It’s a historic turning point: solar is overshadowing oil and gas. For the first time, worldwide, capital expenditure on renewable energy will exceed that on oil, according to the latest report from the International Energy Agency (IEA). This year, players in the sector will agree to around $2,800 billion in investments, including $1,700 billion in renewable energies. Spending on photovoltaics will exceed that on oil.
This sum covers a very broad field, from deployment expenses in renewable energies, to those for the installation of charging stations for electric vehicles, but also nuclear energy – classified as green energy by the IEA – the electric vehicles, storage, heat pumps… The balance, just over 1000 billion dollars, will still be invested in coal, gas and oil.
But the trend is there. Expenditure on green energies should increase by 24% between 2021 and 2023 according to the IEA, boosted by renewable energies (EnR) and electric vehicles, against an increase of 15% “only” for fossil fuels. “Green energy is moving fast, faster than many people imagine. For every dollar invested in fossil fuels, 1.7 goes to renewables. Five years ago, the ratio was one to one,” said Fatih Birol, Executive Director of the AIE.
Investment expenditure concerns the entire chain. Developments in new energy production capacities are oriented towards renewables, while consumer spending is also increasingly oriented towards equipment powered by these energies: heat pumps, electric cars, for example.
Public policies, in particular the Inflation Reduction Act in the United States, also support and encourage spending on renewable energy. A risk is nevertheless underlined. Most spending in the sector is borne by Western countries and China. With, however, an acceleration in India and Brazil. A new dividing line is likely to emerge between the countries, drawn this time by the capacity to have or not to have carbon-free energy. This dichotomy is also explained by a different sensitivity depending on the region to geopolitical issues. The war in Ukraine has precipitated the awareness of Europeans as to the need to reduce their dependence on fossil fuels, certainly to preserve the planet, but above all to regain their sovereignty and above all, no longer depend on imports of Russian hydrocarbons.
However, not all turn signals have turned green yet. The IEA expects a rebound in fossil fuel investment, especially in the Middle East, as local majors posted record profits in 2022. Global coal demand also hit an all-time high in 2022 , and investments in this sector should still be six times higher than those envisaged in the scenarios aiming for carbon neutrality in 2030!
