According to the International Energy Agency (IEA), the case for renewable energy investment has never been stronger. Recovery from the devastating effects of the global pandemic and the recent price hikes experienced as a result of the ensuing energy crisis have accelerated a long-anticipated increase in renewable energy investment and clean energy production.
World Energy Investment 2023
The IEA’s World Energy Investment (WEI) 2023 report reveals that the world has reached a turning point with regards to energy investment. To further clarify the situation, the report outlines the disparity between historical and current investment rates within the energy sector, the risks for investors and forecasts the direction of the energy markets in 2023.
Investment in clean energy moving fast
One of the most interesting takeaways for analysts at RA-ESG was the acknowledgement that spending in the clean energy sector has already overtaken investment in fossil fuels. To paraphrase Fatih Birol, the IEA Executive Director clarified the reports findings, investment in clean energy is moving fast and there is a clear trend towards clean technology, and away from fossil fuels. He explained, “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. One shining example is investment in solar, which is set to overtake the amount of investment going into oil production for the first time.”
90% of energy investment attributed to clean energy
Global investment in energy in 2023 is pegged at approximately 2.8 trillion USD, of which 1.7 trillion will be invested in clean energy, including electric vehicles (EV car charger points and EV charger stations), renewables such as solar power, low emission fuels and efficiency improvements etc. In balance, around 1 trillion USD will be allocated to fossil fuels coal, gas and oil). Around 90 percent of the investment will be attributed to solar energy and low emission electricity generation. As a knock-on effect, there will be an increase in investment in related electrified end-uses such as heat pumps and electric vehicles (sales were already showing a substantial uptick throughout 2022).
2023 clean energy spending
Annual clean energy investment figures between 2015 to 2023 (IEA: Licence CC BY 4.0) illustrate savvy investors move towards alternative investment opportunities in renewables and clean energy. Renewable power investment has increased from 331 billion USD (2015) to 659 billion USD (2023), equating to a substantial 99.09% increase. Similarly, investment in electric vehicles has risen from 14 billion USD (2018) to 129 billion USD (2023) and battery storage from 10 billion USD (2021) to 37 billion USD (2023).
Is 1.70 USD enough?
However, the report suggests a potential slowdown in 2023 and an imbalance between the level of investments in different countries. The sentiment was echoed in an article on the World Economic Forum website weforum.org, which questioned whether the ratio of 1.70USD spent on clean energy for every 1USD spent on fossil fuel is actually enough (in 2018 the ratio was closer to 1:1).
The United Nations article, “The world needs to do more to hit clean energy goals” also references a report Tracking SDG7 Energy Progress Report 2023 jointly published by IEA and International Renewable Energy Agency (IRENA), the UN Statistics Division (UNSD), World Health Organisation (WHO) and the World Bank, which suggests that the current level of commitment, spending and investment is not enough to achieve the United Nations’ SDG 7 (Sustainable Development Goal – 7) to provide affordable, sustainable and modern energy globally by the year 2030.
At the current rate, by 2030 up to 660 million people around the world will still have no access to electricity (the figure in 2021 was 733 million people) and 2 billion will still use fossil fuels. In the region of 35 – 40 billion USD will be needed every year to achieve the SDG 7 goals.
If you would like to know more about RA-ESG.com’s ESG renewable energy investment opportunities (such as solar energy and ev charging stations) visit www.ra-esg.com or email info@raesg.x-co.dev.
