The latest report by the International Energy Agency, ‘World Energy Investment 2023,’ shows that investment in clean energy has increased in recent years, with the transition mainly fuelled by Electric Vehicles (EVs) and renewable power. However, investments are concentrated in advanced economies and China. More worryingly, the decline in the prices of clean energy technologies has reversed slightly in the past two years.
The report shows that economic recovery from the COVID-19 pandemic coupled with global efforts in tackling energy scarcity have significantly propelled investments in the renewable energy sector. The report, which compares the International Energy Agency’s 2023 forecasts with the actual data from 2021, highlights a notable finding: annual investments in green energy have outpaced those in fossil fuels during this period, recording a growth of 24% against 15%.
The report also highlights the influence of recent geopolitical events on the energy market. Specifically, it points out that Russia’s invasion of Ukraine has led to substantial instability in the fossil fuel markets. Interestingly, this volatility has inadvertently accelerated the deployment of various renewable energy technologies, despite triggering an immediate scramble for oil and gas resources.
Chart 1 | The chart shows the global energy investment in clean energy and fossil fuels, 2015-2023 (estimated) in billion $
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While investments in fossil fuels have been stagnant, money flow into clean energy has considerably grown in recent years. The push towards greener fuels is driven predominantly by renewable power and EVs, according to the report. These sectors, complemented by additional contributions from other areas like battery technology, heat pumps, and nuclear power, have been at the forefront of this transition.
In 2023, low-emission power sources are expected to attract nearly 90% of the total investment in electricity generation. Among these, solar energy shines brightest. Investment in solar energy is projected to exceed $1 billion per day in 2023, totaling $380 billion for the year.
Chart 2 | The chart shows the annual clean energy investment, 2015-2023 (estimated) in billion $
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The report shows that over 90% of the surge in clean energy investment since 2021 has been concentrated in advanced economies and China. The increases in clean energy investment in these regions since 2021 have outstripped the total clean energy investment in the rest of the world combined.
However, there are other regions that are demonstrating progress. India, for instance, continues to exhibit robust investment in solar energy. Brazil’s deployment of renewable energy is on a consistent upward trajectory, while investor interest is escalating in parts of West Asia, specifically Saudi Arabia, the UAE, and Oman. But despite these developments, hurdles remain for many countries, the report argues. Higher interest rates, ambiguous policy frameworks, market designs, financially constrained utilities, and a high cost of capital are all impeding investment.
Chart 3 | The chart shows the increase in annual clean energy investment across select countries and regions, 2019-2023 (estimated) in billion $
In a shift from the consistent trend of cost reductions, prices for several crucial clean energy technologies experienced a rise in 2021 and 2022, largely because of escalating input prices for critical minerals, semiconductors, and bulk materials such as steel and cement.
Chart 4 | The chart shows the average prices for selected technologies in $ per kilowatt hour (nominal prices) and $ million per megawatt
Source: Energy Investment Unit in the Energy Supply, Investment Outlook Division of the Directorate of Sustainability, Technology and Outlooks
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