The world invested USD 1.1 trillion (EUR 1tn) in the low-carbon energy transition in 2022, a 31% jump on the previous year, according to BloombergNEF (BNEF).
This is the first time energy transition investment has crossed the trillion-dollar threshold and has also drawn even with fossil fuel investments, also estimated at USD 1.1 trillion last year.
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“Our findings put to bed any debate about how the energy crisis will impact clean energy deployment,” Albert Cheung, head of global analysis at BNEF, said last week as the research firm released its report.
Low-carbon energy technology investment was driven by electrified transport, which saw a 54% year-on-year surge in spending, up to USD 466 billion, and is approaching renewable energy, which remained the leading sector with USD 495 billion of investment, up 17% from 2021.
Almost every sector in the report set investment records last year, including renewable energy, energy storage, electrified transport, electrified heat, carbon capture and storage (CCS), hydrogen and sustainable materials, BNEF said. Only nuclear power investment was relatively flat.
Hydrogen, which is drawing much attention, remains a small sector with only USD 1.1 billion in investment, which is up more than threefold on the previous year.
China accounted for around half of the global investment, USD 546 billion. It was well ahead of the number two the US, which was responsible for USD 141 billion of investment. Next came Germany, France and the UK. The EU as a bloc accounted for USD 180 billion of investment.
Despite the acceleration last year, energy transition investment is much below what is needed for net zero. Adding USD 274 billion of investment in power grids, the figure reaches USD 1.38 trillion, while the world will need to invest an average of USD 4.55 trillion a year for the remainder of the decade to get on track under BNEF’s Net Zero Scenario.
The report also shows that investments in factories for clean energy technologies increased to USD 78.7 billion in 2022 from USD 52.6 billion in 2021, with China accounting for 91% of the amount.
Of the total, USD 45.4 billion was invested in plants for batteries and related components and USD 23.9 billion in solar factories.
While manufacturing investment is not expected to be a challenge on the road to net zero, supply chain diversification is not yet evident. “China is investing by far the most in building out its clean energy supply chain, and it remains to be seen if other regions can capture significant market share,” said Antoine Vagneur-Jones, BNEF’s head of Trade and Supply Chains research.
The report tracks commissioned manufacturing facilities and recent announcements in the US in particular for new or expanded factories are not yet part of the calculations.
(USD 1 = EUR 0.920)