Global clean energy investment must triple by 2030 to fulfill the projected 1.5°C future in the International Energy Agency’s net-zero by 2050 roadmap, the agency warns today in its annual World Energy Investment report.
Global energy investment is set to increase 10% this year, to US$1.9 trillion, as parts of the world begin to emerge from a pandemic-driven downturn, and those dollars are shifting out of “traditional fuel production” in favour of electricity and end use sectors like buildings and transportation, the IEA says.
But while “the rebound in energy investment is a welcome sign,” Executive Director Fatih Birol said in a release, “much greater resources have to be mobilized and directed to clean energy technologies to put the world on track to reach net-zero emissions by 2050.”
The IEA expects renewable energy to “dominate investment in new power generation,” accounting for for 70% of the US$530 billion to be spent on new generation capacity, with the remainder going to grids and storage. And “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 10 years ago.”
The agency also foresees energy efficiency investments rising 10% this year.
But despite these and other “encouraging signs,” the report states, “stimulus spending on clean energy technologies is falling well short of what is needed to ensure a sustainable recovery from the COVID-19 crisis. Many developing countries lack the means to pursue expansive recovery strategies, and early signs of inflation in some economies have led to questions about how long the current environment of low interest rates will last.”
The last year has seen governments and financial institutions produce a “proliferation of commitments” to net-zero emissions by 2050 or “soon thereafter”, the agency adds. And clean energy companies have done well on stock markets, “with renewable power companies outperforming both listed fossil fuel companies and public equity market indices in recent years, and with lower volatility.”
But renewable energy financing is growing faster than actual spending, the IEA warns, pointing to a shortage of “high-quality” clean energy projects. “This is compounded by inadequate channels to guide available funds in the right direction and a lack of intermediaries capable of matching surplus capital with the sustainability needs of companies and consumers.”
The current state of clean energy finance points to the need for better policies to drive the “historic surge” in investment, the IEA says.
“The $750 billion that is expected to be spent on clean energy technologies and efficiency worldwide in 2021 remains far below what is required in climate-driven scenarios,” the report states. “Clean energy investment would need to double in the 2020s to maintain temperatures well below a 2°C rise and more than triple in order to keep the door open for a 1.5°C stabilization.”
It advises that “moving to a climate-aligned energy pathway hinges on a broad range of government actions, including attention to the financial architecture that can accelerate direct investments in market-ready solutions and promote innovation in early-stage technologies.”