Global Solar Investments Increased By 2% In Last 8 Years: Report

A latest report by the International Solar Alliance (ISA) stated that global investment in solar increased by an average of around 2 percent over the last eight years. It added that, on the contrary, fossil fuels are still receiving a major share at nearly a trillion dollars annually. 

The report put the investment in the global energy sector at $2.6 trillion in 2022, which has increased by 13.5 percent over the preceding year. The report states that, between 2015-2022, the overall investment in the energy sector has remained stagnant. There has been slow growth at an average rate of 2%. 

Overall, the energy investments were driven by investments in the power sector, accounting for just over 41%. It was followed by investment in fuels at 35%, of which 98% is attributable to fossil fuels and just over 2% to clean fuels. 

Moreover, the report put the investment in the power sector to have increased by (29% growth since 2015), which is driven mainly by investments in renewable energy and electricity networks. The investments in energy end use and energy efficiency have reportedly grown by 57% since 2015, thereby making it the fastest-growing sector. 

 

The report states that renewable energy technologies have propelled the power sector investments. The power sector investments reportedly grew by 12% in 2022, surpassing $1 trillion for the first time, with 2023 and expected to see further growth to almost $1.2 trillion.

The report finds renewables and electricity networks to be the leading components of power sector investments and are expected to account for more than ~ $1 trillion in 2023. On the contrary, the report finds that RE investment has increased from ~$330 billion in 2015 to ~$600 billion in 2022, a growth of more than 80%; investment in coal and oil & natural gas has reduced by 60% and 25% respectively during the same period.

The report anticipates that the investments in solar energy are expected to grow to top $380 billion by 2023. It suggested that in 2023, the major contributing factors to this solar investment trend are technological maturity and improved system performance. These investments drove down technology costs, with the support of a favorable policy and regulatory environment, that worked in tandem with reduced technology risk and increased developer experience, thereby increasing manufacturing and assembling capacities and continued innovations in technologies and business models and enhanced system integration. All these factors have increased the cost competitiveness of the solar sector, thereby attracting investments from different players.

A region-wide analysis suggests that regions such as China, the United States of America (USA), Japan, Spain, Australia, Netherlands, South Korea, Brazil, Vietnam, Germany, and India. China and the USA have reportedly witnessed a surge in investments. They have dominated the mature solar PV market. This has reportedly been consistently attracting the most annual solar investments, with a combined share of about 50% of all solar investments since 2015. On the contrary, only a small fraction of global investments in the solar sector are being made in emerging and developing economies such as the Middle East and Africa, Latin America, and the Caribbean.

Based on the latest trend, it can be evaluated that while the residential segment has reportedly witnessed a record growth of more than 50% in terms of both capacity installations and investments, the utility segment has recorded a growth of 30% and the C&I segment has recorded the lowest growth of 8% over 2021. On the contrary, the off-grid solar segment had a record investment of $746 million in 2022, an increase of 63% over 2021.

This segment has been catching the interest of investors, as a result of which financial commitment in the form of equity exceeded debt for the first time in 2022. The major takeaway from the report is that it places the solar energy sector to be a major source of investment and has reportedly commanded (45-60%) over the last 6-7 years. This composes the largest share of overall RE investments, the report adds. This is due to its technological and financial maturity, and the Investments in the solar sector have grown over 84% between 2015 and 2022.