Clean energy investments outpacing fossil fuels, says IEA

The International Energy Agency (IEA) has published its annual World Energy Investment report. The findings are stark – spending on clean energy technology is “significantly outpacing” outlay on fossil fuels globally.

Around $2.8 trillion USD will be invested globally in energy in 2023, of which $1.7 trillion will be spent on clean technologies – including renewables, electric vehicles, nuclear power, grids, storage, low-emissions fuels, efficiency improvements and heat pumps. The remainder will go on coal, gas and oil.

This represents a 24% rise 2021-2023, the bulk of which is driven by renewables and electric vehicles, compared with a 15% rise in fossil fuel investment in the same period. Low-emissions electricity technologies are expected to account for almost 90% of investment in power generation.

Consumers are also investing in more electrified end-use products and services. Global heat pump sales have enjoyed double-digit annual growth since 2021, while electric vehicle sales are expected to leap by a third this year after “surging” in 2022, the Agency records.

While green advocates may take these figures as an encouraging sign of mounting private sector action on climate change, the IEA found this was just one of several issues contributing to growing “hesitation” over traditional oil and gas investments. Anxieties about costs, uncertainties on longer-term demand, and investor pressure to focus on returns rather than production growth were all cited as factors far more extensively than the environment.

Overwhelmingly, the IEA attributes the seismic recent shift towards clean energy investments to volatile fossil fuel prices produced by Russia’s invasion of Ukraine, exacerbating existing concerns about energy security, and affordability.

Nonetheless, it’s clear that societal pressure, and government regulations, have played some role in compelling corporations and investors to limit their exposure to traditional energy resources. For example, currently “nearly all” coal investment is focused on maintaining or boosting production from existing mines, which the IEA suggests reflects “increased emphasis on environmental, social and corporate governance,” and “public opposition,” limiting new coal mine development. Still, coal investment in 2023 is set to reach nearly six times the levels envisaged in the IEA’s Net Zero by 2030 modelling.

There remain “bright spots” in clean energy investment across the globe, with China playing a key role in the research, development, adoption and export of clean technology. India is too singled out for “dynamic investments in solar,” and Brazil for its push into renewables. However, the Agency identifies investment in many countries being held back by 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,” the IEA report concludes.