Money makes the world go round. And when it comes to energy, we’re seeing more investment than ever: companies, research institutions, and governments are all pouring money into technologies that could help power our world in the future.
The International Energy Agency just published its annual report on global investment in energy, where it tallies up all that cash. The world saw about $2.8 trillion of investments in energy in 2022, with about $1.7 trillion of that going into clean energy.
That’s the biggest single-year investment in clean energy ever, and where it’s all going is pretty interesting. I have some good news, some bad news, and a couple of surprising tidbits to share. So grab some popcorn and let’s dive into the data.
Fossil fuels are faltering
Let’s start with what I consider to be good news: there’s a lot of money going into clean energy—including renewables, nuclear, and things that help cut emissions, like EVs and heat pumps. And not only is it a lot of money, but it’s more than the amount going toward fossil fuels. In 2022, for every dollar spent on fossil fuels, $1.70 went to clean energy. Just five years ago, it was dead even.
Clean energy’s growing dominance is especially clear when it comes to solar power. In 2023, for the first time, investment in solar energy is expected to beat out investment in oil production. It’s a stark difference from what the picture looked like a decade ago, when oil spending outpaced solar spending by nearly six to one.
While we’re on oil and gas, I think it’s worth pointing out one really interesting point: while there’s a lot of money flowing to clean energy, it doesn’t make up a big share of spending by fossil-fuel companies.
See those tiny dark slivers in 2021 and 2022? That’s the share of oil and gas companies’ spending that went toward clean energy. Spending on oil infrastructure has fallen (which is what’s allowed solar to catch up), but companies are making up for it by paying out dividends, buying back stock, and paying back debt rather than putting more into low-emissions tech.
Any investment and attention going to renewables and innovations that could help cut emissions is great, and I do think oil and gas companies can play a role in boosting new technologies, especially those where they have expertise (I’m looking at you, geothermal!). But I think it’s important to keep that spending in context—oil and gas companies are putting less money into renewables than ad campaigns would have you think.
Bring it on
Within clean energy, the vast majority of spending is going into renewables like wind and solar, grid upgrades, and efforts to improve energy efficiency.
But smaller sectors are growing quickly, especially when you look at projections for this year. I’m really excited to see how fast money is moving into electric vehicles: spending went from $29 billion as recently as 2020 to an expected $129 billion in 2023. And spending on batteries for energy storage is set to double between 2022 and 2023.
All that new money could change everything, and there are already big shifts in the battery industry because of it. We can’t seem to go more than a few days without an announcement of a new battery factory (most recently, yet another multibillion-dollar factory in Georgia).
If all these plans take shape, we’re going to reach nearly seven terawatt-hours of manufacturing capacity for lithium-ion batteries in 2030. That’s enough for over 100 million EVs annually. Most of it’s going to be in China, but the US and Europe are starting to make a dent in that country’s dominance of all things EV.
The road ahead
So this all sounds like a lot of money … but is it enough?
To keep global warming below 1.5 °C over preindustrial levels and avoid the worst impacts of climate change, we need to reach net-zero emissions around 2050. If we’re going to hit that goal, according to the IEA, annual investment needs to reach $4.5 trillion in 2030—nearly triple current spending.
Some technologies are actually in great shape. Solar spending just needs to keep growing as it has been for that sector to keep pace with the 2050 goal. But there needs to be much more spending in other areas, especially technologies like energy storage and transmission lines—that will help balance the grid as more solar and other intermittent renewable power sources come online. There’s also a huge geographical imbalance, and poorer countries will need a significant boost to help build up their electrical grids and establish new technologies.
Investments are broadly on the right track, and I’m excited to see what next year’s report will hold. But there’s still definitely a long road ahead and a lot of building left to do.