INDUSTRY REPORT
accelerate clean energy transitions is the only lasting solution . This kind of investment is rising , but we need a much faster increase to ease the pressure on consumers from high fossil fuel prices , make our energy systems more secure and get the world on track to reach our climate goals .”
Clean energy investment grew by only 2 % per year in the five years after the Paris Agreement was signed in 2015 . But since 2020 , the pace of growth has accelerated significantly to 12 %. Spending has been underpinned by fiscal support from governments and aided by the rise of sustainable finance , especially in advanced economies . Renewables , grids and storage now account for more than 80 % of total power sector investment . Spending on solar PV , batteries and electric vehicles is now growing at rates consistent with reaching global net zero emissions by 2050 .
“ Tight supply chains are also playing a large part in the headline rise in investment . Almost half of the overall increase in spending reflects higher costs , from labour and services to materials such as cement , steel and critical minerals . These challenges are deterring some energy companies from picking up their spending more quickly ,” explained the IEA .
“ From a low base , there is rapid growth underway in spending on some emerging technologies notably batteries , low emissions hydrogen and carbon capture utilisation and storage . Investment in battery energy storage is expected to more than double to reach almost US $ 20 billion in 2022 ,” it added .
However , despite some bright spots such as solar in India , clean energy spending in emerging and developing economies ( excluding China ) remains stuck at 2015 levels , with no increase since the Paris Agreement was reached . Fatih Birol , Executive Director , IEA . Public funds to support sustainable recovery are scarce , policy frameworks are often weak , economic clouds are gathering and borrowing costs are rising . This all undercuts the economic attractiveness of capital-intensive clean technologies .
“ Much more needs to be done , including by international development institutions , to boost these investment levels and bridge widening regional divergences in the pace of energy transition investment ,” cautioned the IEA .
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Targeted investment needed
“ Another warning sign comes in the form of a 10 % rise in investment in coal supply in 2021 , led by emerging economies in Asia , with a similar increase likely in 2022 . Although China has pledged to stop building coal-fired power plants abroad , a significant amount of new coal capacity is coming onto the Chinese domestic market ,” added the IEA .
Russia ’ s invasion of Ukraine has pushed up energy prices for many consumers and businesses around the world , hurting households , industries and entire economies – most severely in the developing world where people can least afford it . Some of the immediate shortfalls in exports from Russia need to be met by production elsewhere , notably for natural gas , and new LNG infrastructure may also be required to facilitate the diversification of supply away from Russia . While oil and gas investment is up 10 % from last year , it remains well below 2019 levels .
“ Overall , today ’ s oil and gas spending is caught between two visions of the future : it is too high for a pathway aligned with limiting global warming to 1.5 ° C , but not enough to satisfy rising demand in a scenario where governments stick with today ’ s policy settings and fail to deliver on their climate pledges . Today ’ s high fossil fuel prices are generating pain for many economies but are also generating an unprecedented windfall for oil and gas producers . Global oil and gas sector income is set to jump to US $ 4 trillion in 2022 , more than twice its five-year average , with the bulk of it going to major oil and gas exporting states ,” explained the IEA .
“ These windfall gains provide a once-in-a-generation opportunity for oil and gas-producing economies to fund the much-needed transformation of their economies , and for major oil and gas companies to do more to diversify their spending . The share of spending by oil and gas companies on clean energy is rising slowly , with progress driven mainly by the European majors and a handful of other companies . Overall , clean energy investment accounts for around 5 % of oil and gas company capital expenditure worldwide , up from 1 % in 2019 ,” it added .
Clean energy technologies require a host of critical minerals , and for the first time the World Energy Investment report includes a detailed review of investment trends for critical minerals . Higher and more diversified investment is needed to curb today ’ s price pressures and create more resilient clean energy supply chains , said the IEA . Worldwide exploration spending rose 30 % in 2021 , with the increase in the United States , Canada and Latin America offering the prospect of more diversified supply in the years ahead .