(MENAFN- Khaleej Times) Global investments in clean energy technologies are set to exceed $1.7 trillion in 2023 with solar set to eclipse oil production spending for the first time, the International Energy Agency (IEA) said.
In a forecast on how the energy transition is progressing, the IEA's World Energy Investment Report said solar investments are expected to attract over $1 billion a day in 2023.
Fatih Birol, the IEA's executive director, said on Thursday that investment in solar was set to overtake the amount of investment going into oil production for the first time.“Today's fossil fuel investment spending is now more than double the levels needed in the Net Zero Emissions by 2050 Scenario,” he said.
About $2.8 trillion is expected to be invested globally in energy in 2023, of which $1.7 trillion is expected to go to clean technologies – including renewables, electric vehicles, nuclear power, grids, storage, low-emissions fuels, efficiency improvements, and heat pumps – the report said. The remainder, slightly more than $1 trillion, is going to coal, gas, and oil.
“Clean energy is moving fast – faster than many people realise. This is clear in the investment trends, where clean technologies are pulling away from fossil fuels,” said Birol.“For every dollar invested in fossil fuels, about $1.7 are now going into clean energy. Five years ago, this ratio was one-to-one. One shining example is an investment in solar, which is set to overtake the amount of investment going into oil production for the first time.”
Haitham Al Ghais, secretary general, Opec, said recently that the global oil sector would need an accumulative investment of $12.1 trillion till 2045 which is around $500 billion a year. Ghais said at the Annual Middle East Petroleum & Gas Conference oil is expected to retain the largest share in the energy mix throughout the outlook period, accounting for almost 30 per cent in the year 2045.
Led by solar, low-emissions electricity technologies are expected to account for almost 90 per cent of investment in power generation. Consumers are also investing in more electrified end-uses. Global heat pump sales have seen double-digit annual growth since 2021. Electric vehicle sales are expected to leap by a third this year after already surging in 2022.
Clean energy investments have been boosted by a variety of factors in recent years, including periods of strong economic growth and volatile fossil fuel prices that raised concerns about energy security, especially following Russia's invasion of Ukraine. Enhanced policy support through major actions like the US Inflation Reduction Act and initiatives in Europe, Japan, China, and elsewhere have also played a role.
Spending on upstream oil and gas is expected to rise by 7.0 per cent in 2023, taking it back to 2019 levels. The few oil companies that are investing more than before the Covid-19 pandemic are mostly large national oil companies in the Middle East. Many fossil fuel producers made record profits last year because of higher fuel prices, but the majority of this cash flow has gone to dividends, share buybacks, and debt repayment – rather than back into traditional supply.
The expected rebound in fossil fuel investment means it is set to rise in 2023 to more than double the levels needed in 2030 in the IEA's Net Zero Emissions by 2050 Scenario. Global coal demand reached an all-time high in 2022, and coal investment this year is on course to reach nearly six times the levels envisaged in 2030 in the Net Zero Scenario.
The oil and gas industry's capital spending on low-emissions alternatives such as clean electricity, clean fuels, and carbon capture technologies was less than 5.0 per cent of its upstream spending in 2022. That level was little changed from last year – though the share is higher for some of the larger European companies.
The IEA report noted that annual clean energy investment is expected to rise by 24 per cent between 2021 and 2023, driven by renewables and electric vehicles, compared with a 15 per cent rise in fossil fuel investment over the same period. But more than 90 per cent of this increase comes from advanced economies and China, presenting a serious risk of new dividing lines in global energy if clean energy transitions don't pick up elsewhere.