Global spending on clean energy is taking a toll on fossil fuels. This is as the latter now receives relatively low amounts of investment unlike the former.
Just recently, a disclosure by the International Energy Agency, IEA, stated that the total energy investment worldwide is expected to top $3tn for the first time this year.
It further revealed that out of the total $3tn energy investment projected for the year, renewable energy sources are expected to attract $2tn globally – nearly double of the amount going to fossil fuels in the same year.
To that end, fossil fuels will enjoy slightly over $1tn spread across coal, gas and oil, establishing a huge margin in investment rates.
“Some $2tn is expected to flow towards clean technologies such as renewables, electric vehicles, nuclear power, grids, storage, low-emissions fuels, efficiency improvements and heat pumps. The remainder – slightly over $1tn – is set to go to coal, gas and oil,” the IEA stated in its report which acknowledged high pressures on financing.
The IEA however said that the unequal distribution of finance to the two energy sources which saw renewable energy take the lionshare was helped by improving supply chains and lowering costs for clean technologies and that even as spending on clean energy broke records, there were still major imbalances and shortfalls in energy investment in many parts of the world.
Citing China which is perceived as a leading hub for a strong domestic demand for solar, the agency said lithium batteries and electric vehicles stand higher chances of accounting for the largest share of clean energy investment for 2024 as it is projected at an estimated $675b.
It also noted that Europe and the United States follow, with clean energy investments of $370bn and $315bn, respectively while clean energy investment in emerging and developing economies in 2024 is reportedly set to surpass $300bn for the first time.
The agency said Brazil and India are set to take the lead on this course.
“These three major economies alone make up more than two-thirds of global clean energy investment,” the report revealed, noting that this level of spending, which accounted for only about 15 per cent of the global total, was far below what was required to meet growing energy demand in many of those countries, where the high cost of capital was holding back the development of new projects.
According to the IEA, global upstream oil and gas investment is expected to increase by seven per cent in 2024 to reach $570bn, following a similar rise in 2023.
“This is broadly aligned with the demand levels implied in 2030 by today’s policy settings, according to the report – but it is far higher than projected in scenarios that hit national or global climate goals.
“Notably, clean energy investments by oil and gas companies accounted for only 4 per cent of the industry’s overall capital spending in 2023,” the report read.
It added that spending on grids, which is key to enabling faster clean energy transitions, is set to reach $400bn in 2024, having been stuck at around $300bn annually between 2015 and 2021 with investments in battery storage taking a new turn to reach $54bn in 2024. This spending however, remains highly geographically concentrated, it stated.
Meanwhile, the IEA Executive Director, Fatih Birol, while disclosing that Nigeria has chosen gas as its transition fuel for being cheaper and cleaner than petrol and diesel, said, “Clean energy investment is setting new records even in challenging economic conditions, highlighting the momentum behind the new global energy economy.”
She added that “For every dollar going to fossil fuels today, almost two dollars are invested in clean energy” and that “the rise in clean energy spending is underpinned by strong economics, by continued cost reductions and by considerations of energy security.”
She however stated that “there is a strong element of industrial policy, too, as major economies compete for advantage in new clean energy supply chains.”
Biroh warned that more must be done to achieve the desired goal especially in developing economies held bound by a myriad of limitations.
She said, “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.”
On its part, the Rural Electrification Agency plans to get about nine megawatts of electricity through solar grids.
