Story By Rocky Teodoro |RigZone| According to the International Energy Agency (IEA), two-thirds of global energy investments will go to clean technologies this year.
The IEA said in the latest edition of its annual World Energy Investment report that total energy investment worldwide would surpass $3 trillion for the first time, and around $2 trillion would be allotted to clean technologies such as renewables, electric vehicles, nuclear power, grids, storage, low-emission fuels, efficiency improvements, and heat pumps.
The IEA noted that investment in clean energy has accelerated since 2020, and spending on renewable power, grids, and storage is now higher than total spending on oil, gas, and coal. It attributes the increase to improved supply chains and lower costs.
Around $1 trillion of global energy investments will go to fossil fuels. The report stated that global upstream oil and gas investment is expected to increase by seven percent in 2024 to reach $570 billion, following a similar rise in 2023. The growth in spending in 2023 and 2024 is predominantly driven by national oil companies in the Middle East and Asia.
The report finds that oil and gas investment in 2024 is “broadly aligned with the demand levels implied in 2030 by today’s policy settings, but far higher than projected in scenarios that hit national or global climate goals”.
Clean energy investment by oil and gas companies reached $30 billion in 2023, accounting for only four percent of the industry’s overall capital spending. Investments in sustainable aviation fuels (SAF) have reached $1 billion, while $800 million is going to direct air capture (DAC) projects, a rise of 140 percent from 2023. Some 20 commercial-scale carbon capture utilization and storage (CCUS) projects in seven countries reached the final investment decision (FID) last year. At the same time, the agency estimates that 110 capture facilities, transport, and storage projects could also reach FID status in 2024.
The report further states that newly approved liquefied natural gas (LNG) projects, led by the USA and Qatar, will bring a new wave of investment that could boost global LNG export capacity by 50 percent. “The concentration of projects looking to start operation in the second half of this decade could increase competition and raise costs for the limited number of specialized contractors in this area,” it notes.
The report highlights that there are still “major imbalances and shortfalls in energy investment flows in many parts of the world”. It highlights the low level of clean energy spending in emerging and developing economies, outside China, as the high cost of capital stifles the development of new projects.
“Clean energy investment is setting new records even in challenging economic conditions, highlighting the momentum behind the new global energy economy. For every dollar going to fossil fuels today, almost two dollars are invested in clean energy,” IEA Executive Director Fatih Birol said. “The rise in clean energy spending is underpinned by strong economics, by continued cost reductions, and by considerations of energy security. However, there is also a strong element of industrial policy, as major economies compete for an advantage in new clean energy supply chains. More must be done to ensure that investment reaches where it is needed most, particularly in developing economies where access to affordable, sustainable, and secure energy is severely lacking today”.
China is set to account for the largest share of clean energy investment in 2024, reaching an estimated $675 billion, which the IEA attributed to strong domestic demand across three industries – solar, lithium batteries, and electric vehicles. Europe and the USA follow, with clean energy investments of $370 billion and $315 billion, respectively. These three major economies alone make up more than two-thirds of global clean energy investment, “underlining the disparities in international capital flows into energy,” the agency remarked.
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