A new report released by the International Energy Agency (IEA) has revealed that solar energy spending this year will surpass fossil fuels for the first time, as affordability and security concerns triggered by the global energy crisis strengthen the momentum behind more sustainable energy options.
According to IEA’s World Energy Investment report, 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 energy technologies, compared to USD 1 trillion spending going to 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 realise. 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 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.
The IEA report however highlights that 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, according to the IEA report, 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.
To help address this, the IEA and the IFC will on 22 June release a new special report on Scaling Up Private Finance for Clean Energy in Emerging and Developing Economies.