Over the past few weeks, many headlines have talked about record heat and forest fires in Canada, record North Atlantic water temperatures and heatwaves around the world. But one piece of good news for our planet is the recent growth of clean energy investing. Clean energy investing has gone into overdrive, according to the International Energy Agency’s (IEA) most recent estimates. Global investment in clean energy is expected to reach USD 1.7 trillion in 2023 (380 billion in solar power alone), an increase of 24% from 2022, and the highest level of investment in clean energy on record. What makes the numbers so intriguing, and exciting for anyone interesting in investing in the energy transition, is the record occurred before the full impact of the Inflation Reduction Act passed by the US, the accelerated decarbonization efforts in the EU, and the most recent decarbonization stimulus in China can be felt.
But what accounts for this growth? The newly released IEA's World Energy Investment 2023 report found that the growth in clean energy investment is being driven by a number of factors, including:
Falling costs: The cost of clean energy technologies has been falling in recent years, making them more affordable and accessible.
Growing demand: The demand for clean energy is growing, as businesses and consumers look for ways to reduce their carbon emissions and also save money by using onsite renewable energy for lower power costs.
Government policies: Governments around the world are increasingly ratifying policies to support clean energy, such as feed-in tariffs, carbon pricing, and renewable portfolio standards. These efforts have been accelerating over the past year and especially over the past few months outside of the United States.
The IEA report also found that investment in clean energy is outpacing investment in fossil fuels. As noted above, investment in clean energy is expected to reach USD 1.7 trillion in 2023; yet investment in fossil fuels is only expected to reach USD 1 trillion. This shift in investment puts us nearer to the trendline the IEA estimates that global investment in clean energy technologies will need to reach ($4 trillion per year by 2030) in order to achieve net-zero emissions by 2050.
While investments are moving in the right direction to hit that IEA trendline, there is still work to be done. What other steps need to be taken to continue that trend?
Renewable energy: The cost of renewables will likely see a continued drop as the technology continues to improve. Every year we hit new records for solar efficiency as the solar cell technology improves, which is why many forecasters now see a continuing rise in deployment of renewable energy around the world. This will also require a massive investment in renewable energy infrastructure such as storage and transmission.
Energy storage: Since most renewable energy is intermittent, a massive investment in energy storage technologies such as battery storage and hydrogen will be required. These technologies have seen massive cost decreases and are now seeing increased investment activity.
Carbon capture and storage: Carbon capture and storage (CCS) is a technology that can be used to capture carbon dioxide emissions from power plants and other industrial facilities. With new incentives in regions such as the US, it will likely see more investment activity.
Research and development: We need to continue to invest in research and development to develop new clean energy technologies, to help to continue making clean energy more affordable and accessible.
Achieving carbon neutrality by 2050 is a major challenge, but it is attainable. As recently as 10 years ago, the idea of carbon neutrality by 2050 was considered an impossibility. Yet, as a world, we have the accelerated investment needed to achieve that goal. More investment needs to be done, and continue at an accelerated rate, to reach that glidepath; but we now can say it is at least in the realm of possible.