IRENA: Investment in renewable energy must more than triple to keep 1.5C alive
Global investment in renewable energy generation in 2022 was less than one-third of the level needed to transition the energy system in line with UN climate goals, and an even steeper uptick in investment is needed in the global south than in wealthy nations.
That is according to the International Renewable Energy Agency (IRENA), which has this week published a preview for this year’s edition of its annual World Energy Transitions Outlook.
The Outlook assesses the scale and pace of the energy transition so far and compares this to a transition that would be aligned with global net-zero by 2050, along the Paris Agreement’s 1.5C temperature pathway. Climate scientists agree that warming beyond this point will create a future that is ‘unliveable’ for billions of people – at least 3.3 billion by 2100 in a pathway exceeding 2C.
According to IRENA, around $0.5trn was invested in renewables in 2022. But in its 1.5C-aligned scenario, annual investment is at least triple this level.
The new report also outlines that investment in renewables is fairly concentrated within a select few markets, including Europe, the US and China. Africa, meanwhile, accounted for just 1% of newly installed renewable energy capacity in 2022. IRENA is emphasising the need for a more rapid and steep increase in investment in the global south going forward.
Additionally highlighted as a cause for concern is how a few technologies are taking the lion’s share of the funding. 95% of renewable energy investments made globally in 2022 went to wind and solar, the IRENA report reveals. The body is calling for more supportive policies and more concerted investment efforts around technologies including microgrids, geothermal, biofuels, hydropower and renewable solutions for heating and transport.
The fact that developing and emerging economies are falling behind – as is investment in some of the technologies that may benefit them most – is partially attributed to the aftermath of the pandemic and the “ripple effects” of Russia’s war in Ukraine.
Moving the trillions
IRENA is, overall, predicting that aligning the global energy system with a 1.5C pathway on the road to net-zero will be $47trn more costly through to 2050 than it would be to continue on a business-as-usual pathway. This is equivalent to $1.7trn extra per year. But, of course, this extra investment would help to avoid trillions of dollars of systemic climate-related risk.
As finance for renewable energy generation increases in the coming decades, the report highlights, it is critically important that investment in fossil fuel extraction and generation decreases. IRENA estimates that cumulative investment in fossil fuels is on track to exceed $30trn between now and 2050. This will need to decrease below $10trn in its 1.5C-aligned scenario.
The report also emphasizes the need for dramatic increases in investment in energy efficiency (more than double); electrifying transport and heat (more than triple) and improving power grids and building in energy flexibility (more than triple).
On this latter point, IRENA acknowledges that global electricity generation will need to more than triple between 2020 and 2050, to reach almost 90PWh. IRENA’s 1.5C-aligned scenario foresees, in 2050, a generation mix that is 91% renewable and 5% fossil fuels, compared with shares of 28% and 62% respectively in 2020. Over the three decades, it sees nuclear’s share decreasing from 10% to 4%.
IRENA’s Director-General Francesco La Camera said, “The stakes could not be higher. A profound and systemic transformation of the global energy system must occur in under 30 years, underscoring the need for a new approach to accelerate the energy transition. Pursuing fossil fuel and sectoral mitigation measures is necessary but insufficient to shift to an energy system fit for the dominance of renewables.”
To help deliver this profound transformation, the IRENA report makes a series of recommendations for policymakers and the private sector, covering not only physical infrastructure but also regulatory enablers and measures to grow the clean energy workforce.
IRENA’s full World Energy Outlook is due out later this year; previous editions have been published in the early summer. The Agency also produces annual reviews of jobs in the sector, which typically come in September.