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June 6, 2024

In Charts: IEA forecasts $2tn spending on clean energy in 2024

The uptake of solar PV is being driven by falling costs, with solar panel costs decreasing by 30% over the past two years © Konstantinos Tsakalidis/Bloomberg
The uptake of solar PV is being driven by falling costs, with solar panel costs decreasing by 30% over the past two years © Konstantinos Tsakalidis/Bloomberg

Emerging and developing economies will only see 15% of global clean energy investment

The world will invest “almost twice as much” in clean energy as it does in fossil fuels in 2024, shows analysis by the International Energy Agency.

Global energy investment is set to exceed $3tn for the first time in 2024, with $2tn going to clean energy technologies and infrastructure by the end of the year, the IEA says in its “World energy investment 2024” report. This figure is a slight increase on the $1.8tn invested in clean energy in 2023.

However, it is not all good news for the net zero transition — upstream oil and gas investments are also projected to increase by 7 per cent in 2024 reaching $570bn, following a 9 per cent rise in 2023.

Laurie van der Burg, public finance lead with advocacy group Oil Change International, said in a statement that as long as fossil fuel investment continues, renewable energy spending is “like filling a leaky bucket”.

Solar dominates investment

Solar photovoltaic tech is top of the renewable energy charts, exceeding $500bn in 2024 and surpassing all other generation sources combined. The uptake of solar PV is being driven by falling costs, with solar panel costs decreasing by 30 per cent over the past two years, the IEA says.

Each dollar invested in wind and solar PV in 2023 provided 2.5 times more energy output than a dollar spent on the same technologies a decade earlier, the report says.

Falling wholesale prices for wind and solar production have also helped to shift the ratio between investments in clean power investments compared with spending on unabated fossil fuel power to a predicted 10:1 ratio in 2024 from a ratio of 2:1 in 2015, it continues.

Investment ‘imbalances’

Despite gains in clean energy investment globally, developing economies are still not seeing sufficient investment, the IEA says.

The share of global clean energy investment in emerging markets and developing economies, excluding China, is predicted to account for around 15 per cent of total global clean energy investment in 2024. 

“Both in terms of volume and share, this is far below the amounts that are required to ensure full access to modern energy and to meet rising energy demand in a sustainable way,” the IEA states.

IEA chief energy economist Tim Gould told journalists during a briefing on Thursday that this trend is “very worrying”.

“This segment [set to receive 15 per cent of clean energy investment] contains countries which are home to two-thirds of the world’s population and will likely see very dynamic energy demand growth,” he said.

Battery storage is one area that has seen “particularly [geographically] concentrated” investment, according to the report. For every dollar invested in battery storage in advanced economies and China in 2023, only one cent was invested in emerging economies, it states.

Van der Burg calls for “grants and highly concessional finance” to increase access to affordable renewable energy, housing retrofits and electrified public transportation for climate-vulnerable countries.

COP29 and COP30 must focus on “how we bring countries together to support clean energy financing in developing countries”, IEA executive director Fatih Birol added during Thursday’s briefing.

Private finance dominates

The majority of investment in the energy sector is by private corporations, the IEA says, with almost three-quarters of global energy investments (74 per cent) between 2018 and 2023 funded from private and commercial sources. Around 25 per cent was from public finance and 1 per cent came from national and international development finance institutions.

However, this split varies significantly according to geography. Half of all energy investments in emerging and developing economies are by governments or state-owned enterprises, compared with 15 per cent in advanced economies, the IEA finds.

Investments from state-owned enterprises are mainly from national oil companies, with investments from these companies in the Middle East and Asia rising “substantially” in recent years, the report says.

Private households boost spending

Global private household spending on energy has doubled to 18 per cent in 2024 from 9 per cent in 2015. This rise is due to the “combined growth” in spending on rooftop solar, home insulation and building efficiency, and electric vehicles, the IEA adds.

Investments in these technologies are largely made by “wealthier households”, the IEA says, but policymakers should focus on developing “well-designed” policies in order to make clean energy tech more financially accessible, it says.

Households have contributed to more than 40 per cent of the “increase in investment in clean energy spending” since 2016, a larger share than governments and private companies, the data shows.

International climate targets

Despite predicting positive investment trends, the IEA says that “much greater efforts” are still needed to provide investment to keep the global temperature rise below 1.5C above pre-industrial levels.

If renewable energy spending trends continue, investment would cover approximately two-thirds of the total investment needed to triple renewable capacity by 2030, as was agreed during COP28, the IEA says.

However, it calculates that if spending for transition grids and energy storage is factored into the target to triple renewables, an additional $500bn a year would need to be invested, equating to a doubling of annual spending by 2030. 

A service from the Financial Times