Renewable energy is growing rapidly as an industry with a much more urgent emphasis on net-zero emissions driving change. However, to overtake fossil fuels, investment is a key component and the time has come for global energy to shift away from oil and towards cleaner means of energy.
The investment in clean energy technologies has majorly contributed to its growth, but the milestone to be discussed is exceeding the spend on fossil fuels.
Roughly US$2.8tn is ready to be invested in the global energy industry this year and US$1.7tn of that will go towards clean technologies, such as renewables, electric vehicle (EV) adoption, nuclear power, energy grids and storage, low-emissions fuels, efficiency improvements, and heat pumps. This puts global energy investment at an inflection point between renewable and non-renewable sources in history’s largest push towards sustainable energy.
“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,” says Fatih Birol, Executive Director at the International Energy Agency (IEA).
“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.”
How sustainable is the global energy sector?
According to the latest data from the IEA, solar energy leads the way and is expected to be the chosen solution for 90% of the power investment.
In 2021, the organisation reported 1,002.9 TWh of energy generated by means of solar PV, which accounted for 3.6% of electricity production worldwide. This was the result of a 22% increase in solar PV installations, which would suggest minimal increase in infrastructure at the current rate of adoption—therefore, no wonder a large sum will be spent on developing solar energy further.
Further insight from the IEA suggests that heat pump sales have doubled over the past two years as one of the solutions gaining investment from consumers. This also aligns with the number of EVs taking to the roads as more drivers look to decarbonise their transport.
Investment in developing economies, such as Brazil and areas of the Middle East, show great promise for further solar projects and other sustainable energy applications. Policies, interest rates, and infrastructure are just some of the factors holding back faster-paced adoption of cleaner solutions.
Where is oil going?
Naturally the oil and gas industry will begin to see fewer investments as time goes on and renewable energy solutions skyrocket as a result of significant funding. We’ve already seen many of the major fossil fuel companies, such as Shell and BP, turning over to more renewable energy sources and evolving with some of the major trends like EV transition and wind energy projects.
While there are solutions that could minimise the impact of fossil fuels on the planet, such as clean fuels and carbon capture solutions, these received a very small investment below 5% in 2022.