Fossil Investment Shrinks, Renewables Surge, But Still Fall Short of Global Target

Global renewable energy investment is on track to hit US$2.2 billion this year, double the amount directed to fossil fuels, and the dollars poured oil, gas, and coal will fall for the first time since 2020, the International Energy Agency concludes in its annual World Energy Investment report released June 5.

The growth in financing for renewables, nuclear, grids, energy storage, low-emissions fuels, energy efficiency, and electrification reflects “not only efforts to reduce emissions but also the growing influence of industrial policy, energy security concerns, and the cost competitiveness of electricity-based solutions,” the IEA said in a release.

“Amid the geopolitical and economic uncertainties that are clouding the outlook for the energy world, we see energy security coming through as a key driver of the growth in global investment this year to a record $3.3 trillion as countries and companies seek to insulate themselves from a wide range of risks,” said IEA Executive Director Fatih Birol. “The fast-evolving economic and trade picture means that some investors are adopting a wait-and-see approach to new energy project approvals, but in most areas we have yet to see significant implications for existing projects.”

Still, total investment flows are still insufficient to hit the tripling of global renewable energy capacity that countries agreed to at the COP28 climate summit in Dubai in 2023, the Paris-based IEA warned.

The analysis shows China solidifying its position as the global leader in clean energy investment, while oil and gas exploration and development concentrate in the Middle East. “Today, China is by far the largest energy investor globally, spending twice as much on energy as the European Union—and almost as much as the EU and United States combined,” Birol said.

Earlier this year, China’s solar exports to the Global South pulled ahead of its sales to richer countries, with Pakistan alone importing about 19 gigawatts in 2024.

The IEA reports that:

• A decade ago, fossil investment was 30% higher than combined spending in power generation, grids, and storage. Today, electricity investments are 50% higher than the dollars going into fossil fuels.

• Investment in low-emitting power generation has nearly doubled in the last five years.

• Utility-scale and rooftop solar investments are set to reach $450 billion this year, while battery storage surges above $65 billion.

• Nuclear investment is up 50% over the last five years, to $75 billion.

• China and India are still building new coal plants to meet rapid growth in electricity demand, with nearly 100 gigawatts of new capacity in China this year pushing global coal approvals to their highest level since 2015. “If it’s a hot year, the air conditioning-driven electricity consumption grows very strongly, and at the same time, generation from hydropower electricity is low, so they want to build coal-fired power plants in order to address this challenge,” Birol said.

• Reduced investment in oil, the first drop since the COVID-19 pandemic in 2020, will be driven by lower prices and expectations for falling demand. The global liquefied natural gas (LNG) market will see its biggest increase ever between 2026 and 2028.

“In a worrying sign for electricity security, investment in grids, now at $400 billion per year, is failing to keep pace with spending on generation and electrification,” the IEA warns. “Maintaining electricity security would require investment in grids to rise towards parity with generation spending by the early 2030s. However, this is being held back by lengthy permitting procedures and tight supply chains for transformers and cables.”

As in past years, the IEA points to a deep disparity in global energy investment, with Africa receiving just 2% of the total.

“Despite being home to 20% of the world’s population and rapidly growing energy demand, total investment across the continent has fallen by a third over the past decade due to declining fossil fuel spending and insufficient growth in clean energy,” the release states. “To close the financing gap in African countries and other emerging and developing economies, international public finance needs to be scaled up and used strategically to bring in larger volumes of private capital.”