In its recently released 2023 outlook, the International Renewable Energy Agency (IRENA) has highlighted concerns regarding the current state of investment in the energy transition. The agency claims that the current focus on a limited number of technologies and countries is hindering progress and jeopardizing the achievement of key Paris Accord goals.
IRENA's assessment of global efforts to limit global warming to 1.5 degrees Celsius reveals that the energy transition is currently “off-track.” The agency strongly recommends increasing investments in renewable energy and diversifying the funding sources, urging both governments and private investors to contribute more substantially.
However, this recommendation may face controversy within the energy transition advocacy community. Environmental organizations often call for directing available funding towards technologies that are currently deemed more promising. IRENA's statistics play a crucial role in helping governments formulate scenarios and funding requirements to meet global transition objectives.
According to IRENA, the investment in renewable energy reached $500 billion in 2022. While this figure seems substantial, it represents only around one-third of the average investment required annually to align with the Paris Accord targets. Furthermore, the majority of these investments were directed towards solar photovoltaic and wind power, accounting for 95% of the total investment in these technologies last year.
IRENA emphasizes the importance of redirecting larger volumes of funding towards other energy transition technologies, including biofuels, hydropower, and geothermal energy. Moreover, the agency urges investment in sectors beyond power, such as heating and transport, to foster comprehensive transformation.
Highlighting an imbalance, IRENA reports that 75% of global renewable investment between 2013 and 2020 originated from the private sector. Private capital tends to gravitate towards technologies and countries with the least associated risks. To address this disparity, IRENA stresses the urgent need for public funding, particularly for developing basic energy infrastructure in the developing world and supporting the deployment of less mature technologies.
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Last year, 85% of global renewable investment disproportionately benefited less than 50% of the world's population, according to IRENA's findings. The agency expresses concern over the geographic concentration of energy transition progress, which has limited its reach to a few countries and regions. This exclusionary pattern has left almost half of the global population underserved, particularly those in countries with significant energy access needs.
IRENA Director-General, Francesco La Camera, comments on this worrisome trend, stating, “A concerning trend is the geographic concentration [of energy transition progress], which remains limited to a few countries and regions. This pattern has excluded almost half of the global population, and particularly those in countries with significant energy access needs.”
As stakeholders in the global energy transition grapple with the challenges ahead, IRENA's call for diversified investments and wider technology focus serves as a reminder that a more inclusive and comprehensive approach is essential to meet the ambitious targets set forth in the Paris Accord.
