The Global Landscape of Renewable Energy Finance 2023 report reveals that global investment in energy transition technologies last year – including energy efficiency – reached US$1.3 trillion.
It set a new record, up 19 per cent from 2021 investment levels, and 50 per cent from before the pandemic in 2019.
The joint report by the International Renewable Energy Agency (IRENA) and Climate Policy Initiative (CPI) – launched on the sidelines of the Spanish International Conference on Renewable Energy in Madrid in February – also found that, although global investment in renewable energy reached a record high of US$0.5 trillion in 2022, this still represents less than 40 per cent of the average investment needed each year between 2021 and 2030, according to IRENA’s 1.5°C Scenario.
Investments are also not on track to achieve the 2030 Agenda for Sustainable Development Goals. Since decentralised solutions are vital in plugging the access gap to reach universal energy access to improve livelihoods and welfare under the 2030 Agenda, efforts must be made to scale up investments in the off-grid renewables sector.
Despite reaching record-high annual investments exceeding US$0.5 billion in 2021, investments in off-grid renewable solutions fall far short of the US$2.3 billion needed annually between 2021 and 2030.
Furthermore, investments have become concentrated on specific technologies and use. In 2020, solar photovoltaic alone attracted 43 per cent of the total investment in renewables, followed by onshore and offshore wind at 35 per cent and 12 per cent shares, respectively.
Based on preliminary figures, this concentration seems to have continued until 2022. To best support the energy transition, more funds must flow to less mature technologies and other sectors beyond electricity, such as heating, cooling, and system integration.
Comparing renewables financing across countries and regions, the report shows that glaring disparities have increased significantly over the last six years. About 70 per cent of the world’s population, mostly residing in developing and emerging countries, received only 15 per cent of global investments in 2020.
Sub-Saharan Africa, for example, received less than 1.5 per cent of the amount invested globally between 2000 and 2020. In 2021, European investment per capita was 127 times that in Sub-Saharan Africa, and 179 times more in North America.
The report emphasises how lending to developing countries looking to deploy renewables must be reformed and highlights the need for public financing to play a much more vital role beyond mitigating investment risks.
Recognising the limited public funds available in the developing world, the report calls for more vigorous international collaborations, including a substantial increase in financial flows from the Global North, to the Global South.
“For the energy transition to improve lives and livelihoods, governments and development partners need to ensure a more equitable flow of finance by recognising the different contexts and needs,” said IRENA director-general, Francesco La Camera.
“This joint report underscores the need to direct public funds to regions and countries with many untapped renewables potential, but find it difficult to attract investment. International cooperation must aim to direct these funds to enable policy frameworks, develop energy transition infrastructure, and address persistent socio-economic gaps.”
Achieving an energy transition in line with the 1.5°C Scenario also requires redirecting US$0.7 trillion annually from fossil fuels to energy-transition-related technologies. But fossil fuel investments are now rising following a brief decline in 2020 due to Covid-19.
Some large multinational banks have even increased their investments in fossil fuels at an average of about US$0.75 trillion a year since the Paris Agreement.
In addition, the fossil fuel industry continues to benefit from subsidies, which doubled in 2021 across 51 countries. The phasing out of investments in fossil fuel assets should be coupled with eliminating subsidies to level the playing field with renewables.
However, the phase-out of subsidies must be accompanied by a good safety net to ensure adequate living standards for vulnerable populations.
CPI’s global managing director Barbara Buchner said: “The path to net zero can only happen with a just and equitable energy transition. While our numbers show that there were record levels of investment for renewables last year, a greater scale-up is critically needed to avoid dangerous climate change, particularly in developing countries.”
This is the third edition of the biannual joint report by IRENA and CPI. This report series analyses investment trends by technology, sector, region, source of finance, and financial instrument.
It also analyses financing gaps to support informed policy-making to deploy renewables at the scale needed to accelerate the energy transition. This third edition looks at 2013-2020 and provides preliminary insights and figures for 2021 and 2022. – @Green
