In Charts: UK clean energy investment jumps in 2023 but ‘acceleration’ still needed

UK clean energy investment increased dramatically between 2022 and 2023, according to data from Bloomberg New Energy Finance – but experts urge policymakers not to rest on their laurels

UK energy transition spending jumped 84 per cent in 2023 compared to 2022, data from Bloomberg New Energy Finance shows. Investment in wind and solar rebounded strongly from a weak 2022 and the electric vehicle market “reached new highs”.

Last year, the UK invested $73.9bn in the energy transition, making it the fourth largest clean energy investor globally. This figure was a significant increase from the $40bn invested in 2022, $3.7bn of which was spent on boosting renewable energy infrastructure investment, compared to the $23.2bn that went into renewables in 2023.

The UK’s growth in clean energy spending came from “very strong renewable energy investment last year for wind and solar” and “growth in the electric vehicles market”, BNEF deputy CEO Albert Cheung tells Sustainable Views.

Some people may be surprised that wind growth was strong, following the September 2023 contracts for difference round that failed to secure any bids for offshore wind, says Cheung, however, “a lot of [the contracts] ended up being allocated towards onshore wind and solar so you ended up with quite strong investment despite the news cycle being negative around it”.

The UK has a tendency to “downplay” its achievements on clean energy investments, says Cheung, and Heather McKay, a senior policy advisor at climate change think-tank E3G, concurs. “I think we beat the UK over the head slightly too much on its progress on the net zero transition,” she says. 

Despite its improved figures, in 2023 the UK lagged behind Germany, which invested $95.4bn in clean energy; the US, which invested $303.1bn; and China, which emerged as a clear leader, spending $675.9bn, according to BNEF’s Energy Transition Investment Trends 2024 report.

BNEF calculates that globally, clean energy investment will need to triple to $4.84tn a year between 2024 and 2030, compared to the $1.77tn spent in 2023.

Indeed, most major economies are not aligned with BNEF’s net zero emissions scenario, which outlines the technological investment required by different economies to reach net zero by 2050. To align with the scenario, the UK would need to nearly double its 2023 clean energy investment every year between 2024 and 2030.

“It’s clear that the UK needs to accelerate investment in the energy transition to get on track for its own legislated targets, net zero by 2050 and the interim carbon budgets that we’ve set,” Cheung says.

The Climate Change Act, signed into law in 2008, commits the UK government to reducing greenhouse gas emissions by at least 100 per cent of 1990 levels by 2050. On February 20, non-profits Client Earth, Friends of the Earth and Good Law Project announced they were taking the government to court for an “inadequate net zero strategy” that “breaches the Climate Change Act”.

UK ‘flip flopping’ is hindering progress

In February, the government released a statement announcing that the UK cut emissions by 50 per cent between 2012 and 2022. However, the data does not take into account Prime Minister Rishi Sunak’s recent decision to push back deadlines for several key net zero policies, including a ban on the sale of combustion engine vehicles, the phase-out of gas boilers, and energy efficiency requirements.

McKay at E3G says the effects of such policy “flip flopping” on long-term investment should not be underestimated. “If we really want to kickstart this green industrial revolution we really need to see delivery, and a sense from the government that they are actually confident they’re going to drive this overarching plan forward,” she adds.

Investors are looking for is a “robust commitment” from government to providing a stable policy landscape into the future, Ross Grier, head of UK investments at NextEnergy Capital, which specialises in solar investment, tells Sustainable Views. “What we really need to get away from is any short-term electioneering and short-term decision making,” he adds.

The government maintains that it is pursuing a “pragmatic” approach to net zero.

‘No growth without green’

A report by the Institute for Public Policy Research and the Green Finance Institute, published on February 20, says the UK’s “fundamental problem” has been “a lack of policy clarity and consistency” to ensure green investment. The report says that to reach net zero, between £50bn and £60bn will be needed in UK annual green finance between 2030 and 2050, on top of £400bn in economy-wide investment as recommended by the UK’s Climate Change Committee.

The UK government has previously accepted this figure, which will come from the public and private sectors. The IPPR has also previously said the government should aim to mobilise £30bn in annual additional investment between now and 2030.

“The challenge for policymakers is while we’ve made real progress on energy, we’re still off track from the deployment that the UK’s independent Climate Change Committee expects to hit our climate targets,” Sam Alvis, associate fellow at the IPPR and author of the report tells Sustainable View.

“We shouldn’t rest on our laurels. The UK has led in clean energy investment for some time, but we’re now falling behind. This has both been from a general unease about the UK’s policy on climate, and whether the government might be moving in a different direction,” he adds.

NextEnergy Capital’s Grier highlights project planning and grid capacity challenges as key areas on which policymakers should focus. “Over the last few years, particularly, we have been a little bit overconfident in terms of how attractive the UK market is in the global space. We need to maintain the UK as an important home for that future growth prospect,” he says.

The IPPR research, which included insights from the private sector, concluded that the only way to scale up private finance in the energy transition is through policy predictability, “catalytic public finance” and greater collaboration between the public and private sectors.

E3G’s McKay says that investing in the energy transition holds a multitude of benefits. “There is no growth in the UK without green,” she says. “By investing in the net zero transition, we drive forward the growth agenda, which is on the minds of all political leaders at the moment, and [create] better lives for the average person [and] a safe and stable climate.” 

In February, the Energy and Climate Intelligence Unit think-tank published analysis that found UK households paid additional annual costs of up to £2,100 in 2023 due to “climate change and slow progress to net zero”.