Matthew Wolf (Switzerland) has experience of a range of different investment specialties, including working as an Australian stock market analyst focusing on banks, property, retail and insurance. Matthew Wolf, Capital Group partner and investment analyst from 2008 to 2023, has also worked as a European energy and utility analyst. This article will look at the global energy market, exploring pertinent investment trends in 2024.
As the world recovers from the economic slump created by COVID-19 and the ensuing global energy crisis, clean energy investment has seen a considerable uptick in interest. According to the International Energy Agency, clean energy investment is increasing its lead over fossil fuels, bolstered by energy security strengths.
Comparing its estimates for 2023 with data for 2021, the International Energy Agency reports that annual clean energy investment has increased at a much faster rate than investment in fossil fuels over the same period, at 24% versus 15% respectively. This new analysis highlights how a period of volatility in fossil fuel markets stemming from Russia’s invasion of Ukraine has increased the impetus for deployment of various clean energy technologies, in spite of the short-term scramble for gas and oil supplies created by the conflict.
The International Energy Agency estimated that around $2.8 trillion would be invested in the global energy industry in 2023, with more than $1.7 trillion invested in clean energy, including renewable power, grids, storage, nuclear, energy improvements, low-emission fuels, end-use renewables and electrification. The organisation anticipated that the remainder, amounting to just over $1 trillion, would be invested in fossil fuel supply and power, with 15% of that figure invested in coal and the rest on gas and oil. For every $1 dollar spent on fossil fuels, $1.7 was spent on clean energy in 2023, the International Energy Agency pointed out, compared with a 1:1 ratio five years previously.
The International Energy Agency’s World Energy Investment 2023 report suggested that the world was reaching a turning point for energy investment. The preceding few years had marked a period of extreme disruption for the energy sector, with a shock to the system created by the global energy crisis coming at a time of increasingly visible impacts of climate change. Energy price spikes provided strong economic incentives to seek out more efficient alternatives to meet energy demand. In addition, energy security shocks also provided powerful incentives for policymakers to reduce dependencies and vulnerabilities, particularly for developing economies, helping them to avoid the huge drain on financial resources.
In the report, Dr Fatih Birol, executive director of the International Energy Agency, suggested that clean energy is moving faster than many realise. He said this was clear in investment trends, with clean technologies pulling away from fossil fuels. Dr Birol cited ‘one shining example’ as investment in solar, which as he pointed out is on course to overtake the amount being invested in oil production for the first time.
Led by solar, clean electricity technologies are predicted to account for almost 90% of investment in power generation. Simultaneously, consumers are also investing in more electrified end-uses, with global sales of heat pumps seeing double-digit annual growth since 2021. Meanwhile, electric vehicle sales were predicted to rise by a third in 2023 after surging in 2022.
The International Energy Agency’s 2023 report revealed that clean energy investments had been advanced by a variety of factors, including improved economics at a time of high fossil fuel prices. In addition, enhanced policy support through instruments like the Inflation Reduction Act in the United States had also been a factor, with similar policies adopted throughout Europe, China and Japan. In addition, strong alignment of energy security and climate goals had also provided a further boost, creating increased impetus for countries to strengthen their footholds in the emerging renewable energy economy.
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