Investment in solar energy will overtake oil for the first time, says IEA head

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Investment in solar energy will exceed spending on oil production for the first time this year, the head of the International Energy Agency said, highlighting a surge in the development of clean energy that will help curb emissions global if the trend persists.

“If these investments in clean energy continue to grow in line with what we have seen in recent years . . . we will soon start to see a very different energy system emerge and we can keep the 1.5C target alive,” Fatih Birol, executive director of the IEA, told the Financial Times, referring to the Paris Agreement goal to limit the increase in global temperature.

This year, $1.7 trillion is expected to be spent on cleantech compared to $1 trillion on fossil fuels. Five years ago, the $2 trillion in annual energy investments were split evenly between fossil fuels and clean technologies, such as renewable energy, electric vehicles and low-emission fuels.

Birol said “a new global clean energy economy is emerging,” adding, “For a man like me who gets his hands dirty with data every single day, this is an astonishing and dramatic shift.”

Rising clean energy spending is driven by a sharp rebound in economic growth following the Covid-19 pandemic, as well as concerns over price volatility and energy security triggered by the full-scale invasion of Ukraine by Russia last year, according to the IEA’s annual Report on World Energy Investment, released on Thursday.

Strengthened policy support such as the US Inflation Reduction Act, which provided $369 billion in subsidies and tax credits for clean energy technologies, has also helped, the report said.

As a result, the IEA projects annual investments in clean energy will increase by 24% compared to 2021, while spending on fossil fuels will increase by 15%, he added.

Solar power has been the “star of global energy investment” with total spending expected to exceed $1 billion a day, surpassing spending on oil production, Birol said.

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The IEA chief attended the recent G7 summit in Japan and said he was encouraged by the level of alignment on energy issues between G7 members and invited countries such as Brazil, India and Indonesia. “I have rarely seen such a homogeneous vision of the future of energy markets,” he added.

But to maintain momentum, G7 leaders needed to ensure that current clean energy spending was extended to more emerging and developing countries, Birol said. “If there’s a challenge, it’s whether or not emerging countries will be able to finance their clean energy transition on their own,” he added.

Despite booming clean energy spending, global energy-related carbon emissions grew 0.9 percent last year to a record 36.8 billion tonnes, the IEA said in March.

Birol also called on domestic and international oil companies to direct more of their spending towards low-carbon energy solutions. Total investment by the oil and gas industry in low-emission energy sources is less than 5% of total spent on fossil fuel production, according to IEA analysis.

“I hope there is more of a parallel between what the heads of international and domestic oil companies say about their concerns about climate change and what they do in terms of investments,” said Birol.