Clean energy investments are expected to top US$1.4 trillion in 2022, with renewables, energy efficiency, grid infrastructures, and storage accounting for the majority of the spending, and all these sectors are expected to expand this year, according to the report released this week by the International Energy Agency (IEA).
Clean energy investment growth has climbed to 12% since 2020, after averaging just over 2% in the five years after the 2015 Paris Agreement. Although this falls well short of what is required to meet international climate objectives, the IEA said today that it is still an important start in the right direction.
This year’s clean energy investment is predicted to account for over three-quarters of the entire energy investment growth in 2022, which is expected to increase by 8% to US$2.4 trillion.
However, rising costs will account for nearly half of the overall rise in spending, said IEA. The report comes at a time of growing inflation, prolonged increases in oil and gas prices, and geopolitical tensions due to the Russia’s invasion in Ukraine. These elements have created an extremely difficult environment for firms, governments, and consumers.
After a period of decline, the costs of solar panels and wind turbines, which are technologies critical to the energy transition, are now up by between 10% and 20% since 2020, the agency added.
The report forecasts that the surge in clean energy spending is concentrated in advanced nations and China, while in other areas, energy security concerns and high costs are driving additional investment in fossil fuel supply, notably coal.
According to the IEA research, around US$105 billion have been invested in the coal supply chain in 2021. This marked a 10% increase over the previous year. The sector is expected to continue a similar trajectory this year.
Global coal supply investment is likely to expand by another 10% in 2022 as limited supply attracts new projects, the report added. With over US$80 billion in investment, China and India are expected to account for the majority of global coal investment in 2022.