Global energy investment is set to exceed USD 3 trillion for the first time in 2024, with a significant portion of this going towards clean energy technologies and infrastructure. Specifically, around USD 2 trillion will be directed at clean energy. This surge in investment follows an accelerating trend since 2020. Spending on renewable energy sources, including solar power, grid improvements, and energy storage, now surpasses total spending on oil, gas, and coal combined.
The shift comes as the era of low-cost borrowing ends, leading to higher financing costs. Despite this, easing supply chain pressures and falling prices have somewhat mitigated the impact on project economics. Solar panel costs have dropped by 30% over the past two years, and prices for essential minerals and metals, particularly those needed for batteries, have also decreased significantly.
However, the World Energy Investment report has consistently highlighted imbalances in energy investments, especially in emerging markets and developing economies (EMDE) outside of China. These regions are seeing a gradual increase in clean energy investments, with spending expected to reach around USD 320 billion in 2024, a 50% rise since 2020. This growth is comparable to that seen in advanced economies, though it lags behind China’s 75% increase. Major progress is noted in countries like India, Brazil, and parts of Southeast Asia and Africa, driven by new policies, well-managed public tenders, and improved grid infrastructure. For instance, Africa’s clean energy investments are projected to exceed USD 40 billion in 2024, nearly double the amount from 2020.
Despite these gains, many of the least-developed economies are falling behind, often struggling with high levels of debt. Investment in clean energy in these regions is expected to remain around 15% of the global total in 2024, which is insufficient to ensure universal access to modern energy and meet the growing demand sustainably.
Investment in solar photovoltaic (PV) technology is expected to surpass USD 500 billion in 2024, making it the largest investment category in the power sector. Solar’s central role in the power sector’s transformation is evident, even though growth might slow slightly due to falling PV module prices. Investments in solar and wind power have driven wholesale prices down in some countries, sometimes to below zero, highlighting the need for more flexibility and storage capacity investments.
Nuclear power investments are anticipated to rise in 2024, reaching an estimated USD 80 billion, nearly double the investment levels from 2018. Grid investments, which had stagnated around USD 300 billion annually since 2015, are expected to hit USD 400 billion in 2024, thanks to new policies and funding, particularly in Europe, the United States, China, and parts of Latin America. Latin America’s grid investment has almost doubled since 2021, notably in Colombia, Chile, and Brazil.
Battery storage investments are also increasing, set to exceed USD 50 billion in 2024. However, this spending is highly concentrated, with advanced economies and China receiving most of the funding. In 2023, only one cent of every dollar invested in battery storage went to other EMDE regions. Investments in energy efficiency and building electrification are relatively resilient despite economic challenges, with transport sector investments, particularly in electric vehicles (EVs), reaching new highs.
The rise in clean energy spending is driven by emissions reduction goals, technological advancements, energy security needs, and strategic industrial policies aimed at boosting local clean energy manufacturing. In the United States, clean energy investment is estimated to exceed USD 300 billion in 2024, more than 1.5 times the amount from 2020 and significantly ahead of fossil fuel investments. The European Union is expected to spend USD 370 billion, while China’s clean energy investment will approach USD 680 billion, bolstered by its large domestic market and rapid growth in solar cells, lithium battery production, and EV manufacturing.
On the other hand, upstream oil and gas investment is projected to rise by 7% in 2024, reaching USD 570 billion. This increase is largely driven by Middle Eastern and Asian national oil companies (NOCs), which have significantly boosted their investments since 2017. Most of the oil and gas investments are directed towards existing fields, new fields, and exploration.
Despite the rise in oil and gas investment, the clean energy sector still faces challenges. Clean energy spending by oil and gas companies reached about USD 30 billion in 2023, but this is less than 4% of global clean energy capital investment. Future investments in liquefied natural gas (LNG) and sustainable fuels are anticipated, though high costs and limited project capacities may affect outcomes.
Current investment trends are not aligned with the levels needed to limit global warming to 1.5°C above pre-industrial levels or meet the interim goals set at COP28. While the momentum behind renewable power is strong, an additional USD 500 billion annually is required to bridge the gap and triple renewable capacity by 2030. This would involve doubling current annual spending on renewable power, grids, and storage. Investment in energy efficiency and building electrification also needs to increase significantly.
The anticipated oil and gas investment for 2024 aligns with the 2030 goals in the Stated Policies Scenario, but there is a risk of over-investment if net-zero pledges and climate goals are met rapidly. Achieving net-zero emissions by 2050 would require a major shift in investments, with spending on fossil fuels dropping sharply and investment in low-emissions fuels rising substantially.
High capital costs in many EMDE regions remain a significant barrier to clean energy investment. Enhancing support from development finance institutions (DFIs) could help reduce financing costs and attract more private capital. However, current DFI support for clean energy projects is limited and mainly provided as debt, often in hard currencies, which raises borrowing costs. More focus is needed on de-risking projects to mobilize larger volumes of private capital and ensure sustainable energy transitions.
Discover more from SolarQuarter
Subscribe to get the latest posts sent to your email.
