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$1.7T is projected to be invested globally in clean energy by 2023.

Solar energy is expected to surpass oil output for the first time in 2023 when global investments in renewable energy are projected to reach USD1.7 trillion.

According to a recent IEA research, spending on fossil fuels is significantly being outpaced by investments in clean energy technology as concerns about affordability and security brought on by the current global energy crisis increase support for greener solutions.

According to the IEA’s most recent World Energy Investment report, approximately USD2.8 trillion will be invested globally in energy in 2023, of which more than USD1.7 trillion is anticipated to go to clean technologies, such as renewables, electric vehicles, nuclear power, grids, storage, low-emissions fuels, efficiency upgrades, and heat pumps.

The remainder, or just over $1 trillion, will be used for coal, gas, and oil.

Between 2021 and 2023, annual clean energy investment is anticipated to increase by 24 percent, led by renewables and electric cars, as opposed to a 15 percent increase in fossil fuel investment during the same time frame.

However, more than 90% of this growth comes from developed nations and China, posing a severe threat of creating new energy divides if renewable energy transitions do not accelerate elsewhere.

“Clean energy is developing quickly, more quickly than most people realize. According to IEA Executive Director Fatih Birol, the investment trends show that clean technologies are displacing fossil fuels. “Roughly 1.7 dollars are spent on sustainable energy for every dollar invested in fossil fuels. This ratio was one-to-one five years ago. Solar investment is one illustrative case, which is on track to, for the first time, surpass investment in oil production.

Nearly 90% of investments in power generation are anticipated to be made in low-emission electricity technologies, led by solar. Additionally, consumers are spending money on increasingly electrified end uses.

Since 2021, the sales of heat pumps have increased by double digits every year. After increasing in 2022, sales of electric vehicles are predicted to increase by a third this year.

Several variables, including times of rapid economic expansion and erratic fossil fuel prices that fueled worries about energy security, particularly in the wake of the Ukraine crisis, have encouraged investments in clean energy in recent years.

Significant policy support through programs in Europe, Japan, China, and other regions and the US Inflation Reduction Act played a part.

In 2023, spending on upstream oil and gas is anticipated to increase by 7%, returning to 2019 levels. The few significant national oil firms in the Middle East invest more money than before the coronavirus disease 2019 (Covid-19) pandemic.

Since fuel prices increased last year, many fossil fuel producers saw record profits; however, the majority of this cash flow has gone to dividends, share buybacks, and debt payments rather than returning to the conventional supply.

Despite this, the IEA’s Nett Zero Emissions by 2050 Scenario predicts that fossil fuel investment would increase in 2023 to more than twice as high as those required in 2030.

Global coal demand peaked in 2022, and this year’s coal investment is on track to be roughly six times higher than predicted for 2030 under the Nett Zero Scenario.

Less than 5% of the oil and gas industry’s upstream spending 2022 went towards investing in low-emissions alternatives like renewable power, sustainable fuels, and carbon capture technologies.

Although the share is higher for some major European corporations, that level was not significantly different from the previous year.

There are the greatest renewable energy investment deficits in emerging and developing economies. There are some encouraging signs, such as the brisk solar investments in India and the renewable energy developments in Brazil and sections of the Middle East.

However, several factors, such as increased interest rates, hazy regulatory and market structures, shoddy grid infrastructure, financially troubled utilities, and a high cost of capital, are preventing investment in many nations.

The international community needs to do much more, particularly to encourage investment in lower-income economies where the private sector has hesitated to take risks.

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This article is for informational purposes only and does not constitute endorsement of any specific technologies or methodologies and financial advice or endorsement of any specific products or services.

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