Global energy investment is set to increase by 8% in 2022 to reach $2.4 trillion in total, according to a new report by the International Energy Agency (IEA). Clean energy will be the primary driver of these investments.
The current growth in investment is inadequate for addressing the multiple dimensions of today’s energy crisis and in paving the way toward a cleaner and more secure energy future, notes IEA’s World Energy Investment 2022 report.
The fastest growth in energy investment is coming from the power sector – mainly in renewables and grids – as well as from energy efficiency expansion, according to the report. The rise in clean energy spending is not evenly distributed, however, with most of it initiating in advanced economies and in China. And in some markets, energy security concerns and high prices are instead prompting higher investment in fossil fuel supplies, most notably coal.
“We cannot afford to ignore either today’s global energy crisis or the climate crisis, but the good news is that we do not need to choose between them – we can tackle both at the same time,” said IEA Executive Director Fatih Birol. “A massive surge in investment to accelerate clean energy transitions is the only lasting solution. This kind of investment is rising, but we need a much faster increase to ease the pressure on consumers from high fossil fuel prices, make our energy systems more secure, and get the world on track to reach our climate goals.”
Clean energy investment grew by only 2% per year in the five years after the Paris Agreement was signed in 2015. But since 2020, the pace of growth has accelerated significantly to 12%. Spending has been underpinned by financial support from governments and aided by the rise of sustainable finance, particularly in advanced economies. Renewables, grids and storage now account for more than 80% of total power sector investment. Spending on solar PV, batteries and electric vehicles is now growing at rates consistent with the goal of reaching global net-zero emissions by 2050.
Tight supply chains are also impacting the investment push. Almost half of the overall increase in spending is a reflection of higher costs, from labor and services to materials such as cement, steel and critical minerals. These challenges are deterring some energy companies from accelerating their spending capacity.
Overall, clean energy investment accounts for around 5% of oil and gas company capital expenditure worldwide, up from 1% in 2019. The oil and gas companies invested around $10 billion in clean energy technologies in 2021, more than double the level in 2020, but still less than 4% of their total upstream spending. These companies’ investment is on track to almost double again in 2022, which would increase the share of clean energy to just over 5% of upstream capital investment. The majors and Equinor have led this growth, accounting for about 90% of total clean energy investment by the oil and gas industry in 2021 and almost all of the investment tracked so far in 2022. If growth continues according to recent trends, the companies are likely to spend around 15-20% of their upstream capital on clean energy by 2030, or around $50-60 billion per year at current rates, equivalent to 4-5% of total global spending on clean energy in 2021.
