In 2021, investment per capita in Europe was 127 times that in Sub-Saharan Africa and 179 times more in North America, says the report
Although global investment in renewable energy reached a record high of $0.5 trillion in 2022, this still represents less than 40% of the average investment needed each year between 2021-2030, according to a new joint report by the International Renewable Energy Agency (IRENA) and Climate Policy Initiative (CPI). The report looked at the period of 2013-2020 and provided preliminary insights and figures for 2021 and 2022. It found that investments are also not on track to achieve the goals set by the 2030 Agenda for Sustainable Development.
The report Global Landscape of Renewable Energy Finance 2023 revealed that global investment in energy transition technologies last year, including energy efficiency, reached $1.3 trillion. It set a new record-high, up 19% from 2021 investment levels, and 50% from before the pandemic in 2019.
Yet, the current pace of investment is not sufficient as annual investments need to at least quadruple, estimated the report.
Skewed investments, preference for fossil fuels
The report found that investments have become concentrated in specific technologies and uses. In 2020, solar photovoltaic alone attracted 43% of the total investment in renewables, followed by onshore and offshore wind at 35% and 12% shares, respectively. Based on preliminary figures, the report said, this concentration seems to have continued to the year of 2022. To best support the energy transition, more funds need to flow to less mature technologies as well as to other sectors beyond electricity such as heating, cooling, and system integration.
On comparing renewables financing across countries and regions, the report found glaring disparities increasing significantly over the past six years. About 70% of the world’s population, mostly residing in developing and emerging countries, received only 15% of global investments in 2020. For example, Sub-Saharan Africa received less than 1.5% of the amount invested globally between 2000-2020. In 2021, investment per capita in Europe was 127 times that in Sub-Saharan Africa, and 179 times more in North America, found the report.
The report emphasised how lending to developing countries looking to deploy renewables must be reformed, and highlighted the need for public financing to play a much stronger role, beyond mitigating investment risks. The report called for stronger international collaboration, including a substantial increase in financial flows from the global north to the global south.
“For the energy transition to improve lives and livelihoods, governments and development partners need to ensure a more equitable flow of finance, by recognising the different contexts and needs,” said IRENA director-general, Francesco La Camera. “This joint report underscores the need to direct public funds to regions and countries with a lot of untapped renewables potential but find it difficult to attract investment. International cooperation must aim at directing these funds to enabling policy frameworks, the development of energy transition infrastructure, and to address persistent socio-economic gaps.”
According to the report, achieving an energy transition in line with the 1.5°C scenario also requires the redirection of $0.7 trillion per year from fossil fuels to energy-transition-related technologies. But following a brief decline in 2020 due to COVID-19, fossil fuel investments are now on the rise. Some large multi-national banks have even increased their investments in fossil fuels at an average of about $0.75 trillion a year since the Paris Agreement. In addition, the fossil fuel industry continues to benefit from subsidies, which doubled in 2021 across 51 countries.
The report recommended that the phasing out of investments in fossil fuel assets should be coupled with the elimination of subsidies to level the playing field with renewables. However, the phaseout of subsidies needs to be accompanied by a proper safety net to ensure adequate standards of living for vulnerable populations.