IEA Report: Expect $1.7 Trillion Investments In Clean Energy In 2023

The International Energy Agency has said that the global investment in clean energy is on course to rise to $1.7 trillion in 2023. In this journey, solar energy is set to eclipse oil production for the first time.

According to the new report by IEA, about $2.8 trillion is set to be invested globally in energy in 2023, of which more than $1.7 trillion is expected to go to clean technologies – including renewables, electric vehicles, nuclear power, grids, storage, low-emissions fuels, efficiency improvements and heat pumps – according to the IEA’s latest World Energy Investment report.

The remainder, slightly more than $1 trillion, is 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.

IEA Executive Director Fatih Birol mentions, “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.”

IEA said that clean energy investments have been boosted by a variety of factors, including strong economic growth, volatile fossil fuel prices and Russia’s invasion of Ukraine.

“Enhanced policy support through major actions like the US Inflation Reduction Act and initiatives in Europe, Japan, China and elsewhere have also played a role,” notes IEA.

Fossil Fuels Rebound Scenario

The report by IEA finds that spending on upstream oil and gas is expected to rise by 7% in 2023, taking it back to 2019 levels.

Nonetheless, the expected rebound in fossil fuel investment means it is set to rise in 2023 to more than double the levels needed in 2030 in the IEA’s Net Zero Emissions by 2050 Scenario.

The oil and gas industry’s capital spending on low-emissions alternatives such as clean electricity, clean fuels and carbon capture technologies was less than 5% of its upstream spending in 2022. That level was little changed from last year – though the share is higher for some of the larger European companies.

IEA says 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. But it finds that investment in many countries 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.

IEA said that 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.