Solar investment set to overtake oil production and attract over $1 billion a day in 2023, IEA says

Global investment in energy is slated to hit roughly $2.8 trillion in 2023, according to a new report from the International Energy Agency, with over $1.7 trillion of that set to go on clean energy technologies such as EVs, renewables and storage.

In a sign of how the energy transition is progressing, the IEA’s World Energy Investment report said solar investments were expected to attract over $1 billion a day in 2023.

In a statement, Fatih Birol, the IEA’s executive director, said investment in solar was “set to overtake the amount of investment going into oil production for the first time.”

Speaking to CNBC’s Arabile Gumede Thursday morning, Birol said there was a “growing gap between the investment in fossil energy and investment [in] clean energy.”

There were three reasons for this, he argued. Firstly, the cost of clean energy such as solar and wind was “getting cheaper and cheaper,” he said.

Secondly, Birol noted that many governments now saw “clean energy sources — renewables, electric cars, nuclear power — as a lasting solution to their energy security problem, in addition to climate change.”

Industrial strategy was the third factor, Birol said, namechecking the United States’ Inflation Reduction Act and other programs and policies in Europe, Japan, India and China.

“Governments, investors, see that the next chapter of the industry is clean energy technology manufacturing — batteries, electric cars, solar panels — and they are providing huge incentives to investors,” he explained.

While advocates of the transition to a sustainable future will welcome the above, they’ll likely be disheartened by the IEA’s projection that coal, gas and oil are still on course to attract “slightly over” $1 trillion of investment this year.

“Today’s fossil fuel investment spending is now more than double the levels needed in the Net Zero Emissions by 2050 Scenario,” the IEA’s report said.

“The misalignment for coal is particularly striking: today’s investments are nearly six times the 2030 requirements of the NZE Scenario,” it added.

The effect of fossil fuels on the environment is considerable. The U.N. says that, since the 19th century, “human activities have been the main driver of climate change, primarily due to burning fossil fuels like coal, oil and gas.”

The shadow of 2015?s Paris Agreement looms large over the IEA’s report. The landmark accord aims to “limit global warming to well below 2, preferably to 1.5 degrees Celsius, compared to pre-industrial levels.”

Cutting human-made carbon dioxide emissions to net-zero by 2050 is seen as crucial when it comes to meeting the 1.5 degrees Celsius target.

Major debate

Over the past few years, high profile figures such as U.N. Secretary General Antonio Guterres have made their feelings on fossil fuels known.

In June last year, Guterres slammed new funding for fossil fuel exploration. He described it as “delusional” and called for an abandonment of fossil fuel finance.

Despite these concerns, the oil and gas industry continues to develop projects around the world.

In Oct. 2022, for instance, BP chief Bernard Looney said his firm’s strategy was centered around investing in hydrocarbons whilst simultaneously putting money into the planned energy transition.

While there will be concerns about the money flowing to fossil fuels, the IEA’s Birol sought to highlight what could be a significant shift going forward.

“Clean energy is moving fast — faster than many people realise,” he said in a statement issued alongside the IEA’s report. “This is clear in the investment trends, where clean technologies are pulling away from fossil fuels.”

“For every dollar invested in fossil fuels, about 1.7 dollars are now going into clean energy,” Birol added, explaining that this ratio had been one-to-one just five years ago.

Others commenting on the IEA’s report included Dave Jones, head of data insights at energy thinktank Ember. “This crowns solar as a true energy superpower,” he said.

“It is emerging as the biggest tool we have for rapid decarbonisation of the entire economy, especially as solar is increasingly used to power cars in place of oil,” he added.

“The irony remains that some of the sunniest places in the world have the lowest levels of solar investment, and this is a problem that needs attention.”