Russia’s invasion of Ukraine has helped ignite a boom in clean energy investment which will significantly outpace spending on fossil fuels, according to the International Energy Agency.
A report from the IEA has found that clean energy investment is on track to reach $1.7tn (£1.4tn) this year as investors turn to renewables, electric vehicles, nuclear power, grids, storage and other low-carbon technologies.
At the same time investment in coal, gas and oil will rise to just over $1tn, the IEA said.
The Paris-based agency found that clean energy investments have been boosted by many factors including periods of strong economic growth and volatile fossil fuel prices as well as heightened concerns about energy security after Russia’s invasion of Ukraine.
Fatih Birol, the executive director of the IEA, said: “Clean energy is moving fast – faster than many people realise. This is clear in the investment trends, where clean technologies are pulling away from fossil fuels.
“In very simple, but very striking terms, five years ago global energy investment was $2tn, of which $1tn was for clean energy and $1tn was for fossil fuels. Today, $1tn is for fossil fuels and $1.7tn is for clean energy. This is a dramatic shift which will have consequences for the energy markets and climate change. In my view, it’s very exciting.”
The clean energy boom is particularly apparent in solar power investment, Birol said. “For the first time in history the amount of investment going to solar is higher than the amount going to oil production. It may be symbolic but it is very important because it shows the tide turning,” he said.
Clean energy investment has climbed steadily in recent years as governments and investors have sought to take advantage of the low cost of renewables such as wind and solar power.
In contrast, investment in fossil fuels plunged during the Covid-19 pandemic when severe travel restrictions caused demand for transport fuels to plummet, leading to a collapse in energy commodity prices.
The IEA report showed that clean energy investment has accelerated well beyond spending on gas, coal and oil as governments become increasingly concerned about developing secure, homegrown energy sources.
However, the IEA report warned that Russia’s war in Ukraine has also prompted increased investment in upstream oil and gas, which is expected to rise by 7% in 2023 in a return to 2019 levels.
At the same time global coal demand reached an all-time high in 2022, in part owing to record high gas prices, which has spurred estimated coal investment for this year to nearly six times the levels that are aligned with global 2030 climate targets.
Birol said the single most important barrier facing the expansion of renewable energy remains problems with projects being able to connect to electricity grids.
“We are seeing a pipeline of projects in Europe, US and Asia and Africa where the grid is the main problem. If you cannot reduce permitting time we will not be able to see the rapid expansion of renewables,” he said.
In the UK, developers of renewable energy projects have complained that they have been forced to wait for more than a decade to connect to the electricity grid.