About $2.8 trillion (€2.6 trillion) is set to be invested globally in energy this year, of which over $1.7 trillion (€1.59 trillion) is expected to go to clean technologies - including renewables, electric vehicles, nuclear power, grids, storage, low-emissions fuels, efficiency improvements and heat pumps – according to report.
The remainder, slightly more than $1 trillion (€937.7 billion), is going to coal, gas and oil.
Annual clean energy investment is expected to rise by 24% between 2021 and 2023, driven by renewables and electric vehicles, compared with a 15% rise in fossil fuel investment over the same period.
But more than 90% of this increase comes from advanced economies and China, which the IEA said presents a serious risk of new dividing lines in global energy if clean energy transitions don’t pick up elsewhere.
“Clean energy is moving fast – faster than many people realise. This is clear in the investment trends, where clean technologies are pulling away from fossil fuels,” said IEA executive director Fatih Birol. “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.”
Led by solar, low-emissions electricity technologies are expected to account for almost 90% of investment in power generation.
Consumers are also investing in more electrified end-uses. Global heat pump sales have seen double-digit annual growth since 2021. Electric vehicle sales are expected to leap by a third this year after already surging in 2022.
Clean energy investments have been boosted by a variety of factors in recent years, including periods of strong economic growth and volatile fossil fuel prices that raised concerns about energy security, especially following Russia’s invasion of Ukraine.
Furthermore, enhanced policy support through major actions like the US Inflation Reduction Act and initiatives in Europe, Japan, China and elsewhere have played a role.
The biggest shortfalls in clean energy investment are in emerging and developing economies, the IEA added. It pointed to some bright spots, such as dynamic investments in solar in India and in renewables in Brazil and parts of the Middle East. However, investment in many countries is being held back by factors including higher interest rates, unclear policy frameworks and market designs, weak grid infrastructure, financially strained utilities and a high cost of capital.
"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," according to the IEA.