Globally, clean energy investment will need to triple by 2030 to put the world on track to reach net zero emissions by 2050, says the International Energy Agency (IEA).
“The rebound in energy investment is a welcome sign, and I’m encouraged to see more of it flowing towards renewables,” said Fatih Birol, Executive Director, IEA.
“But much greater resources have to be mobilised and directed to clean energy technologies to put the world on track to reach net-zero emissions by 2050. Based on our new Net Zero Roadmap, clean energy investment will need to triple by 2030,” added Birol.
As per IEA latest Report on World Energy Investment 2021, global investment in energy is set to rebound by nearly 10% in 2021 to US $1.9 trillion, reversing most of last year’s drop caused the Covid-19 pandemic, but spending on clean energy transitions needs to accelerate much more rapidly to meet climate goals.
The bulk of fuel supply investment in 2020 went into fossil fuels – 84% to oil and gas and 14.5% to coal (which is a much less capital-intensive sector) and only around 1.3% was spent on low-carbon fuels.
In 2021, global power sector investment is set to increase by around 5% to more than US $820 billion, its highest ever level, after staying flat in 2020. Renewables are dominating investment in new power generation capacity and are expected to account for 70% of 2021’s total of US $530 billion spent on all new generation capacity. Investment in grids and storage makes up the remainder.
Thanks to rapid technology improvements and cost reductions, a dollar spent on wind and solar photovoltaic (PV) deployment today results in four times more electricity than a dollar spent on the same technologies ten years ago.
Upstream oil and gas investment is expected to rise by about 10% in 2021 as companies recover financially from the shock of 2020 but their spending remains well below pre-crisis levels. There are signs that spending by some global oil and gas companies is starting to diversify.
IEA analysis last year highlighted that only around 1% of capital spending by the industry was going to clean energy investments. But project tracking in 2021 suggests that this could rise to 4% this year for the industry as a whole, and well above 10% for some of the leading European companies.
The influence of recovery packages and new climate policy measures comes through in expectations of rising expenditure in 2021 on renewable power, electricity grids and energy efficiency – notably in the buildings sector in Europe – and emerging technologies such as carbon capture, utilisation and storage and low-carbon hydrogen. The United States may provide further momentum if the infrastructure plan proposed by the administration of President Joe Biden is enacted.
Financial markets are also providing encouraging signs for clean energy investment. Sustainable debt issuance reached a record level in 2020 and renewable power companies have outperformed fossil fuel companies on international equity markets.
Even though spending on clean energy is set to rise in 2021 by around 7%, the report notes that growth in these capital expenditures has lagged changes in financial markets, in part due to a shortage of high-quality clean energy investment opportunities and appropriate channels for allocating capital into projects.
The anticipated US $750 billion to be spent on clean energy technologies and efficiency in 2021 is encouraging but remains far below what’s required to put the energy system on a sustainable path.
Clean energy investment would need to triple in the 2020s to put the world on track to reach net-zero emissions by 2050, thereby keeping the door open for a 1.5°C stabilisation of the rise in global temperatures.
