"A new clean energy economy is emerging - and emerging much faster than many realise," International Energy Agency (IEA) Executive Director Fatih Birol said at the launch of the agency's eighth World Energy Investment report.
Nearly two-thirds of the $2.8tr set to be invested globally in energy in 2023 is expected to go to clean technologies, according to the 179-page report. "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," Birol said. Led by solar, low-emissions electricity technologies are expected to account for almost 90% of investment in power generation.
More than $1.7tr is expected to go to clean technologies – including renewables, electric vehicles, nuclear power, grids, storage, low-emissions fuels, efficiency improvements and heat pumps, according to IEA. The rest is going to coal, gas and oil. Annual clean energy investment is expected to rise by 24% between 2021 and 2023, driven by renewables and electric vehicles, compared with a 15% rise in fossil fuel investment over the same period. “But more than 90% of this increase comes from advanced economies and China, presenting a serious risk of new dividing lines in global energy if clean energy transitions don’t pick up elsewhere,” the report says.
Led by solar, low-emissions electricity technologies are expected to account for almost 90% of investment in power generation. Consumers are also investing in more electrified end-uses. Global heat pump sales have seen double-digit annual growth since 2021. Electric vehicle sales are expected to leap by a third this year after already surging in 2022.
“Clean energy investments have been boosted by a variety of factors in recent years, including periods of strong economic growth and volatile fossil fuel prices that raised concerns about energy security, especially following Russia’s invasion of Ukraine. Enhanced policy support through major actions like the US Inflation Reduction Act and initiatives in Europe, Japan, China and elsewhere have also played a role.”
As to nuclear, it gets 26 mentions in the report, mostly in tables or as part of a list of other energies – just three such references in the “Overview”. Global investment in nuclear generation is projected by the IEA to be just over $60bn in 2023 according to one of the tables. However, this compares to over $650bn in renewables and just over $100bn in fossil-fuel power generation. The report notes that nuclear power investment rose mainly in advanced economies and China. “More than a decade after the accident at Fukushima Daiichi, an increasing number of countries are taking a fresh look at how nuclear technologies might provide low-emissions and dispatchable power.”
In many parts of Asia, IEA says policies supporting both renewables and nuclear power are increasing. “Japan is discussing legislation to extend nuclear power plant lifetimes beyond 60 years and South Korea’s 10th Electricity Plan incorporates a slightly higher share of nuclear power in the generation mix (35% by 2036) as well as a sharp increase in the share of renewables to 31% by 2036 (up from 7.5% in 2021).” However, final investment decisions (FIDs) for large hydropower and NPPs decreased significantly to 14 GW and 4 GW respectively (from 20 GW and 6 GW in 2021, respectively). In 2022 China was the only region to start the construction of a new NPP.
The section on “Energy end use and efficiency” discusses the European Commission’s Green Deal Industrial Plan which was “a multipronged effort to meet its clean energy transition commitments, respond to the US Inflation Reduction Act and address the continent’s high reliance on China for clean energy technologies”. IEA says the strategy has four main pillars: a predictable and simplified regulatory environment; quicker access to finance; enhanced skills; and open trade for resilient supply chains. It notes that the Net Zero Industry Act, proposed in March 2023, aims to provide a regulatory environment suited to the scale-up of the net zero industry, with the overall target of domestically manufacturing at least 40% of Europe’s clean energy technology by annual deployment by 2030.
“Additionally, the act sets out ambitious 2030 manufacturing targets for eight strategic net zero technologies: solar PV and thermal, batteries, heat pumps and geothermal technologies, electrolysers and fuel cells, sustainable biogas/biomethane technologies, CCUS, and grid technologies. In addition, other technologies such as advanced nuclear and small modular reactors, stand to benefit from the act’s measures, but are not assigned 2030 targets.”
The section on “R&D and technology innovation” notes that funding for new nuclear reactor designs was boosted by higher budgets in France, where €1bn was made available to 2030, and the UK, which plans to spend £0.4bn. The table on Corporate energy R&D spending, however shows a total for nuclear in 2022 of less than $10bn, just marginally more than in 2021, compared with more than $75bn for renewables, around $30bn for coal and almost $100bn for oil and gas, all significantly increased from the year before.
The report recognised the number of new companies which are emerging with designs for new energy projects. “For energy start-ups, 2022 was the biggest year to date for early-stage equity funding, with increases in most clean energy technology areas. Most notably, start-ups in CO2 capture, energy efficiency, nuclear and renewables nearly doubled or more than doubled their 2021 level of funding, which was already much higher than the average for the preceding decade. This type of funding supports entrepreneurs with technology testing and design, and plays a critical role in honing good ideas and adapting them to market opportunities.”
Overall, however, the report, shows a continuing interest in fossil fuels despite efforts to promote the green agenda worldwide. “Spending on upstream oil and gas is expected to rise by 7% in 2023, taking it back to 2019 levels. The few oil companies that are investing more than before the Covid-19 pandemic are mostly large national oil companies in the Middle East. Many fossil fuel producers made record profits last year because of higher fuel prices, but the majority of this cash flow has gone to dividends, share buybacks and debt repayment – rather than back into traditional supply.”
It continues: “Nonetheless, the expected rebound in fossil fuel investment means it is set to rise in 2023 to more than double the levels needed in 2030 in the IEA’s Net Zero Emissions by 2050 Scenario. Global coal demand reached an all-time high in 2022, and coal investment this year is on course to reach nearly six times the levels envisaged in 2030 in the Net Zero Scenario.”
IEA says the biggest shortfalls in clean energy investment are in emerging and developing economies, noting that investment in many countries “is being held back by factors including higher interest rates, unclear policy frameworks and market designs, weak grid infrastructure, financially strained utilities, and a high cost of capital”
It says: “Much more needs to be done by the international community, especially to drive investment in lower-income economies, where the private sector has been reluctant to venture.”
To help address this, the IEA and the International Finance Corporation (part of the World Bank) will in June release a new special report on Scaling Up Private Finance for Clean Energy in Emerging and Developing Economies.