While China still leads, accounting for 38% of the total with $676 billion invested last year, the EU, US and UK delivered a combined investment that exceeded that of China. With investment growth driven by renewable energy production, electric vehicles, hydrogen and carbon capture as well as the clean energy supply chain, we take a closer look at energy investment trends and consider how, despite record levels of investment, we are still significantly adrift of the level needed to stand a realistic chance of delivering net zero.
The report, Energy Transition Investment Trends 2024, indicated a new record level of annual global investment and demonstrates the resilience of the clean energy transition in a year of geopolitical turbulence, high interest rates and cost inflation.
It’s electrifying
The report finds that electrified transport is now the largest sector for spending in the energy transition, growing 36% in 2023 to $634 billion. This figure includes spending on electric cars, buses, two- and three-wheelers and commercial vehicles, as well as associated infrastructure.
Electrified transport overtook the renewable energy sector, which saw an 8% increase to $623 billion. This figure reflects investment in the construction of renewable energy production facilities, such as wind, solar and geothermal power plants, as well as biofuels production plants. Power grid investment was the third-largest contributor at $310 billion. Grids are a critical enabler for the energy transition, and investment in them will need to rise in the coming years.
“Last year brought new records for global renewable energy investment. Strong growth in the US and Europe drove the global rise, even as China, the world’s largest renewables market, sputtered, recording an 11% drop. Despite a year of tough headlines, a record amount of offshore wind capacity also reached financial close,” said Meredith Annex, BNEF’s Head of Clean Power and co-author of the report.
There was also strong growth in emerging areas such as hydrogen (with investment tripling year on year), carbon capture and storage (near-doubling) and energy storage (up 76%).
Global energy transition investment by sector
The largest country for investment, by far, was China, with $676 billion invested in 2023 – equivalent to 38% of the global total. Although China remains dominant, its lead has been reduced. Taken together, the European Union, US and UK outpaced China with $718 billion of investment – a feat they hadn’t managed to achieve in 2022. Investment in the US jumped 22% year-on-year, to $303 billion, as the effects of the Inflation Reduction Act started to be felt.
Top 10 economies for 2023 energy transition investment, plus the EU-27 and rest of the world
The current level of investment in clean energy technologies is not nearly sufficient to set the world on track for net zero by mid-century. According to the report, energy transition investment would need to average $4.8 trillion per year from 2024 to 2030 to align with BNEF’s Net Zero Scenario, a Paris Agreement-aligned trajectory from the 2022 New Energy Outlook. This is nearly three times the total investment observed in 2023.
Solar and storage oversupply
In addition, BNEF’s report finds that investment in the global clean energy supply chain, including equipment factories and battery metals production for energy technologies, hit a new record at $135 billion in 2023 (up from just $46 billion in 2020), and is set to surge further over the next two years. BNEF projects this figure to rise to $259 billion by 2025, based on currently announced investment plans. In the next two years, only the wind sector needs to increase its supply chain investment to get on track for a net-zero trajectory; the other areas are investing at a sufficient pace.
Antoine Vagneur-Jones, Head of Trade and Supply Chains at BNEF, said, “Abundant supply chain investment should continue to tamp down equipment prices across most sectors, which is good news for the energy transition. But the ensuing oversupply heralds an era of squeezed margins for solar and battery manufacturers.”
Aside from tracking the funding for clean energy deployment and clean energy supply chain investment, the Energy Transition Investment Trends 2024 report also tracks two other types of funding:
Climate-tech equity raising: Equity raised by companies focused on climate and the energy transition ($84 billion in 2023)
• This figure has fallen for the past two years, as rising interest rates have made it harder for companies to raise capital. Companies had raised $168 billion in 2021 and $127 billion in 2022.
• Clean energy-focused companies raised more equity than any other sector in 2023, at $49 billion.
• Companies in the clean transport sector saw funding drop the most sharply, from $47 billion raised in 2022 to just $18 billion in 2023. Transport remained the second-largest funding sector, followed by Industry, Buildings, Agriculture and ‘Climate and Carbon’.
Energy transition debt issuance: Debt issued by companies and governments to fund the energy transition ($824 billion in 2023)
• This figure rose by 4% in 2023 after dropping 10% in 2022. Stabilising or falling interest rates in various markets helped companies and governments raise debt for energy transition purposes and these trends are reflective of the broader market.
• Utilities raised the most debt for the energy transition ($328 billion), followed by financial institutions ($176 billion) and governments ($141 billion)
• Oil and gas companies’ energy transition debt issuance fell to $8.3 billion, down from $17.5 billion in 2022.
Key findings:
• Electrified transport is now the largest sector of spending in the energy transition, growing 36% in 2023 to $634 billion, overtaking the renewable energy sector, which grew 8% to $623 billion.
• Power grids investment was the third-largest contributor at $310 billion.
• There was also strong growth in emerging areas such as hydrogen (with investment tripling year on year), carbon capture and storage (near-doubling) and energy storage (up 76%).
• The largest country for investment by far was China, with $676 billion invested in 2023 – equivalent to 38% of the global total. Although China dominates, its lead has been reduced, with the EU, US and UK together investing $718 billion in 2023. UK spending jumped 84% thanks to strong EV sales and renewable power investment. The EU posted 35% growth, and the US 22%.
• The current level of investment into clean energy technologies is not nearly sufficient to set the world on track for net zero by mid-century. Energy transition investment would need to average $4.8 trillion per year from 2024 to 2030 in order to align with BNEF’s New Energy Outlook Net Zero Scenario. This is nearly three times the total investment observed in 2023.
• The UK would need to see nearly double the $72 billion spent on energy transition technologies in 2023, every year from 2024 to 2030 to align with the scenario.
• Investment in the global clean energy supply chain, including equipment factories and battery metals production for energy technologies, hit a new record at $135 billion in 2023 and is set to rise to $259 billion by 2025.
• $824 billion was raised in energy transition debt issuance, $84 billion in equity issuance
In summary Albert Cheung, Deputy CEO of BNEF commented: “Our report shows just how quickly the clean energy opportunity is growing, and yet how far off track we still are.
“Energy transition investment spending grew 17% last year, but it needs to grow more than 170% if we are to get on track for net zero in the coming years.
“Only determined action from policymakers can unlock this kind of step-change in momentum.”
Albert Cheung is the Deputy CEO and Head of Global Transition Analysis at BloombergNEF.
