Clean tech investments overtake oil and gas financing in 2023 and are set to triple by 2035
Energize Weekly, November 6, 2024
Investments in low-carbon technologies are accelerating – accounting for more than 50 percent of all energy financing in 2023 for the first time – and are set to triple to $2 trillion by 2035, according to reports by the International Energy Agency (IEA) and Rystad Energy.
“The global energy transition is no longer a distant goal – it’s happening now, and we’re in its acceleration phase,” Jarand Rystad, CEO of Rystad Energy, said in a report by the industry consultant.
A major driver will be the shift to electricity across sectors including buildings, industry, and transport. “Over the past years we have witnessed rapid innovation and commercialization of electric solutions, including electric vehicles, heat pumps, and electrification of industrial processes,” Rystad Energy said.
Electric vehicles, for example, are expected to account for 23 percent of new passenger car sales in 2024, compared with 3 percent four years ago.
To power that transition, wind, solar, and batteries are being installed at a pace “unimaginable just a couple of years ago,” Rystad Energy said.
Last year, solar installations generated 360 gigawatt-hours, up 60 percent from 2022, which had also set a record. Low-carbon sources now supply 40 percent of global electricity generation.
The cost of renewable energy is also at an all-time low, a trend that is expected to continue, Rystad Energy said. Large-scale projects, such as power purchase agreements, are offering electricity at prices below $11 a megawatt-hour.
“As solar, batteries and EVs continue to surge past key tipping points, the global energy system’s transition will eventually reach a sustainable cruising speed,” Jarand Rystad said. Clean tech investments eclipsed those for oil and gas for the first time in 2023.
The IEA said the market value for six manufactured clean energy technologies – solar photovoltaic (PV), wind turbines, EVs, batteries, electrolyzers, and heat pumps – grew nearly fourfold between 2015 and 2023, reaching more than $700 billion.
“Growth has been driven by surging clean technology deployment, particularly for EVs, solar PV, and wind,” the IEA said. “Under today’s policy settings, the market for these clean technologies is set to nearly triple by 2035 to more than $2 trillion. This is close to the average value of the global crude oil market in recent years.”
Global clean-technology manufacturing investment was up 50 percent in 2023 to $235 billion. An increase that is equal to nearly 10 percent of the growth in investment across the entire world economy, the IEA said. Solar PV and battery manufacturing claimed 80 percent of those funds. EV plants accounted for another 15 percent.
International trade in clean technologies will play a significant role, also tripling in the next decade to $575 billion, more than 50 percent larger than the current global trade in natural gas.
“The rapid uptake of clean energy technologies offers major opportunities for countries looking to manufacture and trade them but also presents challenging decisions for governments, which face tensions and trade-offs based on the industrial and trade policies,” the IEA said.
China is the cheapest location for manufacturing all the clean energy technologies, the IEA said, “without taking into account explicit financial support from governments.”
The average solar module, wind turbines, and batteries cost 40 percent more to manufacture in the U.S. than in China and as much as 45 percent more in the European Union. Costs are 25 percent higher in India, the IEA said.
China accounts for between 40 percent and 98 percent of global manufacturing capacity for the key clean technologies and components. Chinese imports, however, have drawn tariffs in both the U.S. and the European Union.
“As countries seek to define their role in the new energy economy, three vital policy areas – energy, industry, and trade – are becoming more and more interlinked,” Fatih Birol, IEA executive director, said in a statement.
“Clean energy transitions present a major economic opportunity, as we have shown, and countries are rightly seeking to capitalize on that,” Birol said. “However, governments should strive to develop measures that also foster continued competition, innovation and cost reductions, as well as progress towards their energy and climate goals.”
