Clean energy investment tops $US1 trillion, sits neck and neck with fossil fuels

Global investment in the low-carbon energy transition reportedly surpassed $US1 trillion in 2022, “a new record and a huge acceleration” from 2021, according to BloombergNEF (BNEF).

BNEF’s annual Energy Transition Investment Trends report determined that the total global investment in the low-carbon energy transition reached $US1.1 trillion in 2022, or around $A1.55 trillion.

Defying the significant headwinds evident throughout the whole of 2022, low-carbon investment jumped a massive 31% on revised 2021 investment levels (which were originally reported by BNEF as reaching $US755 billion, but later revised to $US849 billion).

Maybe more importantly, however, BNEF believes that, for the first time, investment in low-carbon technologies appears to have reached parity with capital deployed in support of fossil fuels.

“Our findings put to bed any debate about how the energy crisis will impact clean energy deployment,” said Albert Cheung, Head of Global Analysis at BloombergNEF.

“Rather than slowing down, energy transition investment has surged to a new record as countries and businesses continue to execute on transition plans.

“Investment in clean energy technologies is on the brink of overtaking fossil fuel investments and won’t look back. These investments will drive short-term job creation and help to address medium-term energy security objectives.

“But much more investment is needed to get on track for net zero in the long term.”

BNEF’s Energy Transition Investment Trends report accounts for the total funding businesses, financial institutions, governments, and end-users have committed to the low-carbon energy transition.

A number of the sectors covered in the report all achieved new record levels of investment in 2022, including renewable energy, energy storage, electrified transport, electrified heat, carbon capture and storage (CCS), hydrogen, and sustainable materials. In fact, out of all sectors covered in the report, only nuclear power investment failed to set a record, remaining basically flat.

And, unsurprisingly, the renewable energy sector – which includes all the different types of renewable technologies like wind and solar – remained the largest sector in investment terms, achieving a new investment record of $US495 billion ($A698 billion), a 54% increase on 2021.

Similarly, electrified transport – the sector which includes spending on EVs and associated infrastructure – came impressively close to overtaking spending on renewables, with $US466 billion ($A657 billion) in 2022, a massive 54% increase.

Conversely, despite seeming to never exit the headlines, the hydrogen sector saw the least financial commitment at only $US1.1 billion ($A1.55 billion) in 2021. That being said, investment in hydrogen nevertheless more than tripled what was seen in 2021.

The low-carbon energy transition attracted the most investment in China, which accounted for a mind-boggling $546 billion ($A770 billion), 49.6% of the global total. In a very distant second place was the United States with investment reaching $US141 billion ($A199 billion). Or, if we treat the European Union as a single bloc, the EU would have hit second place with a marginally better $US180 billion ($A254 billion).

When combining the $US1.1 billion invested on low-carbon technologies in 2022 with the $SU274 billion invested in the power grid, energy transition investment hit a total of $US1.38 trillion ($A1.95 trillion).

BNEF nevertheless concludes that, despite the near-across-the-board record levels of investment, global investment in lower-carbon technologies nevertheless “woefully short of what is needed to confront climate change.”

Specifically, BNEF concludes that to meet a 2050 net zero CO2 emissions trajectory, investment must triple. By comparison to the $US1.38 trillion invested in the clean energy transition in 2022, global investment must annual an average of $US4.55 trillion for the remainder of the decade in order to get on track under BNEF’s Net Zero Scenario.