Kritti Bhalla
Communications Officer
Clean energy investments now surpass fossil fuel spending at a ratio of 2:1, helped by the falling price of essential commodities to renewable technologies, according to the International Energy Agency (IEA).
Solar power investment is set to reach an investment milestone of USD 500bn this year, overtaking all other energy investments and increasing the gap between solar and other forms of electricity generation like coal, hydro and wind.
As a whole, energy investment is set to increase to $3 trillion this year. Clean energy spending now surpasses fossil fuel spending at a ratio of 2:1, according to the IEA's World Energy Investment 2024 report.
Six years ago, this ratio was 1:1.
This momentum seems to transcend politics, with fossil fuel-producing Texas in the USA setting a national record for solar energy generation earlier this year, as reported by the Financial Times.
The growth of renewables projects has been partially set off by easing supply chain pressures and falling prices for the metals and minerals necessary for the energy transition.
“The rise in clean energy spending is underpinned by strong economics, continued cost reductions and by considerations of energy security,” Dr Fatih Birol, Executive Director of the IEA.
Investors can read the IEA overview and key findings at a glance as well as download the full report.
"The biggest fault line"
Despite the overall progress, the report also highlights continued barriers and associated key trends. For example, there is a significant disparity in levels of investment in clean energy between different economies and geographic regions.
Nearly 85% of clean energy investment is concentrated in developed and advanced economies, while emerging markets and developing economies (EMDEs) outside China currently receive only a 15% share of this.
This is despite EMDEs comprising two-thirds of the world’s population and the fact they will create the bulk of future energy demand.
The current investment levels are far below the required amounts in terms of volume and share to ensure those nations have full access to modern energy like solar power, wind energy and clean cooking solutions, and sustainably meet rising energy demand.
Dr Birol said “This is the biggest fault line of reaching a clean and secure energy world. This is an area, I think, international community needs to pay attention to.”
Clean energy investment in EMDEs outside China is anticipated to reach $320 billion this year, matching the 50% growth rate of advanced economies since 2020. This growth is driven by new policy initiatives, well-managed public tenders, and improved grid infrastructure in some regions. However, it comes from a very low base, and many least-developed economies are still being left behind.
Another major hurdle for clean energy investment in EMDEs outside of China is the high cost of capital, which is at least twice as high as in advanced economies. This is due to a mix of economic conditions, country-specific factors, and energy sector-specific risks.
China leads
China is set to account for the largest share of the clean energy investment in 2024, with an estimated $680 billion. The combined investments in the European Union and the United States are expected to match China’s total. Together, the three currently account for 60% of the current global spending on clean energy.
This lead in clean investments comes against the backdrop of China's dual carbon goal to peak carbon emissions before 2030 and achieve carbon neutrality before 2060. The country has long been making strides in building their renewable energy capacity as a result.
In 2023, it commissioned as much solar as the entire world did in 2022 and boosted its wind capacity by 66%. It also added a staggering 11 GW of nuclear power in the past five years, more than any other nation.
China’s ambition does not come without challenges either, especially with a troubled property market. The country’s yields on sovereign bonds have been declining steadily since 2021 and reached a record low in March 2024. It remains the world's heaviest polluter, for now.
Oil and gas over-investment
Oil and gas companies increased their investment towards clean energy to $30 billion last year, nearly 50% of which went into mergers and acquisitions (M&A). Though an increase in absolute terms, clean energy only accounts for 4% of overall capital spending.
The risk of over-investment clouds the sector, warns the IEA. If the world moves swiftly to meet net zero pledges and climate goals as outlined in the Net Zero Emissions (NZE) by 2050 Scenarios and the Announced Pledges Scenario (APS) there could be a "staggering" surplus of oil by 2030.
To protect against these transition risks, oil and gas investments must align with climate goals to avoid financial losses and economic inefficiencies, while supporting a sustainable energy transition.
Our Net Zero Standard for Oil & Gas provides more context for investors. It and offers a practical tool to better understand the specific risks and opportunities associated with this critical sector for the future energy transition.
This latest edition of the IEA’s report underscores the importance of aligning investment with climate goals; to capitalise on the growing clean energy sector while managing the risks of over-reliance on oil and gas.
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