Solar power investment is projected to outpace spending on oil production this year, marking a significant milestone in the transition towards clean energy, according to the head of the International Energy Agency (IEA). Fatih Birol, executive director of the IEA, highlighted the surge in clean energy development as a positive step towards curbing global emissions and achieving the goals set in the Paris Agreement.
Birol stated that if the current trend of increasing investments in clean energy continues, a transformative shift in the global energy system will emerge, supporting the goal of limiting the global temperature rise to 1.5 degrees Celsius.
This year, clean technologies are expected to attract $1.7 trillion in investments, surpassing the $1 trillion allocated to fossil fuels. Just five years ago, annual energy investment of $2 trillion was evenly split between fossil fuels and clean technologies, including renewables, electric vehicles, and low-emission fuels.
Birol described the emergence of a “new global clean energy economy” as a striking and dramatic shift in the energy landscape, highlighting the significance of this transition.
The increased spending on clean energy can be attributed to the post-pandemic economic rebound and concerns about price volatility and energy security triggered by Russia’s invasion of Ukraine. Furthermore, policy support, such as the US Inflation Reduction Act, which has provided substantial subsidies and tax credits for clean energy technologies, has played a vital role in driving clean energy investment.
Consequently, the IEA anticipates a 24% surge in annual clean energy investment compared to 2021, while spending on fossil fuels is expected to rise by 15%. Solar power, in particular, is touted as the standout performer in global energy investments, with daily spending projected to exceed $1 billion, surpassing investment in oil production.
Birol attended the recent G7 summit and expressed optimism about the alignment among G7 members and invited countries, including Brazil, India, and Indonesia, on energy matters. He noted the remarkably homogeneous view of the future of energy markets expressed by the leaders.
However, Birol emphasized the need for G7 leaders to expand the current clean energy spending to include more emerging and developing countries. Ensuring that these countries can finance their clean energy transition is a significant challenge that requires attention and support.
Despite the surge in clean energy investment, global energy-related carbon emissions increased by 0.9% in 2022, reaching a record 36.8 billion tonnes, as reported by the IEA in March.
Birol also called on national and international oil companies to allocate more of their investments toward low-carbon energy solutions. Currently, the total investment by the oil and gas industry in low-emission energy sources is less than 5% of the amount spent on fossil fuel production, according to IEA analysis.
The IEA chief expressed his hope for greater alignment between the statements made by international and national oil company leaders about their concerns regarding climate change and their actual investment decisions.
The shift in solar power investment surpassing oil production spending marks a significant turning point in the global energy landscape. With continued investment in clean energy, there is a real opportunity to reshape the energy system and make substantial progress towards achieving climate goals. The support and commitment of both developed and emerging countries will be crucial in driving this clean energy transition forward and curbing carbon emissions.