Global Energy Investment Hits Record High as Clean Energy Takes Center Stage

Global energy investment is set to exceed USD 3 trillion for the first time in 2024, with a significant portion directed towards clean energy technologies and infrastructure, according to the International Energy Agency's (IEA) latest World Energy Investment report. This surge in clean energy investment, fueled by a confluence of climate goals, technological advancements, and energy security imperatives, is transforming the global energy landscape.

The agency highlights a dramatic shift away from fossil fuels, with spending on renewable power, grids, and storage now surpassing total spending on oil, gas, and coal. Investment in solar photovoltaic (PV) technology is projected to exceed USD 500 billion in 2024, surpassing all other generation sources combined. The ratio of clean power to unabated fossil fuel power investments, which was roughly 2:1 in 2015, is set to reach 10:1 in 2024.

This shift is evident in the rapid growth of solar and wind deployment, which has driven down wholesale prices in some countries, particularly during peak periods of wind and solar generation. This highlights the need for complementary investments in flexibility and storage capacity.

Investment in grids is also on the rise, with spending expected to hit USD 400 billion in 2024, driven by new policies and funding in Europe, the United States, China, and parts of Latin America. Investment in battery storage is also ramping up and is set to exceed USD 50 billion in 2024.

While clean energy investment is on the rise, the IEA report consistently warns of investment flow imbalances, particularly insufficient clean energy investments in emerging markets and developing economies (EMDEs) outside China. The report notes some tentative signs of a pick-up in these investments, but emphasizes that much more needs to be done.

IEA also highlights the importance of investing in energy efficiency and electrification in buildings and industry, as well as transportation, particularly electric vehicles (EVs).

The report sheds light on the key developments in the global energy market:

United States

• Surpassing Fossil Fuel Investment: The US has taken important steps to scale up investments in clean energy. These investments overtook spending on fossil fuels in 2020, and increased to USD 280 billion in 2023 from USD 200 billion in 2020.
• Legislative Support: The Bipartisan Infrastructure Investment and Jobs Act of 2021, allocating around USD 550 billion for clean energy and infrastructure, and the US Inflation Reduction Act (IRA) of 2022, providing an estimated USD 370 billion in funding, have been instrumental in driving this shift.
• Increased Deployment and Manufacturing: The incentives provided by these acts are prompting faster deployment of clean energy technologies and the development of new clean energy manufacturing capacities in the US.
• Continued Fossil Fuel Investments: However, the US remains the world’s largest oil and gas producer, with spending on fossil fuel supply exceeding USD 200 billion in 2023, accounting for around 19% of the global total.
• LNG Export Capacity: The United States is home to around 40% of the new LNG export capacity that is set to come to market in the second half of the decade.

China

• Clean Energy Leader: China accounts for 19% of global GDP and its annual economic growth rate of 5.2% narrowly exceeded the government’s annual target. China has announced dual carbon goals – to peak carbon emissions before 2030 and achieve carbon neutrality before 2060 – and has shown remarkable progress in adding renewable capacity.
• Record Renewable Capacity Additions: In 2023, China commissioned as much solar PV as the entire world did in 2022, while its wind additions also grew by 66% year-on-year.
• "New Three" Industries: China has seen robust growth in the "new three" industries: solar cells, lithium batteries, and electric vehicles (EVs), with exports jumping 30% in 2023.
• Investment Levels: Overall energy investment levels in China are comparable to the amounts required to meet national energy and climate goals, although full alignment with the targets implies a rebalancing away from investments in fossil fuel supply towards grids and the end-use sectors.

European Union

• Policy Momentum: The EU has intensified its clean energy policies due to the energy crisis, with a focus on reducing reliance on Russian gas and accelerating the transition to a clean energy future.
• High Clean Energy Investment: The EU stands out as one of the regions with the highest clean energy to fossil fuels investment ratios, spending more than USD 10 on clean energy for every USD 1 invested in fossil fuels.
• Renewables Growth: In 2023, investment in renewables generation totaled almost USD 110 billion, an increase of more than 6% from the previous year.
• Grid Investment: Investment in power grids rose by more than 20% in 2023, reaching nearly USD 65 billion, reflecting the need for more grid interconnection, especially to facilitate power flows to central European markets.
• LNG Investment: There was also ongoing growth in oil and gas investments, which reached over USD 30 billion in 2023. Investment in LNG reached nearly 7 billion, while Europe added more than 50 bcm/year of extra LNG import capacity to switch away from Russian gas, mainly via Floating Storage Regasification Units (FSRUs).

"The rise in clean energy spending is underpinned by emissions reduction goals, technological gains, energy security imperatives (particularly in the European Union), and an additional strategic element: major economies are deploying new industrial strategies to spur clean energy manufacturing and establish stronger market positions," states the IEA report.