Article Summary
- The International Energy Agency (IEA) says that over $1.7 trillion will be invested in clean energy in 2023.
- The areas to be invested in include renewable power, nuclear, grids, storage, low-emission fuels, efficiency improvements, and end-use renewables and electrification.
- The clean energy momentum has been led by renewable power and electric vehicles.
The International Energy Agency (IEA) has said that over $1.7 trillion will be invested in clean energy in 2023.
The agency stated this in its World Energy Investment report released recently. According to the report, the recovery from the slump caused by the Covid-19 pandemic and the response to the global energy crisis has provided a significant boost to clean energy investment.
A part of the report stated:
- “We estimate that around $2.8 trillion will be invested in energy in 2023. More than $1.7 trillion is going to clean energy, including renewable power, nuclear, grids, storage, low-emission fuels, efficiency improvements, and end-use renewables and electrification.
- “The remainder, slightly over USD 1 trillion, is going to unabated fossil fuel supply and power, of which around 15% is to coal and the rest to oil and gas. For every $1 spent on fossil fuels, $1.7 is now spent on clean energy. Five years ago, this ratio was 1:1.”
The IEA believes that annual clean energy investment has risen much faster than investment in fossil fuels between 2021 and 2023 (24% vs 15%).
The Russia-Ukraine context
The report highlights the fact that the Russia-Ukraine war has contributed significantly to the intense volatility that has plagued the fossil fuel market in the last year. On the positive side though, the volatility has accelerated momentum behind the deployment of a range of clean energy technologies, even as it also prompted a short-term scramble for oil and gas supply.
Factors responsible for increased clean energy investments
According to the IEA report, clean energy investments have been boosted by a variety of factors. These include:
- Improved economics at a time of high and volatile fossil fuel prices
- Enhanced policy support through instruments like the US Inflation Reduction Act and new initiatives in Europe, Japan, China, and elsewhere
- A strong alignment of climate and energy security goals, especially in import-dependent economies
- A focus on industrial strategy as countries seek to strengthen their footholds in the emerging clean energy economy.
The report explains further that the clean energy momentum has been led by renewable power and electric vehicles. Recall that the IEA said that in its 2023 Global Electric Vehicle Outlook report, the IEA said that electric vehicles (EVs) will displace oil in the coming years.
However, this will depend on electromobility pledges made by countries around the world. In the Nigerian context, the government recently adopted the National Automotive Industry Development Plan (NADIP) from 2023 to 2033.
The policy is aimed at enabling the exponential increase in the local production numbers of vehicles, reaching 40% local content, and attaining 30% locally produced electric vehicles.
Solar is the star of clean energy
The IEA report identifies solar energy as being the star of clean energy growth around the world. The report stated:
- “Solar is the star performer and more than $1 billion per day is expected to go into solar investments in 2023 ($380 billion for the year as a whole), edging this spending above that in upstream oil for the first time. Consumers are investing in more electrified end uses.”
Meanwhile, the report states that the demand for electric cars is booming, with sales expected to leap by more than one-third in 2023, after a record-breaking 2022. As a result, investment in electric vehicles has more than doubled since 2021, reaching $130 billion in 2023.
Note that other important clean energy contributions are batteries, heat pumps, and nuclear power. In 2023 low-emissions power is expected to account for almost 90% of total investment in electricity generation.