Global investment in clean energy is poised to reach nearly $2 trillion in 2023, marking a significant milestone as solar energy surpasses oil production for the first time, according to a new report from the International Energy Agency (IEA). The report estimates that out of the projected $2.8 trillion to be invested in the energy sector worldwide this year, over $1.7 trillion will be allocated to clean technologies, including renewables, electric vehicles, nuclear power, grids, storage, low-emissions fuels, efficiency improvements, and heat pumps.
In contrast, the remaining amount, slightly exceeding $1 trillion, will be directed towards coal, gas, and oil, highlighting the growing preference for cleaner alternatives. IEA Executive Director Fatih Birol emphasized the accelerated pace 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. 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.”
The report reveals that low-emissions electricity technologies, led by solar power, are anticipated to account for nearly 90% of the investments in power generation. Dave Jones, the head of data insights at Ember, commented on the IEA's findings, stating, “This crowns solar as a true energy superpower. It is emerging as the biggest tool we have for rapid decarbonization of the entire economy, especially as solar is increasingly used to power cars in place of oil. The irony remains that some of the sunniest places in the world have the lowest levels of solar investment, and this is a problem that needs attention.”
The IEA report projects a 24% increase in annual clean energy investment between 2021 and 2023, driven primarily by renewables and electric vehicles, compared to a 15% rise in fossil fuel investment over the same period. However, the report also highlights that more than 90% of this increase comes from advanced economies and China, which raises concerns about potential disparities in global energy transitions if other regions lag behind.
Various factors have contributed to the surge in clean energy investments in recent years, including robust economic growth, volatile fossil fuel prices that have raised energy security concerns, and geopolitical events such as Russia's invasion of Ukraine. Furthermore, enhanced policy support through significant actions like the US Inflation Reduction Act and initiatives in Europe, Japan, China, and other regions have played a crucial role in driving clean energy investments.
While spending on upstream oil and gas is expected to rise by 7% in 2023, bringing it back to 2019 levels, the majority of the cash flow from fossil fuel producers has been directed towards dividends, share buybacks, and debt repayment rather than reinvested in traditional supply. Nevertheless, the projected rebound in fossil fuel investment indicates that it will exceed the levels required by 2030 in the IEA's Net Zero Emissions by 2050 Scenario.
The report highlights a significant shortfall in clean energy investment in emerging and developing economies, although there are some positive developments in specific regions. India, for instance, has seen dynamic investments in solar energy, while Brazil and parts of the Middle East have witnessed increased investments in renewables.
