A study has revealed that 2022 saw record clean energy investment across the globe, reaching $1.3 trillion.

However, despite being up 19% from 2021 investment levels and 50% from before the pandemic in 2019, more still is needed to meet a 1.5°C goal by 2050.

The report Global Landscape of Renewable Energy Finance 2023 is a joint report released by the International Renewable Energy Agency (IRENA) and Climate Policy Initiative (CPI) on the sidelines of the Spanish International Conference on Renewable Energy in Madrid, Spain.

The report states that, although global investment in renewable energy reached a record high of $0.5 trillion in 2022, this still represents less than 40% of the average investment needed each year between 2021 and 2030, according to IRENA’s 1.5°C scenario.

Efforts must be made to scale up investments in the off-grid renewables sector, which falls far short of the $2.3 billion needed annually between 2021 and 2030, as well as in end-use applications.

Renewables, end-use and electrification

In 2020, solar PV alone attracted 43% of the total investment in renewables, followed by onshore and offshore wind at 35% and 12% shares, respectively. And based on preliminary figures, this concentration seems to have continued into 2022.

To best support the energy transition, the report recommends more funds flow to less mature technologies as well as to other sectors beyond electricity such as heating, cooling and system integration.

Also, investments in renewable energy for end uses need to be urgently scaled up, in parallel with efforts towards renewable generation and end-use electrification.

Investments in end uses, i.e. direct applications, which include heat generation (e.g. solar water heaters, geothermal heat pumps, biomass boilers) and transport (e.g. biofuels) are especially lagging, according to report findings.

And over time this gap has increased; in 2020, renewable energy for end-use applications received less than 5% of the total ($17 billion), down from 8.5% in 2013 ($20 billion).

Although power will account for half of total energy consumption by 2050 – and there have been measures to encourage electrification for end uses. such as electric vehicles and heat pumps in some countries – IRENA advises support for more widespread adoption of direct uses of renewables will be needed to accelerate decarbonization.

Based on IRENA’s 1.5°C Scenario, such direct applications for end uses will be crucial to replace fossil fuels in the industrial, residential and transport sectors.

To achieve this, deployment policies such as targets, mandates, financial incentives and enabling policies such as awareness promotion, as well as funding for research and development and pilot projects, among others, will be needed.

Fossil fuel vs. net zero subsidizing

According to the report, achieving an energy transition in line with the 1.5°C scenario will require redirection of $0.7 trillion per year from fossil fuels to energy-transition-related technologies.

But following a brief decline in 2020 due to COVID-19, fossil fuel investments are now on the rise. Some large multi-national banks have even increased their investments in fossil fuels at an average of $0.75 trillion a year since the Paris Agreement.

In addition, the fossil fuel industry continues to benefit from subsidies, which doubled in 2021 across 51 countries.

IRENA emphasizes the need to phase out investments in fossil fuel assets, coupled with the elimination of subsidies to level the playing field with renewables.

However, the phaseout of subsidies needs to be accompanied by a proper safety net to ensure adequate standards of living for vulnerable populations.

Barbara Buchner, CPI’s global managing director commented: “The path to net zero can only happen with a just and equitable energy transition.

“While our numbers show that there were record levels of investment for renewables last year, a greater scale-up is critically needed to avoid dangerous climate change, particularly in developing countries.”

The 2022 edition was the third of the biannual joint report by IRENA and CPI.

Read more: $3.7 trillion war chest awaits those with right energy transition business model

Originally published on Power Engineering International.

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