Investment In Renewable Energy Matches Fossil Fuels in 2022 For First Time – BNEF

Investments in the renewable energy sector continue to power the energy transition underway, away from fossil fuels. As per a Bloomberg NEF (BNEF) report called  ‘Energy Transition Investment Trends 2023’, for the first time, global investment in low-carbon energy technologies worldwide was roughly equivalent to amount invested in fossil fuels.

The amount of investment in cleaner energy technology in 2022 was reported to be $1.1 trillion. This came despite high spending on fossil fuels as many regions focused their attention on energy security, the report said. Investment towards energy transition grew by $261 billion from the previous year ie, a 31 % increase from 2021. But, there was simultaneous rise in the investment in fossil fuels by $214 billion over 2021 levels.

The report further explained that the growth in fossil fuel investments in 2022 occurred against the backdrop of high commodity prices, with many oil and gas majors earning high profits. However, increased climate awareness has made these companies more focused on share buybacks and diversifying to lower-carbon assets.

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Calling it a’ historic investment’ it said that this historic shift cannot be reversed, as low-carbon industries are on the upward trend, despite clean energy supply not yet being a match for fossil fuels.

The trillion-dollar investment in energy transition include renewables viz, solar, wind and nuclear, storage, charging infrastructure, hydrogen production, and carbon capture, utilisation, and storage. It also included technologies such as small-scale solar, heat pumps, and zero-emission vehicles.

The break-up of the investment into various categories  is given as –Renewable energy remained the largest sector at $495 billion (up by 17 per cent YoY) and electrified transport was growing much faster and hit $466 billion (up by 54 per cent).

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Despite disruptions due to COVID, countries invested heavily in clean energy. Other than nuclear power, which did not see much growth in the last year, all the other sectors surpassed record levels of investment. Electrified transport received $64 billion, energy storage investment reached $15.7 billion and carbon capture and storage hit $6.4 billion, the findings in the report showed. Whereas, the hydrogen sector received the least boost at $1.1 billion but the sector grew the fastest, with investment increasing 3X each year. Investment in clean-technology factories grew fourfold from 2018 and reached $78.7 billion in 2022.

Interestingly, battery-related factory spending is reported to grow attracting more investment than other clean-tech sectors at $45.4 billion in 2022. In addition, facilities to produce lithium-ion battery components accounted for about 58 per cent of facilities opened in 2022.Solar continues to attract significant manufacturing investment at $23.9 billion in 2022, while the wind is showing tremendous growth with investment increased by a third YoY.

However, China is still the leading manufacturer of low-carbon technologies because it attracted over half of the trillion-dollar investment at $546 billion, said the report. This was followed by the European Union at $180 billion and the United States at $141 billion.

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Considering the net-zero mission, energy transition and grid investment need an average annual investment of $4.55 trillion  between 2023 and 2030. In the 2030s, the annual investment goes up to $6.88 trillion. By the 2040s, annual investment on average reaches a total of $7.87 trillion that is almost 6X  the 2022 levels.