higher interest rates, unclear policy frameworks and market plans, weak network infrastructure, financially strained institutions and high capital costs. However, the IEA states that dynamic investments in solar energy in India, Brazil and the Middle East will drive this market forward.
The IEA is releasing a new report titled removing some of the headwinds listed above Increasing private financing for clean energy in emerging and developing economies on June 22.
Fossil fuel producers posted record earnings in 2022, although much of that cash flow has gone to dividends, share buybacks and debt repayments rather than being invested back into traditional acquisitions. The IEA said that while the transition to renewables is underway, fossil fuels are expected to continue to grow – with oil and gas costs rising by 7 percent this year. Demand for coal remains high in some markets, and the transition from these assets may not happen quickly enough, with coal investment six times higher than projected in the IEA’s 2030 net calculation scenario.
The IEA notes that clean energy among major oil and gas producers continues to grow, with solar and wind accounting for the same share. Investments in clean energy by these fossil fuel companies will double in 2022 to about $20 billion. This investment represents approximately 4% of initial capital and 0.5% of net income. According to the IEA, European major oil companies significantly outperform US major oil companies in this category.
In the United States, the demand for the introduction of solar energy is strong. In 2023 Snapshot of the sun Aurora Solar reports that 45% of solar professionals reported increased demand as a result of the Inflation Reduction Act, 40% expected demand to increase soon, and 70% reported an increase in their business. Nearly 77 percent of homeowners either have solar or are interested in purchasing it, Aurora Solar said.
In its 2021 World Energy Outlook report, the IEA stated that the world is not investing enough to meet its future energy needs. This year, “the picture is beginning to change: global energy investment is on the rise, with clean energy investment growth from 2021 leading the way, outpacing fossil fuel investment growth by nearly threefold.”
“If (clean energy investment) continues to grow at the rate seen since 2021, in 2030 total spending on low-emission electricity, grids and storage, and end-use electrification would exceed the levels required to meet globally announced climate commitments. For some technologies, notably solar energy, (investment) would be equivalent to investment, required to stabilize global average temperatures at 1.5°C, the IEA said.