Green shift in 2024: Fossil fuels to top $1 trillion but lion’s share of energy investment going to clean power

As the global energy transition quest makes new inroads, the green shift is gaining more ground with spending on such technologies eclipsing the sum being poured into fossil fuels by a considerable margin. As a result, clean energy technologies and infrastructure are poised to hit $2 trillion in 2024, which is double the amount going to coal, oil, and gas, according to the International Energy Agency (IEA).  

The IEA’s annual ‘World Energy Investment’ report brings good news for the energy transition journey in 2024, as global investment scales are set to tip in favor of clean energy, which is expected to receive twice the amount going to fossil fuels even though higher financing costs hinder new projects, especially in emerging and developing economies.

With improving supply chains and lower costs for clean technologies putting wind in its sails, the total energy investment worldwide is forecasted to surpass $3 trillion in 2024 for the first time. The biggest slice of this investment pie is expected to go to clean technologies, thus, some $2 trillion is earmarked for renewables, electric vehicles, nuclear power, grids, storage, low-emissions fuels, efficiency improvements, and heat pumps.

This by no means ends the bankrolling of fossil fuels, as slightly over $1 trillion is set to go to coal, oil, and gas. However, the rise in clean energy investment in 2024 continues the trend from last year, when combined investment in renewable power and grids overtook the amount spent on fossil fuels for the first time. For the IEA’s new zero pathway to be reached, global clean energy spending needs to rise from $1.8 trillion in 2023 to $4.5 trillion annually by the early 2030s.

The report finds that global upstream oil and gas investment is anticipated to grow by 7% in 2024 to reach $570 billion, following a similar rise in 2023, predominantly driven by national oil companies in the Middle East and Asia. Based on the IEA’s predictions, oil and gas investment is broadly aligned with the demand levels implied in 2030 by the current policy settings. However, this is said to be far higher than projected in scenarios that meet national or global climate goals.

Furthermore, oil and gas players financed clean energy with $30 billion in 2023, accounting for about 4% of the industry’s overall capital spending. In the meantime, the report points out that coal investment continues its upward surge, with last year seeing the highest level since 2015, with over 50 gigawatts of unabated coal-fired power approved.

The combined investment in renewables and nuclear for electricity generation was twice the amount going to fossil fuel-fired power in 2015 when the Paris Agreement was sealed. The IEA’s report indicates that the spending is on track to increase ten times as much in 2024, with solar PV spearheading the power sector’s transformation.

The report claims that solar PV is backed by more money than all other electricity generation technologies combined, investment in solar PV is poised to grow to $500 billion in 2024 as falling module prices spur new investments.

Having been stuck at around $300 billion annually between 2015 and 2021, grids and electricity storage have been pinpointed in the report as significant constraints on clean energy transitions. Things are about to change in 2024 as spending on grids is rising and on the way to reaching $400 billion, largely due to new policy initiatives and funding in Europe, the United States, China, and some countries in Latin America.

As costs fall further, the report notes that battery storage investments are taking off and are on the road to reaching $54 billion in 2024. This spending is perceived as highly concentrated, as for every dollar invested in battery storage in advanced economies and China, only one cent was invested in other emerging and developing economies.

Moreover, China has been identified in the report as the country set to account for the largest share of clean energy investment in 2024, rising an estimated $675 billion, stemming from strong domestic demand across three industries, encompassing solar, lithium batteries, and electric vehicles.

The second and third places go to Europe and the United States, with clean energy investments of $370 billion and $315 billion, respectively. Therefore, the report concludes that these three major economies make up more than two-thirds of global clean energy investment, spotlighting the disparities in international capital flows in energy.

Fatih Birol, IEA’s Executive Director, underscored: “Clean energy investment is setting new records even in challenging economic conditions, highlighting the momentum behind the new global energy economy. For every dollar going to fossil fuels today, almost two dollars are invested in clean energy.

“The rise in clean energy spending is underpinned by strong economics, by continued cost reductions and by considerations of energy security. But there is a strong element of industrial policy, too, as major economies compete for advantage in new clean energy supply chains.”

The report also warns that there are still major imbalances and shortfalls in energy investment flows in many parts of the world, emphasizing the low level of clean energy spending in emerging and developing economies outside China, which is set to exceed $300 billion for the first time led by India and Brazil.

Despite these gains in the green energy shift, the IEA underlines that this investment accounts for only about 15% of global clean energy spending, which is seen to be far below what is required to meet growing energy demand in many of these countries, where the high cost of capital is holding back the development of new projects.

“More must be done to ensure that investment reaches the places where it is needed most, in particular the developing economies where access to affordable, sustainable and secure energy is severely lacking today,” urged Birol.