Energy transition investments hit record $1.8 trillion in 2023

Global investment in the energy transition increased 17% in 2023, reaching a new high of $1.8 trillion, according to a new report from BloombergNEF (BNEF).

The report, Energy Transition Investment Trends 2024, finds that electrified transport is now the largest sector for spending in the energy transition, growing 36% in 2023 to $634 billion. This figure includes spending on electric cars, buses, two- and three-wheelers, and commercial vehicles, as well as associated infrastructure.

Electrified transport overtook the renewable energy sector, which saw an 8% increase to $623 billion. This figure reflects investment to construct renewable energy production facilities, such as wind, solar, and geothermal power plants, and biofuels production plants. Power grid investment was the third-largest contributor at $310 billion.

“Last year brought new records for global renewable energy investment,” said Meredith Annex, BNEF’s Head of Clean Power and co-author of the report. “Strong growth in the US and Europe drove the global rise, even as China, the world’s largest renewables market, sputtered, recording an 11% drop. Despite a year of tough headlines, a record amount of offshore wind capacity also reached financial close.”

There was also strong growth in emerging areas such as hydrogen (with investment tripling year on year), carbon capture and storage (near-doubling), and energy storage (up 76%).

China spent the most of any country by a large margin, with $676 billion invested in 2023 – equivalent to 38% of the global total. However, China’s lead has been reduced, the report said. Taken together, the European Union, U.S., and UK outpaced China with $718 billion of investments – something they didn’t achieve in 2022. Investment in the US jumped 22% year-on-year, to $303 billion, as the effects of the Inflation Reduction Act started to be felt.

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Yet, the report states the current level of investment in clean energy technologies is not sufficient to set Earth on track to reach net-zero by mid-century. Energy transition investment would need to average $4.8 trillion per year from 2024 to 2030 to align with BNEF’s Net Zero Scenario, the report says, which it describes as a Paris Agreement-aligned trajectory from the 2022 New Energy Outlook. This is nearly three times the total investment observed in 2023.

“Our report shows just how quickly the clean energy opportunity is growing, and yet how far off track we still are,” said Albert Cheung, Deputy CEO of BNEF. “Energy transition investment spending grew 17% last year, but it needs to grow more than 170% if we are to get on track for net zero in the coming years. Only determined action from policymakers can unlock this kind of step-change in momentum.”

In addition, BNEF’s report finds that investment in the global clean energy supply chain, including equipment factories and battery metals production for energy technologies, hit a new record at $135 billion in 2023 (up from just $46 billion in 2020), and is set to surge further over the next two years. BNEF projects this figure to rise to $259 billion by 2025, based on currently announced investment plans. In the next two years, only the wind sector needs to increase its supply chain investment to get on track for a net-zero trajectory; the other areas are investing at a sufficient pace, the report says.

Climate-tech equity raising has been falling for the past two years, hitting $84 billion in 2023 after $127 billion in 2022 and $168 billion in 2021. The report says rising interest rates have made it difficult for companies to raise capital. Clean energy-focused companies raised $49 billion, more than any other sector in 2023. The clean transport sector, however, saw its funding drop from $47 billion raised in 2022 to $18 billion in 2023.

Debt issuance for the energy transition also increased, with a 4% raise in 2023 to $824 billion after dropping 10% in 2022. The report says stabilizing or falling interest rates in various markets helped companies and governments raise debt – utilities raised the most with $328 billion, followed by financial institutions at $176 billion, and governments at $141 billion. Oil and gas companies’ energy transition debt issuance fell to $8.3 billion from $17.5 billion in 2022.