Global investment in energy is expected to reach $2.8 trillion in 2023, of which more than $1.7 trillion is likely to go to clean technologies, including renewables, electric vehicles, nuclear power, grids, storage, low-emissions fuels, efficiency improvements, and heat pumps, finds a new report from the International Energy Agency (IEA).

The report “World Energy Investment 2023” found that investment in clean energy technologies is significantly outpacing spending on fossil fuels as affordability and security concerns triggered by the global energy crisis strengthen the momentum behind more sustainable options.

The remainder, slightly more than $1 trillion, is going to coal, gas, and oil.

Annual clean energy investment is expected to rise by 24% between 2021 and 2023, driven by renewables and electric vehicles, compared with a 15% rise in fossil fuel investment over the same period.

But more than 90% of this increase comes from advanced economies and China, presenting a serious risk of new dividing lines in global energy if clean energy transitions do not pick up elsewhere.

“Clean energy is moving fast – faster than many people realize,” said IEA Executive Director Fatih Birol. “This is clear in the investment trends, where clean technologies are pulling away from fossil fuels.”

Led by solar, low-emission electricity technologies are expected to account for almost 90% of investment in power generation.

Consumers are also investing in more electrified end-uses. Global heat pump sales have seen double-digit annual growth since 2021. Electric vehicle sales are expected to leap by a third this year after already surging in 2022.

The IEA report said clean energy investments had been boosted by a variety of factors in recent years, including periods of strong economic growth and volatile fossil fuel prices that raised concerns about energy security, especially following the war in Ukraine.

Enhanced policy support through significant actions like the Inflation Reduction Act (IRA) in the U.S. and initiatives in Europe, Japan, and China, have also played a role.

Solar – The Star Performer

Solar is the star performer, and more than $1 billion per day is expected to go into solar investments in 2023 ($380 billion for the year as a whole), edging this spending above that in upstream oil for the first time.

EV Sales to Surge

Demand for electric cars is booming, with sales expected to leap by more than one-third this year after a record-breaking 2022.

As a result, investment in EVs has more than doubled since 2021, reaching $130 billion in 2023. Global sales of heat pumps have seen double-digit growth since 2021.

Emerging Economies Lagging

The biggest shortfalls in clean energy investment are in emerging and developing economies.

There are some bright spots, such as dynamic investments in solar in India and renewables in Brazil and parts of the Middle East.

However, investment in many countries is being held back by factors including higher interest rates, unclear policy frameworks and market designs, weak grid infrastructure, financially strained utilities, and a high cost of capital.

In March, a new report by the International Renewable Energy Agency (IRENA) stated that the lack of adequate progress in the global energy transition would require even more investment, and a systematic change in the volume and type of investments is necessary to prioritize the transition.

According to a BloombergNEF report, global investment in energy transition reached a record $755 billion in 2021.