The International Energy Agency projects that photovoltaic solar energy will attract more investment than all other sources of electricity generation combined. Global energy spending is expected to surpass $3 trillion for the first time this year.
This year’s edition of the World Energy Investment provides a full update on the investment picture in 2023 and an initial reading of the emerging picture for 2024.
The report provides a global benchmark for tracking capital flows in the energy sector and examines how investors are assessing risks and opportunities across all areas of fuel and electricity supply, critical minerals, efficiency, research and development and energy finance.
The report highlights several key aspects of the current investment landscape, including persistent cost and interest rates pressures, the new industrial strategies being adopted by major economies to boost clean energy manufacturing, and the policies that support incentives for clean energy spending, notably from the increasingly important viewpoints of energy security and affordability.
This year’s edition provides an expanded analysis on the sources of investment and sources of finance in the energy sector, including new insights on the role of development finance institutions in energy investments across emerging and developing economies. It will also look at how investment trends in clean energy compare with those in fossil fuels, as well as the geographic distribution of these investments.
The report also includes a new regional section covering 10 major economies and regions. It also assesses additional efforts needed to meet the COP28 goals to transition away from fossil fuels, triple renewable capacity and double the rate of improvements in energy efficiency by 2030.
According to the World Energy Investment 2024 report from the IEA, total energy spending, including fuels and infrastructure, will exceed $3 trillion for the first time this year. Of that, $2 trillion will be directed toward clean energy technologies.
Clean energy technology investments are rising globally, with China leading the way, but significant increases in spending are evident across all continents. Overall, investment in renewable electricity generation is expected to reach a moderate $770 billion.
The $770 billion figure is considered “moderate” because the precipitous drop in solar panel prices has slowed the dollar increase in solar investment, even as capacity continues to grow rapidly. The chart above shows that more money is going into solar than all other forms of generation combined, reaching $500 billion in 2024.
The IEA notes that in 2023, each dollar invested in wind power and solar PV yielded 2.5 times more energy output than a dollar spent on the same technologies a decade ago.
Globally, fossil fuel generation investments are projected to reach $80 billion for new generation facilities, with coal investment falling by 30% and gas decreasing by 8% compared to 2023 levels. The largest portion of the overall $3 trillion will be spent on fuel purchases, nearly $1.1 trillion, with only a small single-digit percentage going to low-emission fuels.
Investment in wind is expected to reach $200 billion, nuclear could touch $80 billion, which is double its 2018 investments. Battery storage is projected to reach $50 billion.
Private household investment in energy doubled from 9% of the total in 2015 to 18% at the end of 2023, driven largely by spending on rooftop solar, building efficiency, and electric vehicles. Since 2016, households have accounted for “40% of the increase in investment in clean energy spending,” which the IEA says is the largest share by far. Advanced economies saw 60% of their growth coming from private decisions, bolstered by strong policy support.
The moderating effect of falling hardware prices for solar panels, energy storage, and, to a lesser extent, wind turbines, has significantly offset the increased cost of capital.
Even with increased capital costs, and while hardware manufacturers face financial challenges, renewable projects themselves are seeing improved profitability. The IEA reports that returns on investment capital increased by one-third in 2023 compared to the previous year, due to the declining costs of hardware. The decrease in solar module prices on its own has lowered the projected levelized cost of electricity for solar power facilities by 5%, with energy storage projects experiencing even greater payback improvements due to their own price collapses.
John Fitzgerald Weaver, .pv-magazine.com
