Recent reports, based on the global clean energy pipeline, suggest that investments in renewables, clean tech, and energy infrastructure are expected to soar this year. This is not surprising given the increase in commitment to a green transition from governments around the globe. Nonetheless, the rate at which investment is growing is perhaps unexpected, as green energy funding rapidly increases to overtake oil and gas.
As investment in fossil fuels has been slowly falling over the last decade, the financing of renewable energy projects, grids and storage, nuclear power, and low-carbon fuels has risen. The global energy investment is, for the first time, expected to exceed $3 trillion in 2024, and two-thirds of this funding will go towards clean energy technologies and infrastructure, according to the International Energy Agency (IEA). Investment in renewable power and grids and storage has risen above that of fossil fuels. This shows the rapid transition away from oil, gas, and coal in favor of renewable alternatives, considering that fossil fuels held around two-thirds of the total global energy investment just nine years ago.
While China continues to dominate the clean energy space, several other global powers are rapidly increasing their renewable energy capacity, such as India, Brazil, parts of Southeast Asia, and Africa. Investment in clean energy in Africa will almost double from 2020 to $40 billion in 2024.
Investments in solar photovoltaic (PV) technology are expected to reach $500 billion globally this year. Further, investors are getting more for their money as the price of solar panels has fallen significantly in recent years as the technology has improved. For example, every dollar invested in wind and solar PV in 2023 resulted in an energy yield 2.5 times higher than a decade before.
In addition to renewable energy, investment in other low-carbon energy sources, such as nuclear power, is also increasing rapidly. Around 9 percent of energy funding is expected to go towards nuclear power in 2024, totaling approximately $80 billion. This is around double the investment seen in 2018, due to a significant decrease in interest in nuclear energy in previous decades and the recent resurgence of the clean energy source.
To prepare for the growth in global clean energy capacity, companies and governments must also invest heavily in energy infrastructure to ensure that new projects can effectively deliver the energy they are producing. Investment in grids is expected to total around $400 billion in 2024, with new policies driving spending in Europe, the United States, China, and parts of Latin America. China will account for approximately 80 percent of this grid spending. Several countries are also investing heavily in battery storage to provide a more stable energy supply, with spending expected to exceed $50 billion worldwide this year. While spending on grid improvements is increasing in several areas of the world, some countries are falling way behind when it comes to infrastructure modernization.
Clean energy spending in the U.S. is expected to rise to over $300 billion this year, according to the IEA. This is around 1.6 times the level of spending in 2020 and is higher than the investment being made in fossil fuels in the U.S. Meanwhile, the EU will spend around $370 billion, and China will spend the most, at $680 billion, this year. Fatih Birol, the Executive Director of the IEA, stated, “The rise in clean energy spending is underpinned by strong economics, continued cost reductions, and by considerations of energy security.” However, he warned that energy investment must reach “the places where it is needed most, in particular the developing economies where access to affordable, sustainable and secure energy is severely lacking today”.
Nevertheless, the IEA is still concerned about the high level of spending on fossil fuels, suggesting that if funding is not cut further then the world will be unlikely to meet its climate goals. Investments in coal have continued to increase, with over 50 GW of new projects approved in 2023, the highest rate of approval since 2015. Meanwhile, global investments in oil and gas are expected to rise by 7 percent this year, to achieve $570 billion, led by the Middle East and Asia. Despite many major oil and gas companies claiming to be investing heavily in the green transition, just 4 percent of their investment budgets go towards clean energy on average.
The rapid increase in renewable energy funding reflects a global commitment to a green transition, with several countries investing heavily in renewable energy, clean technology, and energy infrastructure. Nevertheless, investment in fossil fuels continues to be too high and must be cut to ensure the world meets its climate goals by the end of the decade, according to the IEA. Further, most green energy investment continues to be concentrated in a few major world powers, suggesting there is still a need to cultivate the renewable energy capacity of developing economies worldwide to support a global green transition.
By Felicity Bradstock for Oilprice.com
