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Global investment in clean energy is projected to reach an impressive $1.7 trillion in 2023, marking a significant milestone as solar energy surpasses oil production for the first time. A new report from the International Energy Agency (IEA) highlights that investment in clean energy technologies is outstripping spending on fossil fuels. Affordability and security concerns stemming from the global energy crisis are driving the momentum behind sustainable alternatives.
The IEA’s latest World Energy Investment report predicts that out of the anticipated $2.8 trillion global energy investment in 2023, more than $1.7 trillion will be directed towards clean technologies. These include renewables, electric vehicles, nuclear power, grids, storage, low-emissions fuels, efficiency improvements, and heat pumps. Meanwhile, slightly over $1 trillion will be allocated to coal, gas, and oil.
Clean energy investment is projected to increase by 24% between 2021 and 2023, primarily driven by renewables and electric vehicles. In comparison, fossil fuel investment is expected to rise by 15% during the same period. However, over 90% of this clean energy investment surge is concentrated in advanced economies and China, posing a risk of energy disparities if other regions do not accelerate their clean energy transitions.
IEA Executive Director Fatih Birol emphasized the rapid progress of clean energy, stating, “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.” Birol highlighted the remarkable rise of solar energy, set to surpass oil production in terms of investment for the first time.
Low-emissions electricity technologies, led by solar power, are anticipated to account for nearly 90% of investment in power generation. Consumers are also increasingly investing in electrified end-uses, with global heat pump sales experiencing double-digit annual growth since 2021. Electric vehicle sales are projected to surge by one-third this year, building upon the significant growth witnessed in 2022.
Several factors have contributed to the boost in clean energy investments, including periods of robust economic growth, volatile fossil fuel prices that raise energy security concerns, and policy support through initiatives such as the US Inflation Reduction Act and efforts in Europe, Japan, China, and other regions.
Despite an expected rebound in fossil fuel investment, with a 7% rise predicted for 2023, it remains significantly higher than the levels needed in the IEA’s Net Zero Emissions by 2050 Scenario. Global coal demand reached record highs in 2022, and coal investment this year is projected to exceed the levels projected for 2030 in the Net Zero Scenario.
The oil and gas industry’s spending on low-emissions alternatives, including clean electricity and clean fuels, accounts for less than 5% of its upstream spending in 2022. While some larger European companies allocate a higher share, overall progress remains limited.
Notably, emerging and developing economies face significant shortfalls in clean energy investment. While countries like India, Brazil, and certain parts of the Middle East show promising investments in solar and renewables, many nations are hindered by factors such as higher interest rates, unclear policy frameworks, weak grid infrastructure, financially strained utilities, and high capital costs. The international community must take concerted action, especially in driving investment in lower-income economies where the private sector has been hesitant to invest.
The surge in global clean energy investment signifies a major shift in the energy landscape, with renewables and electric vehicles taking center stage. The transition to cleaner and more sustainable energy sources is being driven by a combination of economic factors, environmental concerns, and advancements in technology. It is a clear indication that clean energy is not only economically viable but also increasingly becoming the preferred choice for investors.
Investing in clean energy not only helps address climate change and reduce greenhouse gas emissions but also presents opportunities for job creation, energy security, and improved public health. The continued growth in clean energy investment will be vital in accelerating the global energy transition and achieving the goals outlined in various climate agreements.