Solar-power investment to exceed oil for the first time - IEA

May 30, 2023

This article is published in collaboration with Reuters

Solar power is expected to overtake oil production investment for the first time in 2023.

The International Energy Agency predicts solar-power investment will reach $286 billion this year. Image: Pexels/Trinh Trần

Noah Browning

Writer, Reuters

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Solar power is expected to overtake oil production investment for the first time in 2023.
The International Energy Agency (IEA) predicts that solar power investment will reach $286 billion this year, while oil production investment will fall to $280 billion.
The shift to solar power is being driven by a number of factors, including the falling cost of solar panels and the increasing focus on renewable energy.
The IEA says that the transition to solar power will help to reduce greenhouse gas emissions and improve air quality.

Investment in clean energy will extend its lead over spending on fossil fuels in 2023, the International Energy Agency said on Thursday, with solar projects expected to outpace outlays on oil production for the first time.

Annual investment in renewable energy was up by nearly a quarter since 2021 compared to a 15% rise for fossil fuels, the Paris-based energy watchdog said in its World Energy Investment report.

Around 90% of that clean energy spending comes from advanced economies and China, however, highlighting the global divide between rich and poor countries as fossil fuel investment is still double the levels needed to reach net-zero emissions by mid-century.

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Moving to clean energy is key to combating climate change, yet in the past five years, the energy transition has stagnated.

Energy consumption and production contribute to two-thirds of global emissions, and 81% of the global energy system is still based on fossil fuels, the same percentage as 30 years ago. Plus, improvements in the energy intensity of the global economy (the amount of energy used per unit of economic activity) are slowing. In 2018 energy intensity improved by 1.2%, the slowest rate since 2010.

Effective policies, private-sector action and public-private cooperation are needed to create a more inclusive, sustainable, affordable and secure global energy system.

Benchmarking progress is essential to a successful transition. The World Economic Forum’s Energy Transition Index, which ranks 115 economies on how well they balance energy security and access with environmental sustainability and affordability, shows that the biggest challenge facing energy transition is the lack of readiness among the world’s largest emitters, including US, China, India and Russia. The 10 countries that score the highest in terms of readiness account for only 2.6% of global annual emissions.

To future-proof the global energy system, the Forum’s Centre for Energy & Materials is working on initiatives including Clean Power and Electrification, Energy and Industry Transition Intelligence, Industrial Ecosystems Transformation, and Transition Enablers to encourage and enable innovative energy investments, technologies and solutions.

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"Clean energy is moving fast – faster than many people realise," said IEA Executive Director Fatih Birol.

"For every dollar invested in fossil fuels, about 1.7 dollars are now going into clean energy. Five years ago, this ratio was one-to-one."

Around $2.8 trillion is set to be invested in energy worldwide in 2023, of which more than $1.7 trillion is expected to go to renewables, nuclear power, electric vehicles, and efficiency improvements.

The rest, or around $1 trillion, will go to oil, gas and coal, demand for the last of which will reach and all-time high or six times the level needed in 2030 to reach net zero by 2050.

Current fossil fuel spending is significantly higher than what it should be to reach the goal of net zero by mid-century, the agency said.

In 2023, solar power spending is due to hit more than $1 billion a day or around $380 billion on a yearly basis.

"This crowns solar as a true energy superpower. It is emerging as the biggest tool we have for rapid decarbonisation of the entire economy," energy think tank Ember's head of data insights, Dave Jones, said in a statement.

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"The irony remains that some of the sunniest places in the world have the lowest levels of solar investment."

Investment in new fossil fuel supply will rise by 6% in 2023 to $950 billion, the IEA added.

The agency did not expressly reiterate its blockbuster projection from 2021 that investors should not fund new oil, gas and coal supply projects if the world wants to reach net-zero emissions by mid-century.

Producer group OPEC has said calls by the IEA to stop investing in oil undermine global energy security and growth. Scientists and international climate activists have warned the fossil fuel industry exacerbates the catastrophic impacts of climate change.

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