The world is planning to invest nearly twice as clean energy as fossil fuels this year, according to a report by the new International Energy Agency.
Fossil fuel spending remains important, but this year is around $1.15 trillion, but clean energy is expected to receive $2.15 trillion in 2025, but clean energy is now increasing.
But the real point is that the energy transition shows no signs of slowing down.
It has been revealed that two investment trends are plotted. Over the past decade, fossil fuel investments have been relatively stable when they have declined slightly. There have been an increase since the drop, which coincided with the pandemic, but it still shows signs of softening this year.
However, clean energy investments take a different path. This is a much more positive and positive trend. The curve rises and is on the right.
For data nerds: Quadratic polynomial fit to fossil fuel investments is a reasonable job of explaining variance (R2 = 0.74), suggesting that in the near future the world may be extracting a little more oil, coal and gas. However, the same type of equations applied to clean energy numbers are much better suited for the data (R2 = 0.94). Unless the world does not U-turn in the decade that the IEA has collected this data, including the pandemic – expects a larger clean energy number next year.
The big question is whether it’s too little or too late.
According to a report by the World Economic Foundation, to hit net zero by 2050, the world will need to invest an average of $4.5 trillion per year. This is twice as much as this year’s investment. However, analysts have previously issued overly cautious clean energy investment forecasts. Trends in new IEA data suggest that the target is within range.
The exponential growth of clean energy will not last forever. This trend could potentially tapering over the next few years, like in the mid-2010s. However, as I wrote before, this kind of fit and start is not uncommon, and the adoption of new technologies is by no means continuous. Instead, it is influenced by global economic trends and the learning curves companies face when incorporating into their businesses.
Ultimately, by 2050, the average annual investment will likely meet or exceed the $4.5 trillion annual fees that the World Economic Forum is seeking. Clean Energy Technologies are cheaper each year, making them easier to access. Certainly, 85% of electricity demand growth over the next two years will come from developing and emerging economies. And while cheap coal drives the story with many of them, we should not count the sun and the wind.
Of course, the wildcard is the data center. Utilities are facing demand forecasts with huge error bars, at least in the US. These predictions can be scarce, but utilities tend to make mistakes on the attention side. This means finding more power.
Some will turn to gas turbines, while others will bet on the nuke. However, in the coming years and perhaps long term, renewable energy combined with energy storage will have an advantage. They’re not only because they’re cheaper, but because they’re modular. These can be deployed on a variety of scales and prices. It’s easy for them to be everywhere, and that’s something investors love to see.