On the bright side, solar investment finally set to surpass oil spending
But fossil fuels won't go down without a fight
If the International Energy Agency's predictions are correct, 2023 is set to be the year that investment in solar energy technologies finally overtakes spending on oil production. Lest you forget, however, spending on fossil fuels is still rising too.
In its 2023 World Energy Investment report, the IEA estimates total world energy investments will reach $2.8 trillion (£2.3 trillion) in 2023, with $1.7 trillion going to clean technologies including renewables, EVs, nuclear power plants, power grid improvements and the like. Of that spending, 90 percent of energy generation investment will be in low-emissions tech, with most of that coming from solar.
"For every dollar invested in fossil fuels, about 1.7 dollars are now going into clean energy. Five years ago, this ratio was one-to-one. One shining example is investment in solar, which is set to overtake the amount of investment going into oil production for the first time," said IEA executive director Fatih Birol. The IEA said investment in solar technology was expected to surpass $1 billion per day in 2023.
The IEA cites three reasons for the rise in solar and other renewable investment: decreasing costs, more attention being paid at the national level to climate change, and energy security and industrial strategies being launched by various governments to encourage renewable energy development.
More governments are beginning to see clean energy sources "as a lasting solution to their energy security problem, in addition to climate change," Birol told CNBC. To make renewable investments a more attractive opportunity to profit-focused businesses, Birol said various countries are enacting legislation, like the US's Inflation Reduction Act and similar policies are emerging in China, Japan, the EU, and India to drive down renewable processes and encourage electrification.
"Governments, investors, see that the next chapter of the industry is clean energy technology manufacturing – batteries, electric cars, solar panels – and they are providing huge incentives to investors," Birol said.
One country that's been criticized for its lack of renewable energy incentives is the UK, which solar power firm Oxford PV recently described as the least attractive market for a new photovoltaic cell factory. Oxford PV CTO Chris Case told the Financial Times that his company was considering Germany, the US, and Hong Kong for its new solar cell factory because "it seems to me the rest of the world is staking their future on solar and the UK is not."
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According to Case, Oxford PV's current factory is located in Berlin because the UK offered zero incentives, while Germany said it would subsidize 20 percent of the capital required to build the plant. "It was quite disappointing to have a technology born and bred in the UK yet commercialized elsewhere," Case told FT.
World still not on course for net zero
While the IEA expects annual clean energy investment to increase by 24 percent from 2021 through this year, fossil fuel spending hasn't completely dried up. It's still increasing as well, rising by 15 percent over the same time period. In other words, fossil fuels aren't going anywhere.
"The expected rebound in fossil fuel investment means it is set to rise in 2023 to more than double the levels needed in 2030 in the IEA's Net Zero Emissions by 2050 Scenario," the IEA said. Demand for coal in particular reached an all-time global high last year, and is expected to reach nearly six times the levels needed to reduce emissions to desired goals by 2030.
If that doom and gloom sounds familiar, it's practically the same thing the IEA warned us about last year when it said that renewable investment needs to increase by 60 percent to meet 2050 net zero goals.
The IEA said that advanced economies like the US and China were where 90 percent of clean energy investment has been happening since 2021, which is great for those countries but not for the rest of the world. According to the IEA, renewable investments in developing economies can be hamstrung by high upfront costs exacerbated by high interest rates, unclear government policy, and weak infrastructure.
The solution? Governments need to get involved because the private sector sure isn't. "Much more needs to be done by the international community, especially to drive investment in lower-income economies, where the private sector has been reluctant to venture," the IEA said. ®