Clean energy funding to surge 12% in 2022, remains insufficient: IEA
Quantum Commodity Intelligence – Global energy investment is set to rise 8% this year, supported heavily by a 12% rise in investment in clean energy, but the funding is far from enough to solve the twin problems of a shortage of energy and the move towards a cleaner, secure and affordable form of fuel.
According to the annual IEA’s World Energy Investment report, total energy investment will reach $2.4 trillion this year, but half of the increase in capital spending is linked to higher costs for key inputs such as steel, cement and metals.
Of that, almost $1.5 billion is in clean energy investment, including in electric vehicles, low carbon fuels, infrastructure, such as grids and storage, improving energy efficiency and nuclear.
“This kind of investment is rising, but we need a much faster increase to ease the pressure on consumers from high fossil fuel prices, make our energy systems more secure, and get the world on track to reach our climate goals,” said IEA Executive Director Fatih Birol.
The agency estimates that investment needs to double annually to meet nations’ pledges to cut emissions under the Paris Agreement and treble to over $4.5 trillion per year to keep the planet from warming more than 1.5C.
The IEA highlighted that high oil and gas prices and security issues would drive additional investment in clean energy, but even in a high oil price scenario, government support and regulations were needed in areas that have huge developmental costs, such as hydrogen.
“The net result is that we are still unfortunately a long way off track for that kind of net zero emissions by 2050 scenario,” said Tim Gould, chief economist at the IEA.
China invested the most in clean energy in 2021 at $380 billion, followed by the EU with $260 billion and the US with $215 billion.
In terms of upstream oil and natural gas, the IEA expects investment to increase almost 10% to over $400 billion in 2022, a three-year high, but around $90 billion below 2019 funding.
That is largely due to the fact that oil majors have been shy to make large capital commitments with long payback times due to uncertainty over demand for fossil fuels, the IEA said.
Investment in refining is also increasing, reaching $73 billion in 2022, up from about $70 billion in 2021.
“Oil and gas investment has come down sharply in recent years, its roughly half the level it was in 2014 and of course oil and gas demand hasn’t halved since 2014,” Gould said, adding that while some of that was due to improved efficiency, it was far short of what was needed given the shortfall in clean energy investment.
“Something needs to give,” he said.
Coal investment is expected to rise by almost 10% this year to $116 billion, the second successive double digit annual growth of funding in the dirtiest form of energy on the back of increased energy security issues.
That growth was seen mostly in China and India.
Birol said that he expected investment in coal to grow again next year on energy security fears and soaring prices.