Finance

Solar power investment to exceed oil for first time, says IEA chief

May 25, 2023

Solar energy funding is about to outstrip spending on oil manufacturing this yr for the primary time, the pinnacle of the Worldwide Vitality Company has mentioned, highlighting a surge in clear vitality growth that may assist curb world emissions if the development persists.

“If these clear vitality investments proceed to develop consistent with what we’ve seen prior to now few years . . . we’ll quickly begin to see a really completely different vitality system rising and we will preserve the 1.5C purpose alive,” Fatih Birol, government director of the IEA, informed the Monetary Occasions, in reference to the Paris Settlement goal to restrict the worldwide temperature rise.

This yr $1.7tn is forecast to be spent on clear applied sciences in contrast with $1tn on fossil fuels. 5 years in the past, the $2tn in annual vitality funding was break up evenly between fossil fuels and clear expertise, akin to renewables, electrical autos and low-emissions fuels.

Birol mentioned a “new world clear vitality economic system is rising”, including: “For a person like me who makes his fingers soiled with knowledge each single day it is a hanging, dramatic shift.”

The elevated spending on clear vitality is being pushed by a robust rebound in financial development following the Covid-19 pandemic, in addition to issues about value volatility and vitality safety sparked by Russia’s full-scale invasion of Ukraine final yr, in accordance with the IEA’s annual World Vitality Funding report, printed on Thursday.

Enhanced coverage help such because the US Inflation Discount Act, which has offered $369bn of subsidies and tax credit for clear vitality applied sciences, has additionally helped, the report mentioned.

In consequence, the IEA expects annual clear vitality funding to leap by 24 per cent in contrast with 2021, whereas spending on fossil fuels will rise by 15 per cent, it added.

Solar energy is the “star of world vitality investments”, with whole spending in 2023 forecast to achieve $382bn, exceeding the $371bn anticipated to be spent on oil manufacturing, mentioned Birol. In 2013, $636bn was spent on oil manufacturing and $127bn on solar energy.

The IEA chief attended the current G7 summit in Japan and mentioned he was inspired by the extent of alignment on vitality issues between G7 members and invited international locations akin to Brazil, India and Indonesia. “I had hardly ever seen such a homogeneous view of the way forward for vitality markets,” he added.

However to take care of the momentum G7 leaders wanted to make sure that present spending on clear vitality was broadened to extra rising and creating international locations, mentioned Birol. “If there may be one problem it’s whether or not or not the rising international locations will have the ability to finance their clear vitality transition alone,” he added.

Regardless of the increase in clear vitality spending, world energy-related carbon emissions grew 0.9 per cent final yr to a report 36.8bn tonnes, the IEA mentioned in March.

Birol additionally referred to as on nationwide and worldwide oil firms to direct extra of their spending in direction of low-carbon vitality options. Complete funding by the oil and gasoline trade on low-emissions sources of vitality is lower than 5 per cent of the overall spent on fossil gas manufacturing, in accordance with IEA evaluation.

“I hope that there’s extra of a parallel between what the heads of the worldwide and nationwide oil firms say about their issues about local weather change and what they do when it comes to their funding,” mentioned Birol.