IEA report says spending on clean energy transitions needs to accelerate much more rapidly to meet climate goals
Energy sector’s global investment is set to rebound by nearly 10 percent in 2021 to $1.9 trillion, reversing most of last year’s drop caused by the COVID-19 pandemic, according to a new report from the International Energy Agency (IEA).
But the spending on clean energy transitions needs to accelerate much more rapidly to meet climate goals, the report said on Wednesday.
It will be the sixth year in a row that investment in the power sector exceeds that in traditional oil and gas supply, according to the World Energy Investment 2021 report. Global power sector investment is set to increase by around 5 percent in 2021 to more than $820 billion, its highest ever level, after staying flat in 2020.
Renewables are dominating investment in new power generation capacity and are expected to account for 70 percent of the total this year.
And that money now goes further than ever in financing clean electricity, with a dollar spent on solar PV deployment today resulting in four times more electricity than ten years ago, thanks to greatly improved technology and falling costs.
“The rebound in energy investment is a welcome sign, and I’m encouraged to see more of it flowing towards renewables,” said Fatih Birol, the IEA’s Executive Director. “But much greater resources have to be mobilised and directed to clean energy technologies to put the world on track to reach net-zero emissions by 2050.”
While renewables dominate new power investment, and approvals for coal-fired plants are some 80 percent below where they were five years ago, coal is not out of the picture.
There was even a slight increase in go-aheads for coal-fired plants in 2020, driven by China and some other Asian economies.
Upstream oil and gas investment is expected to rise by about 10 percent in 2021 as companies recover financially from the shock of 2020, but their spending remains well below pre-crisis levels.
The majors are holding oil and gas spending flat on aggregate in 2021, despite recovering prices.
Meanwhile, some national oil companies are stepping up investment, raising the possibility of increased market share if demand continues to grow.
Qatar’s decision to move ahead with the world’s largest liquefied natural gas (LNG) expansion, and to include carbon capture technologies in this investment, is a strong signal of its intent to maintain a leadership position in LNG.
IEA analysis last year highlighted that only around 1 percent of capital spending by the industry was going to clean energy investments.
But project tracking to date in 2021 suggests that this could rise to 4 percent this year for the industry as a whole, and well above 10 percent for some of the leading European companies.
The United States may provide further momentum if the infrastructure plan proposed by the administration of President Joe Biden is enacted.
Financial markets are also providing encouraging signs for clean energy investment. But even though spending on clean energy is set to rise in 2021 by around 7 percent, the report notes that growth in these capital expenditures has lagged changes in financial markets, in part due to a shortage of high-quality clean energy investment opportunities and appropriate channels for allocating capital into projects.
The anticipated $750 billion to be spent on clean energy technologies and efficiency in 2021 is encouraging but remains far below what’s required to put the energy system on a sustainable path.
Clean energy investment would need to triple in the 2020s to put the world on track to reach net-zero emissions by 2050, thereby keeping the door open for a 1.5 °C stabilisation of the rise in global temperatures.
“As set out in detail in our recent roadmap to net zero by 2050, governments need to go beyond making pledges to cut emissions and take concrete steps to accelerate investments in market-ready clean energy solutions and promote innovation in early-stage technologies,” said Dr Birol.