Solar power investments to outpace oil, IEA forecasts

May 25, 2023 (MLN): Investments in solar energy is expected to outpace oil, marking a significant shift towards renewable energy sources, indicating growth in the importance and potential of clean energy, as per the latest international Energy Agency (IEA) report.

However, the IEA alarmed that fossil fuel investment is at hike even though it should be declining to achieve the net zero emissions target by 2050.

Fatih Birol, executive director at IEA accompanying the release of the agency's latest report on energy investment stated "Clean energy is moving faster than many people realize."

He further added that it is clear in the investment trends, where clean technologies are pulling away from fossil fuels.

Annual investment in clean energy is expected to have risen by 24% from 2021, a strong increase of more than $1.7 trillion in 2023, as per IEA. The growth for fossil fuels investment was 15% over the same time period.

Five years ago, investment in fossil fuels and clean energy stood equal. However, the increase in spending on clean energy can be attributed to a combination of factors, mainly concerns about the supply of oil and gas along with increase in their relative prices.

One shining example is investment in solar, which is set to overtake the amount of investment going into oil production for the first time, Birol said.

The IEA forecasts investment in solar power, essentially photovoltaic panels, to hit $380 billion this year, while investment in oil exploration and extraction should come in at $370bn.

The low price of solar power generation will help propel de-carbonization efforts as electric car adoption gathers pace.

But the rebound in oil and gas investment, which is expected to return to 2019 levels this year, puts the industry further away from the IEA's 2050 net zero trajectory.

According to IEA, the fossil fuel investment for the period ended 2023 is expected to be more than double the amount the sector should be spending in 2030.

The IEA also noted that clean energy investment was concentrated in advanced nations and China, while the biggest increases in fossil fuel investment are in Middle Eastern nations.

They also found that major energy companies, for the most part, are not putting considerable funds into the transition to green energy.

Just 5% of their cash flow last year went to low-carbon and renewable energies or carbon capture projects, only about a quarter of the amount that was paid out overall to shareholders.

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