Clean Energy Investments Set New Record in 2023

Last year was a big year for the transition to clean energy. For the first time, investment in clean energy equaled investment in fossil fuels, according to data from BloombergNEF. This is a huge milestone in the fight against climate change.

Last year, $1.1 trillion was invested in the upstream, midstream, and downstream segments of oil and gas, as well as in fossil fuel-fired power generation without emissions reduction technology. Likewise, $1.1 trillion was invested in renewable energy, electrified transport and heat, energy storage, and other technologies.

2022 was a milestone year in terms of investment in decarbonizing energy, with investment surpassing $1 trillion. This represents a year-on-year increase of more than $250 billion from 2021, which is the largest jump yet.

There is a growing global investment in energy transition, as the world looks to move away from fossil fuels and towards cleaner energy sources. This shift is being driven by a number of factors, including the need to address climate change, the increasing cost-competitiveness of renewable energy, and the desire to achieve energy security.

Renewable energy and electrified transport are reaping most of the benefits from the surge in investment in clean energy. With more than 350 gigawatts of assets built, the wind and solar sectors are booming, and sales of electric vehicles are in the millions globally.

Investment in renewable energy and electrified transport is crucial to reducing our reliance on fossil fuels and mitigating the effects of climate change. Renewable energy sources like solar and wind power are becoming increasingly cost-competitive with traditional fossil fuels, making them a more attractive option for both businesses and consumers. Electric vehicles are also becoming more popular, as they offer a cleaner and more efficient alternative to gas-powered cars. By investing in renewable energy and electrified transport, we can help create a cleaner, more sustainable future for ourselves and future generations.

Although renewable energy saw record investment in 2022, electrified transport is growing at an even faster rate. Passenger EVs account for the majority of transport dollars invested ($380 billion) but that's not all that the sector saw last year. Public charging infrastructure saw an influx of $24 billion, while nearly $23 billion was spent on electric 2- and 3-wheelers. Electric buses got $15 billion, and commercial electric vehicles such as trucks received $8 billion.

BNEF tracks six other sectors in the energy transition, and all but one of them (nuclear) also set annual investment records last year. This shows that the energy transition is gaining momentum and that investors are confident in the sector.

Investment in electrified heat, nuclear power, energy storage, and sustainable materials is expected to reach $ billion by 2030. This would represent a significant increase from the current level of investment, which is estimated at $ billion. The increase is due to the growing awareness of the need to transition to cleaner energy sources and the potential benefits of doing so.

The two smallest sectors for investment are carbon capture and hydrogen. Carbon capture received $6.3 billion in 2022 and hydrogen a little over $1 billion. However, both grew significantly in relative terms. Carbon capture investment almost tripled while hydrogen investment more than tripled. Both technologies have made big promises in the past half-decade, and investment is now following. But there will need to be orders of magnitude more use of them to have a substantial climate impact.

Investment in carbon capture and hydrogen is expected to reach $ billion by 2025.

A trillion dollars invested in a year is a significant amount of money. However, it is not enough to meet the world's climate goals. In order to get on track for net zero emissions by 2050, the world would need to immediately triple its current spending of $1.1 trillion. Additionally, hundreds of billions of dollars would need to be invested in upgrading the global power grid.

Decarbonization is a long-term process that requires significant investment. Since 2004, the world has invested $6.7 trillion in the energy transition. It took eight years, from 2004 through 2011, to reach the first $1 trillion. It took less than four years to reach the next trillion, and a little less than one more year to reach the latest trillion. In 2022, one dollar out of every six invested over the last 18 years will be devoted to decarbonization efforts.

T. Boone Pickens famously said that the first trillion was the hardest. The most recent trillion was the fastest - but if we want to achieve the deepest decarbonization possible, it will be slower than every trillion that comes after it.