Clean Energy Investments Nearly Double the Investment in Fossil Fuels

The International Energy Agency (IEA), a leading authority on global energy trends and investment, has reported that the world currently invests almost twice as much in clean energy as fossil fuels. The report shows that the global energy investment is, for the first time, set to exceed $3 trillion in 2024, with every dollar going to fossil fuels, two dollars are invested in clean energy.

Main Findings of the IEA’s World Energy Investment 2024 Report

The primary finding of the IEA’s World Energy Investment 2024 report on clean energy investment is that it is set to be almost twice the amount going to fossil fuels.  

Despite financing pressures, global energy investment in clean energy technologies and infrastructure is expected to increase to 2 trillion USD. This investment will be directed towards a range of technologies and infrastructure, including solar and wind farms, energy storage systems, and smart grids. Investments in these areas have been accelerating since 2000 and are currently higher than the overall spending on oil, gas, and coal.

However, the report also warns that there are still significant imbalances and shortfalls in energy investments in many parts of the world; for example, there are low amounts of clean energy investments in emerging and developing economies such as India and Brazil (outside China).

The major factors driving the significant uptake in energy include:

• Strong clean energy economics.
• Clean energy product cost reductions.
• Energy affordability by local and global communities.

The IEA concludes by emphasising the urgent need for more investment to reach developing economies lacking access to secure, affordable, and sustainable energy sources.

What Has Caused the Increase in Clean Energy Investments?

The IEA report suggests that intergovernmental agreements and policies, such as the Paris Agreement, have played a significant role in promoting the uptake of clean energy systems. These agreements provide a framework for governments to collaborate on climate change mitigation and adaptation, creating a favourable environment for clean energy investments.

For example, the combined investment in renewable and nuclear power used to generate electricity around the Paris Agreement 2015 was twice the fossil-fuel investments.

Fast forward to 2024, the IEA report highlights that the investments in renewable power and nuclear power used to generate electricity are expected to be ten times that of investments in fossil fuels. In 2024, solar PV investments will lead to renewable energy investment, above well-established renewables such as wind and hydropower systems, and are expected to continue growing to $500 billion, primarily due to the recent reductions in solar module prices.

Which Economies Are Investing in Clean Energy?

The IEA report warns about significant investment flow imbalances in the emerging economies outside China, which is expected to be the largest share of clean energy investment of $675 in 2024. This investment will be primarily driven by strong local demand for solar energy, lithium batteries, and electric vehicles.

To fully realise the potential of these investments, supportive policies, and government actions are needed. These could include feed-in tariffs for renewable energy, tax incentives for clean energy investments, and regulations to promote energy efficiency. The following regions and economies in the developed economies with higher clean energy investments include the United States and Europe, with clean energy investments of $370 billion and $315 billion, respectively.

More investment is needed for the grids and electricity storage if major headwinds are to be achieved, and the constraints faced by the energy transition are overcome. Besides, more policies and government action are needed to translate the ambitions for clean energy into actions that deliver real-term values.

Which Economies Are Still Investing in Fossil Fuels?

Regarding worldwide oil and gas investments, it is expected that spending by national fossil fuel companies based in the Middle East and Asia will be a dominant factor in increasing global upstream oil and gas investment by 7% to reach around $570 billion.

The IEA report highlights that the 2024 oil and gas investment closely follows projected fossil fuel consumption patterns for the medium term in 2030. Additionally, from recent trends, oil and gas companies' investments in clean energy were $30 billion in 2023, accounting for 4% of the industry's capital spending.

Nonetheless, there is a worrying trend that coal investments continue to rise based on the 2023 data compared to previous 2015 spending data.

What Does This Mean for the Future?

This recent achievement in higher investments in clean energy, such as renewable energy, grids, and storage capacity, than fossil fuels, is a recent trend, with the first time this occurred in recent years being in 2023. This trend is a testament to the potential of clean energy investments.

As a result, more effort is needed to maintain the momentum and commitments to ensure that the clean energy systems continue to receive the much-needed investment that enables businesses and governments to innovate and support the clean energy ecosystem.

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