Low-Carbon Energy Tech Investment Exceeds $1 Trillion for First Time Globally
Energy transition investment rose 31% to draw level with fossil fuels
January 27, 2023
Investments in the low-carbon energy transition have accounted for a record-breaking $1.1 trillion in 2022 and have reached parity with capital deployed for fossil fuel supply, a BloombergNEF report has said.
The investment was primarily driven by the energy crisis and policy action, leading to faster deployments of clean energy technologies.
“Our findings put to bed any debate about how the energy crisis will impact clean energy deployment,” said Albert Cheung, Head of Global Analysis at BNEF. “Rather than slowing down, energy transition investment has surged to a new record as countries and businesses continue to execute transition plans.”
BNEF’s Energy Transition Investment Trends annually tracks how much funding businesses, financial institutions, governments, and end-users are committing to the low-carbon energy transition.
The report identified that all sectors achieved a new record level of investment in 2022, including renewable energy, energy storage, electrified transport, electrified heat, carbon capture and storage (CCS), hydrogen, and sustainable materials.
The only exception was nuclear power investment, which remained broadly flat.
Renewable energy remained the largest sector in investment terms, achieving a new record of $495 billion committed in 2022, up 17% from the year prior.
Electrified transport, which includes spending on electric vehicles and associated infrastructure, accounted for a 54% increase year-on-year with a $466 billion investment in 2022.
Despite interest from the private sector and growing policy support, the hydrogen sector received the least financial commitment at just $1.1 billion in 2022, which accounts for 0.1% of the total investment.
Yet the report suggests that the hydrogen sector is still the fastest growing with investment more than tripling over the year before.
China was the leading country in attracting energy transition investment, accounting for $546 billion, which comprises half of the global total.
The European Union region accounted for $181 billion, with countries like Germany, France, and the United Kingdom leading the investments.
The United States mobilized $141 billion in investments in clean energy technologies.
The report also finds that climate-tech corporate finance totaled $119 billion in 2022. This investment category, not included in the $1.1 trillion, describes new equity financing raised by companies in the climate-tech space, either from public markets or private investors.
Supply chain and manufacturing investment rose to $79 billion, dominated by China.
BNEF also reported that investments in manufacturing facilities for clean energy technologies, grew to $78.7 billion in 2022, up from $52.6 billion in 2021.
Manufacturing facilities for batteries and related components formed the largest share of this at $45.4 billion, while solar factories attracted $23.9 billion.
China accounted for 91% of manufacturing investments in 2022, despite efforts from other countries to capture more of the global clean energy opportunity.
Between 2023 and 2026, BNEF estimates that factory investment for clean energy technologies only needs to average $35 billion per year, to get on track for its Net Zero Scenario.
Ramp-up Needed for Net Zero
Despite 2022’s results, global investment in lower-carbon technologies remains woefully short of what is needed to confront climate change.
For the world to get on a 2050 “net-zero” CO2 emissions trajectory, such investment must immediately triple, BNEF estimates.
Including the additional $274 billion invested in the power grid, energy transition investment hit $1.38 trillion in 2022.
By comparison, the world must invest an annual average of $4.55 trillion for the remainder of this decade to get on track under the net-zero scenario, the report concluded.
According to Mercom Capital’s 2022 Solar Funding and M&A Report, global corporate funding for solar companies, including venture capital, private equity, debt financing, and public markets, amounted to $24.1 billion in 2022.
The global corporate funding for energy storage, smart grid, and energy efficiency companies in 2022 totaled $31.7 billion, according to Mercom’s Annual and Q4 2022 Funding and M&A Report for Storage, Grid and Efficiency.