Crisis and transition – World Energy Investment Report 2022

The International Energy Agency’s (IEA) World Energy Investment 2022 report, published in June, reveals a welcome increase in clean energy investment, but also a rise in geopolitical uncertainty.

The primary finding is that, while robust, energy transition investment is still falling short of that required for a net zero carbon world in 2050. Moreover, investment in traditional areas of energy supply, including oil and gas, has been weak, leading to a lack of supply and high prices, which have hit hardest the most vulnerable in society.

“Investment to bring more clean and affordable energy into the system is rising, but not yet quickly enough to forge a path out of today’s crisis or to bring emissions down to net zero by mid-century,” the IEA says.

Flashing red

The agency says the warning signs surrounding global energy investment were already ‘flashing red’ before Russia’s invasion of Ukraine, but this has added a further layer of uncertainty.

The report says energy investment is expected to increase by 8% this year to reach $2.4 trillion, well above pre-Covid levels, but that half of this reflects higher prices.

Wind and solar costs, after years of decline, are up by between 10% to 20%. The IEA is clear that wind and solar power remain the cheapest options for new power generation, owing to much higher rises in fossil fuel prices. However, higher costs – both for raw materials and borrowing — act as a brake on investment plans.

Power sector closest to sustainable pathway

Nonetheless, clean energy investment is picking up, accounting for almost three-quarters of the growth in overall energy investment. The main boost in recent years has come in spending on the power sector, in terms of increased renewable energy capacity, grid investment and end-use efficiency.

Solar PV makes up almost half of new investment in renewable power, while spending on wind is shifting to the offshore sector, which saw a