World Energy
Investment 2023
The IEA examines the full spectrum of energy
issues including oil, gas and coal supply and
demand, renewable energy technologies,
electricity markets, energy efficiency, access to
energy, demand side management and much
more. Through its work, the IEA advocates
policies that will enhance the reliability,
affordability and sustainability of energy in its 31
member countries, 11 association countries and
beyond.
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without prejudice to the status of or sovereignty
over any territory, to the delimitation of
international frontiers and boundaries and to the
name of any territory, city or area.
Source: IEA.
International Energy Agency
Website: www.iea.org
IEA member countries:
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France
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Greece
Hungary
Ireland
Italy
Japan
Korea
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Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
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INTERNATIONAL ENERGY AGENCY
Spain
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also participates in the work
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Revised version, May 2023
Information notice found:
www.iea.org/corrections
World Energy Investment 2023
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IEA. All rights reserved.
Abstract
Abstract
This year’s edition of the World Energy Investment provides a full
update on the investment picture in 2022 and an initial reading of the
emerging picture for 2023.
The report provides a global benchmark for tracking capital flows in
the energy sector and examines how investors are assessing risks
and opportunities across all areas of fuel and electricity supply,
critical minerals, efficiency, research and development and energy
finance.
It focuses on some important features of the new investment
landscape that are already visible, including the policies now in place
that reinforce incentives for clean energy spending, the energy
security lens through which many investments are now viewed,
widespread cost and inflationary pressures, the major boost in
revenues that high fuel prices are bringing to traditional suppliers,
and burgeoning expectations in many countries that investments will
be aligned with solutions to the climate crisis.
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IEA. All rights reserved.
Table of contents
Table of contents
Introduction ...................................................................................................... 5
Overview and key findings ............................................................................. 7
Power sector .................................................................................................. 25
Overview of power investment ..................................................................... 26
Generation ................................................................................................... 31
Final investment decisions (FIDs) ................................................................ 41
Electricity grids and battery storage ............................................................. 48
Implications .................................................................................................. 55
Fuel supply ..................................................................................................... 58
Overview ...................................................................................................... 59
Upstream oil and gas ................................................................................... 66
Midstream and downstream oil and gas ...................................................... 73
Oil and gas industry transitions .................................................................... 79
Low-emission fuels ....................................................................................... 84
Coal .............................................................................................................. 97
Critical minerals .......................................................................................... 101
Implications ................................................................................................ 105
Energy end use and efficiency ................................................................... 108
Buildings ..................................................................................................... 111
Transport .................................................................................................... 117
Industry....................................................................................................... 124
Implications ................................................................................................ 128
R&D and technology innovation ................................................................ 131
Spending on energy R&D .......................................................................... 133
VC funding of early-stage energy technology companies ......................... 141
Implications ................................................................................................ 150
Sustainable finance ..................................................................................... 154
Overview .................................................................................................... 155
Sustainable investing ................................................................................. 159
Sustainable debt issuances ....................................................................... 166
Annex............................................................................................................ 174
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IEA. All rights reserved.
Introduction
Introduction
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Introduction
A turning point for energy investment?
This new World Energy Investment 2023 (WEI 2023) report is the
eighth in our annual series
where we provide the global benchmark
for tracking capital flows in the energy sector. The last few years have
been a period of extreme disruption for the energy sector. The new
WEI 2023 offers an opportunity to take stock of what this has meant
for investment, and what those investments might mean in turn for
the future security and sustainability of the energy sector.
The shock to the system from the global energy crisis has come at a
time of increasingly visible impacts of a changing climate and has
taken many forms. Price spikes created strong economic incentives
to increase supply and to find alternative or more efficient ways to
meet demand. Energy security shocks created powerful incentives
for policy makers to reduce vulnerabilities and dependencies, while
also – for many developing economies in particular – draining the
financial resources available to address them.
In the new WEI 2023 we provide a full update on the investment
picture in 2022 and an initial reading of the emerging picture for 2023.
Huge uncertainties remain over how events will play out. But some
important features of the new investment landscape are already
visible, including the policies now in place that reinforce incentives for
clean energy spending, the energy security lens through which many
investments are now viewed, widespread cost and inflationary
pressures, the major boost in revenues that high fuel prices are
bringing to traditional suppliers, and burgeoning expectations in many
countries that investments will be aligned with solutions to the climate
crisis. The structure of this year’s WEI 2023 is as follows:
In Chapter 1 we present the overview and key findings. Chapter 2
covers the power sector, while Chapter 3 reviews the latest
developments and trends in fuel supply investment. Chapter 4 deals
with investment in energy efficiency and the end-use sectors, and
Chapter 5 brings insights on energy research and development and
innovation. The concluding Chapter 6 considers trends in energy
finance.
While the focus of WEI 2023 is to track investment and financing
trends in 2022 and provide an early indication for 2023, the report
also benchmarks today’s trends against future scenarios from the IEA
World Energy Outlook
. The Stated Policies Scenario (STEPS) is
based on today’s policy settings and considers aspirational targets
only insofar as they are backed by detailed policies. The Announced
Pledges Scenario (APS) assumes that all climate commitments and
net zero targets made by governments around the world will be met
in full and on time. The Net Zero Emissions by 2050 Scenario (NZE
Scenario) sets out a narrow but achievable pathway for the global
energy sector to achieve net zero CO
2
emissions by 2050.
World Energy Investment 2023
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Overview and key findings
Overview and key findings
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Overview and key findings
The recovery from the Covid-19 pandemic and the response to the global energy crisis have
provided a major boost to global clean energy investment
Global energy investment in clean energy and in fossil fuels, 2015-2023e
IEA. CC BY 4.0.
Note: 2023e = estimated values for 2023.
400
800
1 200
1 600
2 000
2015 2016 2017 2018 2019 2020 2021 2022 2023e
Billion USD (2022)
Clean energy
Fossil fuels
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Overview and key findings
Increases across almost all categories push anticipated spending in 2023 up to a
record USD 2.8 trillion
Energy-sector investment, 2019-2023e
IEA. CC BY 4.0.
Notes: “Low-emission fuels” include modern liquid and gaseous bioenergy, low-emission hydrogen and low-emission hydrogen-based fuels; “Other end use” refers to renewables for
end use and electrification in the buildings, transport and industrial sectors. The terms grids and networks are used interchangeably in this report and do not distinguish between
transmission and distribution; 2023e = estimated values for 2023..
100
200
300
400
500
600
700
2019
2020
2021
2022
2023e
2019
2020
2021
2022
2023e
2019
2020
2021
2022
2023e
2019
2020
2021
2022
2023e
2019
2020
2021
2022
2023e
2019
2020
2021
2022
2023e
2019
2020
2021
2022
2023e
2019
2020
2021
2022
2023e
2019
2020
2021
2022
2023e
2019
2020
2021
2022
2023e
Upstream oil
and gas
Midstream oil
and gas
Coal Low-
emission
fuels
Renewables Fossil Grids and
storage
Nuclear Efficiency Electrification
and other
Billion USD (2022)
Fuel supply
investment
Power
investment
End use
investment
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Overview and key findings
Renewables, led by solar, and EVs are leading the expected increase in clean energy
investment in 2023
Annual clean energy investment, 2015-2023e
IEA. CC BY 4.0.
Notes: “Low-emission fuels” include modern liquid and gaseous bioenergy, low-emission hydrogen and hydrogen-based fuels that do not emit any CO
2
from fossil fuels directly when
used and emit very little when being produced; “Other end use” refers to renewables for end use and electrification in the buildings, transport and industrial sectors. 2023e = estimated
values for 2023; CCUS = carbon capture, utilisation and storage; EV = electric vehicle.
400
800
1 200
1 600
2 000
2015 2016 2017 2018 2019 2020 2021 2022 2023e
Billion USD (2022)
Low-emission fuels
and CCUS
Nuclear
Battery storage
EVs
Grids
Other end use
Energy efficiency
Renewable power
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Overview and key findings
Less than half of the oil and gas industry’s unprecedented cash flow from the energy crisis is
going back into traditional supply and only a small fraction to clean technologies
Distribution of cash spending by the oil and gas industry, 2008-2022
IEA. CC BY 4.0.
Source: IEA analysis based on data from S&P Capital IQ.
20%
40%
60%
80%
100%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Net debt repaid
Dividends plus
buybacks minus
issuances
Low-carbon
capital
expenditure
Oil and gas
capital
expenditure
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Overview and key findings
The momentum behind clean energy investment stems from a powerful alignment of costs,
climate and energy security goals, and industrial strategies
The recovery from the slump caused by the Covid-19 pandemic and
the response to the global energy crisis have provided a significant
boost to clean energy investment. Comparing our estimates for 2023
with the data for 2021, annual clean energy investment has risen
much faster than investment in fossil fuels over this period (24% vs
15%). Our new analysis highlights how the period of intense volatility
in fossil fuel markets caused by the Russian Federation’s (hereafter
“Russia”) invasion of Ukraine has accelerated momentum behind the
deployment of a range of clean energy technologies, even as it also
prompted a short-term scramble for oil and gas supply.
We estimate that around USD 2.8 trillion will be invested in energy in
2023. More than USD 1.7 trillion is going to clean energy, including
renewable power, nuclear, grids, storage, low-emission fuels,
efficiency improvements and end-use renewables and electrification.
The remainder, slightly over USD 1 trillion, is going to unabated fossil
fuel supply and power, of which around 15% is to coal and the rest to
oil and gas. For every USD 1 spent on fossil fuels, USD 1.7 is now
spent on clean energy. Five years ago this ratio was 1:1.
Clean energy investments have been boosted by a variety of factors.
These include improved economics at a time of high and volatile fossil
fuel prices; enhanced policy support through instruments like the US
Inflation Reduction Act and new initiatives in Europe, Japan, the
People’s Republic of China (hereafter “China”) and elsewhere; a
strong alignment of climate and energy security goals, especially in
import-dependent economies; and a focus on industrial strategy as
countries seek to strengthen their footholds in the emerging clean
energy economy.
This momentum has been led by renewable power and EVs, with
important contributions also from other areas such as batteries, heat
pumps and nuclear power. In 2023 low-emissions power is expected
to account for almost 90% of total investment in electricity generation.
Solar is the star performer and more than USD 1 billion per day is
expected to go into solar investments in 2023 (USD 380 billion for the
year as a whole), edging this spending above that in upstream oil for
the first time.
Consumers are investing in more electrified end uses. Demand for
electric cars is booming, with sales expected to leap by more than
one-third this year after a record-breaking 2022. As a result,
investment in EVs (defined as the incremental spending on EVs vs
the average price of vehicles sold in a given country) has more than
doubled since 2021, reaching USD 130 billion in 2023. Global sales
of heat pumps have seen double-digit growth since 2021.
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Overview and key findings
The increase in fossil fuel investment expected in 2023 is unevenly spread around the world;
less than half the cash flow available to the oil and gas industry is going back into new supply
2022 was an extraordinarily profitable year for many fossil fuel
companies, as they saw revenues soar on higher fuel prices. Net
income from fossil fuel sales more than doubled compared with the
average in recent years, with global oil and gas producers receiving
around USD 4 trillion.
Our overall expectation, based on analysis of the announced
spending plans of all the large and medium-sized oil, gas and coal
companies, is that investment in unabated fossil fuel supply is set to
rise by more than 6% in 2023, reaching USD 950 billion.
The largest share of this total is going to upstream oil and gas, where
investment is expected to rise by 7% in 2023 to more than USD 500
billion, bringing this indicator in aggregate back to the levels of 2019.
Around half this increase is likely to be absorbed by cost inflation.
Many large oil and gas companies have announced higher spending
plans on the back of record revenues. But uncertainties over longer-
term demand, worries about costs, and pressure from many investors
and owners to focus on returns rather than production growth mean
only large Middle Eastern national oil companies are spending much
more in 2023 than they did in 2022, and they are the only subset of
the industry spending more than pre-pandemic levels.
The headline rise in spending on new oil and gas supply represents
less than half of the cash flow that was available to the oil and gas
industry. Between 2010 and 2019, three-quarters of cash outflows
were typically invested into new supply. This is now less than half,
with the majority going to dividends, share buybacks and debt
repayment.
Investment by the oil and gas industry in low-emissions sources of
energy is less than 5% of its upstream investment. This indicator
differs widely by company, with double-digit shares common among
the large European companies. Investment by the industry in clean
fuels, such as bioenergy, hydrogen and CCUS, is picking up in
response to more supportive policies but remains well short of where
it needs to be in climate-driven scenarios.
Investment in coal supply is expected to rise by 10% in 2023, and is
already well above pre-pandemic levels. Investment in new coal-fired
power plants remains on a declining trend, but a warning sign came
in 2022 with 40 GW of new coal plants being approved – the highest
figure since 2016. Almost all of these were in China, reflecting the
high political priority attached to energy security after severe
electricity market strains in 2021 and 2022, even as China deploys a
range of low-emission technologies at scale.
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Overview and key findings
The increase in clean energy spending in recent years is impressive but heavily concentrated in
a handful of countries
Increase in annual clean energy investment in selected countries and regions, 2019-2023e
IEA. CC BY 4.0
Note: 2023e = estimated values for 2023.
- 10 20 50 80 110 140 170 200
Russia
Indonesia
Middle East
Brazil
Africa
India
Japan
United States
European Union
China
Billion USD (2022)
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Overview and key findings
Clean energy costs edged higher in 2022, but pressures are easing in 2023 and mature clean
technologies remain very cost-competitive in today’s fuel-price environment
IEA clean energy equipment price index Average prices for selected technologies
IEA. CC BY 4.0.
Notes: The IEA clean energy equipment price index tracks price movements of a fixed basket of equipment products that are central to the clean energy transition, weighted according
to their share of global average annual investment in 2020-2022: solar PV modules (48%), wind turbines (36%), EV batteries (13%) and utility-scale batteries (3%). Prices are tracked
on a quarterly basis with Q4 2019 defined as 100.
100
200
300
400
500
0.5
1.0
1.5
2.0
2.5
2014 2015 2016 2017 2018 2019 2020 2021 2022
USD/kWh (nominal prices)
Million USD/MW (nominal prices)
EV batteries (RH axis)
Storage batteries
Wind
turbines
Solar panels
50
100
150
200
250
2014 2015 2016 2017 2018 2019 2020 2021 2022
Index (2019 Q4 = 100)
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Overview and key findings
Notes of caution amid rising momentum behind clean energy transitions
The positive momentum behind clean energy investment is not
distributed evenly across countries or sectors, highlighting issues that
policy makers will need to address to ensure a broad-based and
secure transition. The macroeconomic environment presents
additional obstacles, with higher short-term returns for fossil fuel
assets and rising borrowing costs and debt burdens. Clean energy
investments often require high upfront spending, making the cost of
financing a crucial variable for investors, even if this is offset over time
by lower operating costs.
More than 90% of the increase in clean energy investment since 2021
has taken place in advanced economies and China. There are bright
spots elsewhere: for example, solar investment remains dynamic in
India; deployment in Brazil is on a steady upward curve ; and investor
activity is picking up in parts of the Middle East, notably in Saudi
Arabia, the United Arab Emirates and Oman. However, higher
interest rates, unclear policy frameworks and market designs,
financially-strained utilities and a high cost of capital are holding back
investment in many other countries. Remarkably, the increases in
clean energy investment in advanced economies and China since
2021 exceed total clean energy investment in the rest of the world.
After an unbroken run of cost declines, prices for some key clean
energy technologies rose in 2021 and 2022 thanks largely to higher
input prices for critical minerals, semiconductors and bulk materials
like steel and cement. Solar PV modules were around 20% more
expensive in early 2022 than one year earlier, although these price
pressures have eased since. Wind turbine costs, especially for
European manufacturers, remained high in early 2023, at 35% above
the low levels of early 2020. Permitting has been a key concern for
investors and financiers, especially for wind and grid infrastructure.
While solar deployment has been increasing year-on-year, the
project pipeline for some other technologies has been less reliable.
Investment in wind power has varied year-on-year in key markets in
response to changing policy circumstances. Nuclear investment is
rising but hydropower, a key low-emission source of power market
flexibility, has been on a downward trend.
Weak grid infrastructure is a limiting factor for renewable investment
in many developing economies, and here too current investment
flows are highly concentrated. Advanced economies and China
account for 80% of global spending and for almost all of the growth
in recent years.
Our analysis presents a mixed picture on the prospects for energy
efficiency and end use investments. They rose in 2022 thanks to the
stimulus provided by new policies in Europe and North America,
alongside exceptionally high energy prices. However, we expect
spending to flatten in 2023 amid a slowdown in construction activity,
higher borrowing costs and strains on household budgets.
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Overview and key findings
Cuts in Russian gas deliveries to Europe have prompted higher investment in alternative
sources of supply and in LNG infrastructure
Change in global investment in natural gas supply Annual LNG import and export capacity additions
IEA. CC BY 4.0.
Notes: “Gas supply investment” includes upstream and transport (LNG liquefaction, shipping and regasification and pipeline transmission and distribution).
2023e = estimated values for 2023.
20
40
60
80
100
120
2019 2021 2023 2025 2027
Bcm per year
Import Export
-60
-45
-30
-15
0
15
30
2019 2020 2021 2022 2023e
Billion USD (2022)
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Overview and key findings
Strong policy signals and new support schemes have triggered a rapid expansion in the project
pipelines for low-emissions hydrogen and CCUS
Capacity additions for hydrogen electrolysis and CO
2
capture projects by announced start date, 2017-2026
IEA. CC BY 4.0.
Notes: GW = GW of electricity input; for years before 2023, actual start dates are shown; for 2023 onwards, scheduled start dates as announced by developers are shown; CCUS
covers all sources of CO
2
, including low-emission hydrogen projects using CCUS; data include projects at the “feasibility” stage and beyond.
Sources: IEA analysis based on IEA hydrogen project database, CCUS projects database
and recent announcements.
5
10
15
20
25
30
North America Europe Latin America China Asia Pacific Middle East Other
Hydrogen electrolysis
MW
15
30
45
60
75
90
Mt CO₂/yr
CCUS
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Overview and key findings
Gas investments are caught between immediate shortfalls and longer-term uncertainty,
although low-emission opportunities are growing
Russia cut pipeline deliveries of natural gas to the European Union
by around 80% in 2022, seeking leverage by exposing consumers to
higher energy bills and supply shortages following its invasion of
Ukraine. This led to strong price and policy incentives for investors to
step up non-Russian gas supply, build up alternative delivery
infrastructure, and scale up alternatives to natural gas. All of these
effects are visible in our analysis.
The amount of new oil and gas resources approved for development
in 2022 and 2023 has been below the average level seen over the
past decade. However, 2023 is seeing a 25% increase in new
approvals relative to 2022 and most of these are for natural gas,
reflecting the push to substitute for the shortfall in Russian supply.
A wave of new regasification capacity is also underway as countries
look to secure liquefied natural gas (LNG) imports. Europe’s annual
regasification capacity is set to increase by 50 bcm from 2022-2025,
expanding the continent’s overall LNG import capacity by one-fifth.
Import projects are growing even more quickly in Asia, which is set to
add over 100 bcm of LNG import capacity by 2025 (more than half in
China).
The crisis has also prompted additional investment in liquefaction
capacity, the most expensive part of the gas value chain. Around
60 bcm of capacity has been given the green light since Russia’s
invasion of Ukraine, nearly double the rate of new approvals
compared with the past decade. Along with projects already under
construction, this leads to an unprecedented 170 bcm of export
capacity that could come into operation between 2025 and 2027.
A key dilemma for investors undertaking large, capital‐intensive gas
supply projects is how to reconcile strong near‐term demand growth
with uncertain and possibly declining longer-term demand. This is a
particular issue for Europe, given the continent’s strong climate goals.
Many importers have been reluctant to commit to long-term contracts
for gas supply. A preference for floating regasification terminals has
been a way to avoid locking in future emissions.
Another avenue is to expand investment in low-emission fuels and in
CCUS. New policies are swelling the project pipeline in these areas,
driven by energy security and climate imperatives. Europe has a
burgeoning number of electrolytic hydrogen projects, and reinforced
US incentives in the Inflation Reduction Act have prompted a wave
of investor interest in hydrogen and CCUS. After a number of false
dawns, the number of large-scale projects and well-capitalised
sponsors, along with a string of acquisitions by oil and gas majors
(notably in transport biofuels and biogases), suggests that investment
in low-emission fuels could grow strongly in the coming years.
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Overview and key findings
Investment is flowing to clean energy manufacturing and critical minerals, but ensuring well-
sequenced growth of new supply chains will be a major task
Lithium-ion battery manufacturing capacity Capital expenditure by major mining companies
in the non-ferrous metals
IEA. CC BY 4.0.
Notes: Cu = copper; Ni = nickel; Co = cobalt; the illustrative expansion of manufacturing capacity assumes that all announced projects proceed as planned.
10
20
30
40
50
2018 2019
2020
2021
2022
Billion USD (2022)
China Europe United States Rest of world Diversified major Cu,Ni,Co specialist Lithium specialist
2
4
6
8
2022 2025 2030
TWh
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Overview and key findings
Competition for clean energy manufacturing and for supplies of critical minerals and metals is a
major issue for the resilience of transitions
A secure transition to clean energy hinges on resilient and diversified
clean energy technology supply chains. According to the IEA
Energy
Technology Perspectives, some USD 1.2 trillion of cumulative
investment to 2030 is needed in clean energy manufacturing and in
critical minerals supply to get on track for a 1.5°C scenario, in addition
to the energy sector investments covered in this report.
Record sales of EVs, strong investment in battery storage for power
(which are expected to approach USD 40 billion in 2023, almost
double the 2022 level) and a push from policy makers to scale up
domestic supply chains have sparked a wave of new lithium-ion
battery manufacturing projects around the world. If all capacity
announcements were to materialise, then 5.2 TWh of new capacity
could be available by 2030.
For the moment, China is the main player at every stage of global
battery manufacturing, with the exception of the mining of critical
minerals. The announced manufacturing plans would somewhat
erode this position. In 2022, over 75% of existing battery
manufacturing capacity was located in China. However, despite
accounting for two-thirds of yearly global capacity additions to 2030,
China’s share of global capacity could fall by nearly 10 percentage
points by the end of the decade.
A key question for battery manufacturers is whether supplies of
critical minerals will keep up with demand. Thanks to high prices and
growing policy support, investment in critical mineral mining rose by
30% in 2022. Exploration spending also grew, notably for lithium,
copper and nickel, led by Canada and Australia and with activities
growing in Brazil and resource-rich countries in Africa. But moving
from exploration to new production can take more than 10 years, and
there remain widespread concerns that critical mineral investment will
become a constraining factor for clean technology manufacturing and
deployment.
Critical minerals and batteries are among the areas where clean
technology innovation remains essential. Public spending on
research and development has been on a steady upward trend, as
has corporate spending. But venture capital funding for clean energy,
after reaching a high in 2022, faces headwinds in a more difficult
macroeconomic environment.
For a decade, cheap capital has lowered barriers to investment in
riskier bets and thereby concealed potential weaknesses in
innovation systems. With the cost of money set to rise, the health of
these systems and the level of public support will be a critical
determinant of how quickly new technology ideas continue to flow.
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Overview and key findings
Scaling up clean investment is the key task for the sustainable and secure transformation of
the energy sector
Historical investment in energy benchmarked against needs in IEA scenarios in 2030
IEA. CC BY 4.0.
Notes: STEPS = Stated Policies Scenario; APS = Announced Pledges Scenario; NZE = Net Zero Emissions by 2050 Scenario. 2023e = estimated values for 2023.
1
2
3
4
5
2019 2020 2021 2022 2023e 2030
STEPS
2030
APS
2030
NZE
2019 2020 2021 2022 2023e 2030
STEPS
2030
APS
2030
NZE
Clean energy Fossil fuels
Clean electrification
Low-emission fuels
Energy efficiency Coal Oil Natural gas
Trillion USD (2022)
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Overview and key findings
Expanding access to finance will be vital: sustainable finance has weathered the storm of the
energy crisis, but remains heavily concentrated in advanced economies
Sustainable debt issuances by issuer type, and region, 2016-2022
IEA. CC BY 4.0.
Notes: SSA = sovereigns, supranationals and agencies; this category also includes municipals; Other = asset-based securities and project bonds.
Sources: Bloomberg; Refinitiv.
300
600
900
1 200
1 500
1 800
2016 2017 2018 2019 2020 2021 2022
Billion USD (2022)
Corporates
Financials SSA Other Advanced economies
China Other EMDEs
52%
32%
16%
78%
12%
10%
USD 1.5
trillion
USD 1.6
trillion
Sustainable debt issuances , 2022
Clean energy spending, 2022
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Overview and key findings
Clean energy investment is starting to flow, but imbalances point to continued risks ahead
In the IEA World Energy Outlook 2021, we wrote that “the world is
not investing enough to meet its future energy needs … IEA analysis
has repeatedly highlighted that a surge in spending to boost
deployment of clean energy technologies and infrastructure provides
the way out of this impasse, but this needs to happen quickly or global
energy markets will face a turbulent and volatile period ahead”.
This picture is starting to change: global energy investment is picking
up, and the rise in clean energy investment since 2021 is leading the
way, outpacing the increase in fossil fuel investment by almost three-
to-one. Clean electrification is leading the charge. If it continues to
grow at the rate seen since 2021, then aggregate spending in 2030
on low-emission power, grids and storage, and end-use electrification
would exceed the levels required to meet the world’s announced
climate pledges (the APS). For some technologies, notably solar, it
would match the investment required to get on track for a 1.5°C
stabilisation in global average temperatures (the NZE Scenario).
However, progress has been uneven. Investment in expanding and
modernising grids is lagging behind in many countries. A rising share
of solar and wind needs to be accompanied by spending on
technologies that provide greater flexibility to power systems. Supply
chain and skills bottlenecks could constrain growth. And, above all,
the geographical imbalances in investment need addressing, with
clean energy investment in many emerging and developing
economies growing only slowly and the number of people without
access to modern energy services remaining stubbornly high.
Other pillars of clean energy transitions do not yet show the same
positive dynamics as clean electrification. Investment in energy
efficiency has been increasing, but is well off track to meet more
ambitious climate scenarios. Investment in low-emission fuels is
being spurred by new policy measures, but from a very low base.
Spending on fossil fuels is most closely aligned with the 2030 needs
of a scenario reflecting today’s policy settings (STEPS), but
producers need to watch closely how clean energy spending evolves,
particularly the ways in which clean electrification affects demand for
fuels in power generation, and for mobility and heat. The risks of
locking in fossil fuel use are clear: fossil fuel investment in 2023 is
now more than double the levels required to meet much lower
demand in the NZE Scenario.
The crucial open question is how quickly clean energy investment
scales up in emerging and developing economies, where supportive
strategies and policies will need to be accompanied by improved
access to finance. For the moment, sustainable finance instruments
remain concentrated in advanced economies, accounting for nearly
80% of sustainable debt issuance in 2022. Issuances elsewhere
(outside China) are growing from a low base, with India’s successful
first green bond a landmark in this sector. Scaling up these
instruments and mobilising much greater support from development
finance institutions will be critical to the continued broadening and
acceleration of clean energy transitions.
World Energy Investment 2023
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Power sector
Power sector
World Energy Investment 2023
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AGE | 26
Power sector
Overview of power investment
World Energy Investment 2023
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AGE | 27
Power sector
Power sector investment increased by around 12% in 2022 to USD 1.1 trillion with 2023 expected
to see further growth to almost USD 1.2 trillion
Global average annual investment in the power sector by category, 2011-2023e
IEA. CC BY 4.0.
Notes: Investment is measured as ongoing capital spending on new power capacity; all numbers throughout are in 2022 USD; Fossil fuel power includes unabated and abated power;
EMDEs = emerging market and developing economies; 2023e = estimated values for 2023.
10%
20%
30%
40%
50%
250
500
750
1 000
1 250
2011-16 2017 2018 2019 2020 2021 2022 2023e
Billion USD (2022)
Battery storage
Electricity grids
Nuclear
Fossil fuel power
Renewable power
EMDEs excl. China
(share, right axis)
World Energy Investment 2023
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AGE | 28
Power sector
Advanced economies and China lead investment in renewable power generation and grids, while
many other EMDEs struggle to mobilise sufficient capital for a clean and secure energy transition
Average annual investment in the power sector by geography and category, 2011-2023e
IEA. CC BY 4.0.
Notes: REP = renewable power; FFP = fossil fuel power; batteries are excluded here; 2023e = estimated values for 2023.
50
100
150
200
250
300
REP
Grids
FFP Nuclear REP
Grids
FFP
Nuclear
REP
Grids
FFP
Nuclear
Advanced economies China Other EMDEs
Billion USD (2022)
2011-16
2017-20
2021-23e
World Energy Investment 2023
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AGE | 29
Power sector
Investment in renewables, grids and batteries has accelerated during the global energy crisis,
with capital spending on unabated fossil fuel power generation edging downwards
Power sector investment grew by 12% in 2022, topping USD 1 trillion
for the first time, with 2023 expected to see further growth to almost
USD 1.2 trillion. Our tracking of capital flows and investments
suggests that a major effect of the global energy crisis has been to
accelerate the deployment of clean energy technologies. The strong
underlying economics of renewables have been reinforced by policy
packages such as the US Inflation Reduction Act, the EU
REPowerEU plan and Fit-for-55 package, and India’s renewables
targets. Renewables and grids are the leading components of power
investment and are expected to account for more than USD 1 trillion
of investment on their own in 2023.
Global spending on renewables hit a new record in 2022 at almost
USD 600 billion, driven by solar PV and wind (especially in China)
despite cost and supply chain pressures. Given the reinforced push
for renewables in a range of large markets (e.g. USA, China, Europe,
India) and the gradual unwinding of supply chain problems, we are
now expecting higher capacity additions for wind and especially solar
PV than last year, with 2023 expected to see another 10% increase
in renewables investment to more than USD 650 billion.
Capital expenditure on fossil fuel power increased marginally in 2022
to almost USD 110 billion but this was still significantly lower than the
annual average of USD 135 billion in the period 2016-2021. While
coal-fired power investment decreased, investment in gas-fired
power picked up. Spending on fossil fuel power with CCUS rose but
remains marginal at USD 1 billion. Spending on dispatchable clean
generation, on the other hand, continues its downward investment
trend, with increased spending on nuclear not able to compensate for
a drop in hydropower investment.
Spending on electricity grids built on its 2021 rebound with a further
8% increase in 2022, but initial signs suggest a flattening in spending
in 2023. Most of the infrastructure investment is in advanced
economies and China, underpinned by the need to enable greater
electrification and meet grid balancing demands in power systems
that are increasingly renewables rich. Spending on grids in most
emerging market and developing economies (EMDEs) is falling
behind, a worrying signal given the prospect of rapid increases in
electricity demand. Battery storage investment in 2022 grew in line
with our strong expectations and is set for further growth in 2023,
encouraged by the US Inflation Reduction Act and other incentives in
Europe, Australia, China, Japan and Korea.
Despite upbeat expectations for clean power, final investment
decisions (FIDs) in 2022 had a mixed picture. Solar project approvals
remain strong, while offshore wind lags behind. FIDs for coal- and
gas-fired plants reached their highest level since 2016, driven almost
entirely by China, reflecting security of supply concerns.
World Energy Investment 2023
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AGE | 30
Power sector
Outside China, power sector spending in many EMDEs remains low; it needs to pick up quickly
to meet access, security and sustainability goals
Power sector investment in EMDEs outside China has been
averaging around USD 230 billion per year in recent years, only
around 20% of the global total. This figure increased by 7% in 2022,
but investment spending in advanced economies and in China rose
more rapidly by 14%, reaching more than USD 850 billion.
A number of EMDEs are stepping up their efforts to deploy clean
power. India remains a dynamic market, in particular for solar PV,
with policy makers also focused on building out the grid, promoting
new sources of flexibility in power markets, and encouraging the
domestic supply chain. India’s Production-Linked Incentive (PLI)
scheme is providing incentives for domestic manufacturing of
high-
efficiency solar PV modules as well as for batteries.
Renewable power investment is also starting to pick up in the Middle
East, notably for solar in Saudi Arabia, the United Arab Emirates and
Oman. Deployment is on a steady upward curve in Brazil. South
Africa concluded the sixth round of its Renewable Energy
Independent Power Producer Procurement Program. New power
projects are urgently needed to relieve chronic power shortages: the
South African authorities even declared a “state of disaster” in the
energy sector from February-April 2023. Investments in renewables
should also benefit from the Just Energy Transition Partnerships
(JETPs) that South Africa, Indonesia and Viet Nam have signed with
international partners and financial institutions. JETPs aim to boost
clean power and reduce reliance on coal assets, while addressing
the social implications of change. Kenya also lifted a ban on new
power purchase agreements (mainly affecting renewable projects).
However, the landscape for renewable power investment in many
EMDEs remains difficult, and much more needs to be done to
improve perceived and real investment risks and to reduce costs.
Greater investment in clean power in EMDEs is hindered by a range
of barriers such as higher financing costs, high debt burdens of
electric utilities and the absence of clear clean energy strategies, as
well as challenges related to land acquisition, enabling infrastructure
and skilled labour. Low levels of spending on grids (even compared
with past spending averages in EMDEs) exacerbate challenges with
security of supply and electricity access, as well as leaving EMDEs
ill-prepared for increased investment in variable renewables.
A step up in concessional funding and other dedicated multilateral
support is critically important to increase clean power investment.
The upcoming Summit for a New Global Financial Pact
, which aims
to define a new financial pact with EMDEs, will be an important
stepping stone towards realising this goal. A forthcoming joint
IEA-IFC report will provide analysis and recommendations.
World Energy Investment 2023
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AGE | 31
Power sector
Generation
World Energy Investment 2023
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AGE | 32
Power sector
Variable renewables are by far the most dynamic sectors for investment in power generation…
Global annual investment in the power generation by selected technology, 2020-2023e
IEA. CC BY 4.0.
Notes: Gas-fired generation investment includes both large-scale plants and small-scale generating sets and engines; hydropower includes pumped-hydro storage; 2023e = estimated
values for 2023.
Sources: IEA analysis based on calculations from IRENA (2023) and S&P Global (2023).
50
100
150
200
250
300
350
400
Solar PV Wind Hydro Nuclear Coal
power
Gas
power
Billion USD (2022)
2020
2021
2022
2023e
World Energy Investment 2023
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AGE | 33
Power sector
…despite tight supply chains and higher input costs pushing up renewable project costs in many
markets
IEA global wind turbine and solar PV module producer price index and average manufacturing prices among key regions
IEA. CC BY 4.0.
Notes: The index, developed by the IEA, tracks price movements of a fixed basket of solar PV panels and wind turbines against a base period (Q4 2019); prices are weighted
according to the shares of global average annual investment in 2020-2022: solar modules (58%) and wind turbines (42%); wind turbine prices reflect a weighted average of both
onshore and offshore turbine manufacturers’ prices, noting that this is more sensitive to changes in onshore turbine prices given that they account for a larger share of production;
given that the supply of solar PV modules is highly geographically concentrated (with the majority of production based in China), and data availability constraints, where only the price
trends of Chinese manufacturers are included.
Sources: IEA calculations based on companies’ financial reports, Bloomberg data and BNEF.
80
95
110
125
140
155
170
2017 2018 2019 2020 2021 2022
Index (Q4 2019 = 100)
Global index
European turbine manufacturers
Chinese turbine manufacturers Chinese solar panel manufacturers
Wind turbine and solar module producer price index
0.2
0.4
0.6
0.8
1.0
1.2
2017 2018 2019 2020 2021 2022
Million USD/MW
Manufacturers' average selling price
World Energy Investment 2023
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AGE | 34
Power sector
Power company investment plans remain robust, even as levelised costs for renewables moved
higher
LCOE estimates of utility-scale solar PV and wind; and average annual short-term investment guidelines of selected power companies
IEA. CC BY 4.0.
Notes: LCOEs calculations assume increases in the cost of capital in Europe, United States and India between Q1 2021 and Q4 2022 for both solar PV and wind, while remaining
constant in 2023e. Capital costs are assumed to increase in Q4 2022 across the four regions (except wind in China) and reduce or remain flat in 2023, though not totally compensating
for the 2022 increase. Capacity factors are consistent with WEO 2022. IRA effects assume a 26 USD/MWh of production tax credit. Annual company investment reflects nominal
capital spending guidelines (for all group-level related activities) published in annual reports or strategic plans; for example, if a company announced an investment of USD 15 billion
over 2020-2023 and USD 18 billion over 2023-2025 (most recent announcement) this is reflected as USD 5 billion (previous) and USD 6 billion (current); figures for Indian companies
were not included as data were unavailable; the drop in Enel’s figures is due to Enel streamlining its business (e.g. exiting Argentina, Peru and Romania), but its investment in other
geographies remains as planned. 2023e = estimated values for 2023; IRA = US Inflation Reduction Act; LCOE = levelised cost of electricity
Sources: Companies’ annual reports.
10
20
30
40
50
60
70
80
2022 USD/MWh
Q1 2021
Q4 2022
United
States
China
India
2023e
Europe
IRA effects in
PPA prices
Solar PV Onshore wind
10
20
30
40
50
60
70
80
90
2
4
6
8
10
12
14
16
18
USD billion
Previous
Current guideline
European companies
American
Chinese
World Energy Investment 2023
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AGE | 35
Power sector
Some key parts of the power investment chain are showing greater signs of stress
Profitability of major wind turbine manufacturers and asset owners; and change in bond rating of SOEs in selected EMDEs
IEA. CC BY 4.0.
Notes: EBIT = earnings before interest and taxes, annual basis; European and US manufacturers represent a weighted average (by market share) of Vestas, Siemens Gamesa,
Nordex and GE; Chinese manufacturers represent a weighted average (by market share) of Goldwind, Windey and Mingyang; European and US asset managers represent a simple
average of Nextera, Ørsted, Iberdrola, RWE and Enel; SOE = state-owned enterprise; “Worse” means that the bond’s rating has been downgraded; “Better” means that the bond’s
rating has been upgraded; “No data” means no data on rating available; “Foreign” refers to bonds issued in USD or EUR.
Sources: Companies’ annual reports, Wood MacKenzie and Bloomberg.
-5%
0%
5%
10%
15%
20%
2020 2021 2022
European and US turbine manufacturers
Chinese turbine manufacturers
European and US renewable asset owners
EBIT margin - wind industry segments
5
10
15
20
25
Local
Foreign Local Foreign Local Foreign
CPE (Mexico)
ESKOM (SA) PLN (Indonesia)
Amount issued (billions)
Equal
Worse
Better No data
Change in bond rating
- current vs initial rating
World Energy Investment 2023
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AGE | 36
Power sector
New policies are providing an important boost to the prospects for low-emission power
Key low-emission power policies introduced and proposals announced in 2022-2023 in selected countries and regions
Region
Policies
United
States
• Approval of the Inflation Reduction Act
o Tax credit extensions for solar PV and wind: production credit (per unit of energy) and investment credit (capital costs)
o Investment tax credit also available for battery storage and zero-emission nuclear
o Financial support for grids and manufacturing clean power equipment
China
• 14th Five-Year Plan raises renewable target to 33% of power consumption by 2025 (and 18% for non-hydro renewables)
Europe
• Announcements by the European Commission: REPowerEU Plan, Net-Zero Industry Act proposal and other potential reforms
o Increase EU 2030 renewables target to 45% by 2030 (whole energy matrix not just power)
o Fast-tracking permitting process plus ~EUR 225 billion in loans for grids
o Proposed reform of market design and technology-specific targets for EU manufacturing capacity
• Nine European countries committed to boost offshore wind capacity to over 120 GW by 2030 and over 300 GW by 2050
Indonesia
and
Southeast
Asia
• Indonesia introduced its JETP
o Renewable energy target up to at least 34% of power generation by 2030, accelerate coal power plant retirement and achieve
net zero emissions in the power sector by 2050
o USD 20 billion of initial funding
• Thailand introduced new regulation for renewable power procurement, establishing the feed-in tariffs payable by distribution
companies and capacity targets (additional 5 GW of biogas, solar, solar with storage, and wind)
• Philippines set out a 35% renewable electricity generation target by 2030 (from about 20% in 2021) and 50% by 2040
India
• Continues to expand the Production-Linked Incentive (PLI) scheme
o 50 GWh of battery manufacturing capacity
o 40 GW of solar PV manufacturing capacity to be added in next three years
Japan
• Government is studying extension to lifetime of nuclear power plants (beyond 60 years)
Korea
• Plan to increase nuclear power to 35% of total generation and renewables to 31% from 10% in 2021 by 2036
• Coal-fired power to reduce to 15%
South Africa
• Government concluded sixth renewable auction
Brazil • Planning two major transmission auctions in 2023, including the largest ever held in Brazil (in investment terms)
World Energy Investment 2023
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Power sector
But getting projects up and running has often been slow, putting the focus on permitting and
other practical obstacles facing investors
Capacity awaiting permits and under construction and average permitting times in the United States and major European renewable
markets
IEA. CC BY 4.0.
Notes: United States, United Kingdom and France show capacity in December 2023; Italy shows capacity in January 2023 and Spain in March 2023; wind includes onshore and
offshore.
Sources: Red Eléctrica, Terna, Ministère de la Transition Energétique, National Grid and Lawrence Berkeley National Laboratory; BNEF (average waiting times).
100 200 300
France
Spain
United
Kingdom
Italy
GW
Solar (in operation)
Wind (in operation)
Solar (awaiting permit) Wind (awaiting permit)
Capacity in operation and awaiting a permit
2 4 6 8
Years
Average permitting time
EU
regulatory
limit
2030 solar PV &
wind target
500 1 000 1 500
US
United
States
World Energy Investment 2023
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AGE | 38
Power sector
Solar PV made most of the headlines for power generation investment in 2022, although
increased financing and capital costs were also part of the story
Capital spending on new generation has been setting new records
each year, driven by strong performances from solar, and we expect
the same to be true in 2023. China alone added over 100 GW of solar
PV capacity in 2022, almost 70% higher than in 2021, and annual
installations increased by 40% or more in Europe, India and Brazil,
despite inflation and supply chain issues. Investment in wind power
increased, albeit less than solar (as mainly large projects continue to
face delays) while spending on hydropower continued to fall.
Nuclear power investment also rose, mainly in advanced economies
and China. More than a decade after the accident at Fukushima
Daiichi, an increasing number of countries are taking a fresh look at
how
nuclear technologies might provide low-emissions and
dispatchable power. Investment in fossil-fuel based electricity was
flat, reflecting lower spending on unabated coal power alongside
higher investment in gas-fired plants.
Despite the growth in many sectors, power generation investment in
2022 faced some headwinds. On the financing side, the cost of
borrowing increased as base rates rose to fight inflation. Equity risk
premiums – the premium above risk-free rates that equity investors
expect for an average unit – have gone up across the world. This is
problematic as highly leveraged companies, like many power utilities,
may have to tap into the equity market for financing as higher
leverage (more debt) could affect their credit ratings.
A global producer price index of solar PV modules and wind turbines
developed by the IEA shows that prices fell to a low point in Q3 2020
but then were pushed up by tight markets for materials and labour,
ending 20% higher in Q4 2022. Module prices were around 20%
higher in early 2022 y-o-y, but started to come down in early 2023 as
input costs declined (solar grade silicon and wafers) and
manufacturing capacity expanded (largely in Asia). Wind turbine
costs, especially from European manufacturers, remained high in
early 2023, at 35% above the low levels of early 2020.
China has followed a different path. Debt financing remained
favourable as the People’s Bank of China has kept reference lending
rates low to boost the economy and renewable projects can access
preferential rates. Capital costs for solar PV increased slightly in 2022
before falling back, while wind capital costs were less affected than
elsewhere. The price of local wind turbines continued to decrease
given Chinese manufacturers’ ability to manage supply chain
pressures and a growing number of orders.
World Energy Investment 2023
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AGE | 39
Power sector
Solar and wind retain a strong competitive advantage, although pressures are higher in the wind
sector and the conditions for mobilising capital in EMDEs remain challenging
The rise in project costs has translated into a higher levelised cost of
electricity (LCOE) across technologies. LCOEs for solar PV and wind,
having fallen for years, increased in 2022, but remained a more
attractive proposition than fossil fuel power for new generation in
most markets around the world.
In Europe the average LCOE for solar PV increased by 30% and by
15% for onshore wind between early 2021 and late 2022, despite
continued gains from technology learning. However, absolute values
remain low and capital cost pressures are expected to ease in 2023.
Investment plans by major European utilities also remain strong.
Wholesale power prices have fallen compared to a year ago, but are
still high in historical terms, an additional signal for investors,
although it remains to be seen how the proposed changes to the EU
power market design may affect investors’ views.
Recent years have been challenging for the wind equipment
manufacturing industry outside China. The average ratio of earnings
before interest and taxes (EBIT) to revenues among the largest
European and US turbine producers has been meagre if not negative.
This measure of a company’s profitability saw a big drop in 2022 as
revenues were hit hard by supply chain delays, inflationary pressures
and in some cases impairments due to Russia’s invasion of Ukraine.
Higher prices are also contributing to lower order intakes, even as the
help near-term results, which are also being assisted by
improvements in the service business.
Most EMDEs outside China are experiencing higher costs, especially
where investments are denominated in US dollars. State-owned
utilities – often the main investor and counterparty with the private
sector in EMDEs – remain financially fragile, and rising interest rates
and falling domestic currencies make it harder to pay their existing
debt, let alone invest. More attractive conditions for renewables
investments in advanced economies may also discourage capital
from flowing into countries with higher real or perceived risks. India’s
size and well-developed policy frameworks, especially for solar,
underpin continued strong interest from investors and project
developers, although offtaker and transmission risks remain.
LCOEs for solar PV and onshore wind rose in the United States in
2022, but PPAs are set for important reductions given the tax
extensions in the Inflation Reduction Act. In China LCOEs for solar
PV were also up in 2022, while wind LCOEs fell. After subsidies for
onshore wind were removed in 2020, investment appetite reduced,
forcing domestic turbine makers to slash prices. Increased orders
helped offset lower prices for manufacturers, but competition remains
strong. Manufacturers have also focused on building bigger turbines,
and on innovation and cost control.
World Energy Investment 2023
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AGE | 40
Power sector
Ambitious new policies to accelerate clean power investments are in place, but there are
uncertainties over how quickly these will translate into flows of new projects
The passage of the Inflation Reduction Act in the United States was
a major legislative milestone that included significant financial
support for low-emission technologies. It includes new or extensions
to tax credits for wind, solar PV and storage based on project
investment costs (USD) and generation (USD/MWh), tax credits for
local manufacturing and grid upgrades, and various other forms of
assistance.
The European Union is looking to increase deployment of renewables
across power generation and the end-use sectors as part of its goal
to reduce greenhouse gas emissions by at least 55% by 2030 and to
address the energy market disruption caused by Russia’s invasion of
Ukraine. A provisional agreement was reached in March 2023 to
raise the EU's renewable target for 2030 to a minimum of 42.5% of
final energy consumption, up from the current 32% target. The
European Commission also proposed a Net Zero Industry Act, which
targets domestic manufacture of up to 40% of Europe’s clean energy
technology deployment needs by 2030. The act would cover eight
technologies and simplify regulation, supported by existing funding
channels (e.g. InvestEU; the Recovery and Resilience Facility).
In many parts of Asia, policies supporting both renewables and
nuclear power are on the rise. Japan is discussing legislation to
extend nuclear power plant lifetimes beyond 60 years and South
Korea’s 10
th
Electricity Plan incorporates a slightly higher share of
nuclear power in the generation mix (35% by 2036) as well as a sharp
increase in the share of renewables to 31% by 2036 (up from 7.5%
in 2021) Among EMDEs, Indonesia and Viet Nam concluded JETPs
to accelerate the energy transition away from fossil fuels and towards
renewables. Indonesia’s JETP, for instance, expects to receive
USD 20 billion of initial funding over the next three to five years, with
capital coming from both commercial and concessional sources, and
private as well as public money.
Getting projects up and running at the scale and speed needed to
reach targets is proving hard, with challenges beyond prices.
Permitting has been a key concern for investors and financiers
recently, especially for wind and grid infrastructure. Europe has been
at the centre of this debate, with substantial renewable capacity in
the pipeline waiting for permits, and queues well beyond set limits.
Governments are now enacting policies to address this issue. Other
risks include transmission bottlenecks (either missing or poor-quality
grid infrastructure to connect new renewable projects) and shortages
of skilled labour.
World Energy Investment 2023
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AGE | 41
Power sector
Final investment decisions (FIDs)
World Energy Investment 2023
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AGE | 42
Power sector
More than 40 GW of coal-fired plants were approved in 2022; almost all of this was in China,
reflecting a strong electricity security priority even as low-emissions power scales up fast
Coal-fired power generation capacity subject to a FID by geography (left) and segment (right), 2016-2022
IEA. CC BY 4.0.
Notes: FID = final investment decision; FIDs are an indication of the scale of future capacity to come online in the coming few years; the IEA tracks projects that reach financial close or
begin construction to provide a forward-looking indicator of future capacity additions and spending activity.
Source: IEA calculations based on McCoy Power Reports (2023).
20
40
60
2016
2017
2018 2019 2020 2021
2022
GW
China India
Southeast Asia Rest of world
20
40
60
2016 2017
2018
2019 2020 2021 2022
High efficiency Subcritical
World Energy Investment 2023
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AGE | 43
Power sector
Despite high natural gas prices, FIDs for unabated gas-fired power generation rose in 2022
Gas-fired power generation capacity subject to a FID by geography (left) and segment (right), 2016-2022
IEA. CC BY 4.0.
Notes: MENA = Middle East and North Africa; CCGT = combined-cycle gas turbine; OCGT = open-cycle gas turbine; FIDs are an indication of the scale of future capacity to come
online in the coming years; the IEA tracks projects that reach financial close or begin construction to provide a forward-looking indicator of future capacity additions and spending
activity.
Source: IEA calculations based on McCoy Power Reports (2023).
20
40
60
80
2016 2017 2018 2019 2020 2021 2022
GW
China United States MENA
Other Asia Southeast Asia Europe
Rest of world
20%
40%
60%
80%
20
40
60
80
2016 2017
2018
2019 2020
2021
2022
CCGT
OCGT
Net importers of natural gas (share, right axis)
World Energy Investment 2023
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AGE | 44
Power sector
In 2022 FIDs for unabated fossil fuel generation reached levels last seen in 2016 on the back of
security of supply concerns and diversification
Globally, FIDs for unabated fossil fuel power generation increased by
40% year-on-year to more than 100 GW in 2022, the highest level
since 2016, driven by newly approved coal and natural gas capacity.
China accounts for the vast majority of these FIDs (95% in coal-fired
power) and if China is excluded the global growth rate falls to just 3%.
A severe electricity supply crisis in late 2021 and continued market
strains amid a heatwave in 2022 provide the backdrop to China’s
proposed expansion in capacity. The strains were caused by drought
conditions that lowered hydropower output, inflexible interprovincial
electricity export contracts, and a combination of rising coal prices
and low wholesale tariffs that led some generators to stop operations.
This triggered various regulatory changes, as well as central
government support for more coal- and gas-fired power investment.
The investment case for this new capacity is hardly clear-cut given
the rapid pace of renewable deployment. For the moment, it remains
unclear whether this new capacity – if and when it comes online in a
few years – will be used primarily for flexibility purposes or for
baseload generation; the implications for emissions will depend on
the answer to this question.
In Indonesia, in contrast to 2021, there were no new coal FIDs, an
encouraging signal given the country’s net zero pledge and JETP. In
other Southeast Asian countries and the rest of the world (e.g.
Lao PDR and Russia), only a very limited number of new coal-fired
plants were approved for development, reflecting pledges from a
range of countries and financial institutions to stop backing their
construction (notably the Chinese commitment to stop building or
financing coal plants abroad). Those approved continue to be of
relatively high efficiency, with subcritical facilities dropping to below
5% of new FIDs.
Similar to coal, FIDs for gas-fired power generation amounted to
65 GW in 2022 – a jump of almost 40% despite very high prices for
natural gas in the wake of Russia’s invasion of Ukraine. Some of
these new FIDs were from gas-importing countries that were exposed
to price pressures from natural gas markets. China is a notable
example, approving almost twice as much gas-fired capacity as in
2021. This was largely in the heavily populated southeastern coastal
regions, within reach of LNG import facilities; worries about hydro
availability also supported decisions to go ahead with gas.
Other regions seeing new gas FIDs were largely those with large
resources, such as the United States and the MENA region. While
FIDs in Southeast Asia (especially in Thailand and Viet Nam) rose
year-on-year, decisions to go ahead with gas-fired power in other
parts of Asia, outside China, fell by more than 60%.
World Energy Investment 2023
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AGE | 45
Power sector
Irrespective of the recent increase in new coal FIDs, the pipeline of new coal, hydropower and
nuclear projects is slowing, while gas-fired projects are accelerating
Annual average capacity additions and FIDs by capacity, 2019-2022
IEA. CC BY 4.0.
Notes: Annual average FIDs are an indication of the scale of future capacity to come online in the next few years; the time it takes for a new plant to go online can differ; for example, a
new natural gas plant can take three years, while a new nuclear plant can take seven years.
Sources: IEA calculations based on McCoy Power Reports (2023), S&P Global (2023) and IAEA (2023).
20
40
60
80
Natural gas Coal Hydro Nuclear
GW
Annual average capacity additions Annual average FIDs
World Energy Investment 2023
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Power sector
FIDs for utility-scale renewables remained around 2021 levels in 2022, with higher solar but a
decline in approvals for wind
FIDs for utility-scale renewable plants, 2016-2022
IEA. CC BY 4.0.
Notes: Excludes large hydropower; Other includes biomass, waste-to-energy, geothermal, small hydro and marine.
Source: IEA calculations based on Clean Energy Pipeline (2023).
50
100
150
200
250
300
350
400
2016 2017 2018 2019 2020 2021 2022
Billion USD (2022)
Other
Wind
Solar
World Energy Investment 2023
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AGE | 47
Power sector
Buoyant FIDs for solar kept utility-scale renewables around record levels in 2022
FIDs for utility-scale renewable plants remained high in 2022,
following a record year in 2021. FIDs for solar projects increased
significantly, reaching more than USD 180 billion – 20% more than in
2021 – while wind power experienced a drop, in particular for offshore
wind projects, which fell more than 50%. The total number of utility-
scale FIDs increased, with deals above USD 1 billion playing a larger
role.
In monetary terms, utility-scale renewable approvals in China
decreased by around 5% overall, though increasing by the last
quarter of 2022 (48% higher than in the third quarter). In India, by
contrast, decisions for renewables projects tripled, pushed by its
2022 target for 100 GW of installed solar capacity and the continuing
push for innovative “round-the-clock tenders”
(combining renewables
with storage). A similar jump was observed in South Africa, as the
country aims to tackle a severe electricity crisis and diversify its
electricity mix, supported by the
investment plan of its own JETP and
a group of leading countries. FIDs in the European Union remained
flat, while in the United States they increased by around 5%, with US
approvals in particular accelerating in the second half of 2022 after
the passage of its Inflation Reduction Act.
FIDs for large hydropower and nuclear power plants decreased
significantly to 14 GW and 4 GW respectively (from 20 GW and 6 GW
in 2021, respectively). In 2022 China was the only region to start the
construction of a new nuclear power plant, while investment in large
hydropower was dominated by China and India. Pumped hydro,
which can serve as an energy storage facility, constituted 90% of the
hydropower FIDs. After an uptick in 2021, the declining pipeline for
these projects is a reason for concern given their potential to support
power sector decarbonisation and supply security. However,
additional capital is being spent on modernising and extending the
lifetimes of existing plants, which is not captured by FIDs; and policy
is becoming more supportive to new project approvals in future.
Renewable projects have shown uneven growth, with solar gaining
relevance in the mix and wind facing major challenges particularly for
offshore wind energy, which has experienced setbacks due to
construction delays and supply chain constraints. Furthermore, fossil
fuel power FIDs have risen as many countries have prioritised energy
security projects. However, as Covid-19 regulations are now largely
lifted, supply chain pressures easing and prices for key components
such as critical minerals are moderating, there is growing support for
renewable energy aided by supportive policies in key regions. Recent
examples are the US Inflation Reduction Act and Germany’s
USD 31 billion push
to expand wind and solar. This is expected to
lead to an increase in FIDs for utility-scale renewables in 2023.
World Energy Investment 2023
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Power sector
Electricity grids and battery storage
World Energy Investment 2023
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Power sector
Investment in power grids continues to rise in advanced economies and China, with a rising
share of spending on digitalisation…
Investment in power grid infrastructure by geography (left) and segment (right), 2016-2023e
IEA. CC BY 4.0.
Notes: Automation and communication include both distribution and transmission; 2023e = estimated values for 2023.
Sources: IEA analysis based on transmission and distribution companies’ financial statements, and Guidehouse (2022).
10%
20%
30%
40%
100
200
300
400
2016 2017 2018 2019 2020 2021 2022 2023e
Distribution (left axis) Transmission (left axis)
Smart meters Automation & communication
EV infrastructure Total digital
100
200
300
400
2016 2017 2018 2019 2020 2021 2022 2023e
United States China Europe
OECD Pacific Other
Billion USD (2022)
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AGE | 50
Power sector
…but many EMDEs outside China still face challenges in mobilising capital for infrastructure
development
Advanced economies and China continue to lead investment in grids,
together accounting for 80% of the global spending. Investment in
electricity grids is growing at a stable pace in advanced economies,
with capital expenditure rising 6% in 2022, and China seeing a
steeper 16% rate of growth in investment, despite investment in
2021-2023 overall being lower than in the previous three-year period.
US capital spending on grids remains largely concentrated on
enhancing reliability and upgrading outdated infrastructure. The
amount invested in this area in 2022 was almost USD 90 billion,
around 7% more than in 2021. Europe’s spending rose at a similar
rate, reaching USD 65 billion.
China’s investment continues to grow, especially in ultra-high voltage
transmission projects, with over USD 22 billion worth of projects in
the second half of 2022 and the start of 2023.
Overall, grid investment in EMDEs (excluding China) has been low in
recent years, with 2019-2022 average annual spending around a
third lower than in the 2015-2018 period. The Covid-19 pandemic, a
focus on affordability for consumers and constrained balance sheets
have left grid investment feeble. Privately financed transmission and
distribution investment is also low, outside specific regions such as
Latin America, where private finance is gaining more relevance. In
some regions it is not even allowed. Africa still shows low levels of
investment in absolute terms, despite its enormous access needs. In
2022, however, investment in grids increased significantly across the
continent. In South Africa, investment rose by a third to
USD 290 million, albeit still short of the investment required by its
2023-2027 JETP. The domestic regulator recently approved an 18%
tariff increase that should strengthen Eskom’s balance sheet and
provide financial relief to the power system.
India’s investment picked up in 2022, focused on both expanding its
network as well as improving efficiency and better supporting the
integration of renewables into the grid.
The Green Energy Corridor
Phase II was approved in 2022, which entails a budget of over
USD 1.4 billion being spent over the next four years on capacity
additions (lines and substations), interregional transmission and
neighbouring links for trade. India’s 2022 spending still remains about
a third below its 2015-2018 annual investment average.
Digital spending plays a critical role in enhancing the reliability,
flexibility and efficiency of power grids. There is an increasing focus
on the distribution segment, which now represents over 75% of the
total digital spend. Moreover, there has been a substantial upswing
in investment in EV charging infrastructure, which has doubled in
2022 compared to the previous year.
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Power sector
If policymakers and regulators do not provide the necessary incentives for investment in grid
spending, it could pose a significant obstacle to the clean energy transitions
Grid investment level with current growth trend and gap to reach NZE Scenario trajectory
IEA. CC BY 4.0.
Notes: IEA estimation applying the compound annual growth rate (CAGR) of 2019 to 2023e to grid investment between 2024 and 2030; NZE = IEA Net Zero Emissions by 2050
Scenario; 2023e = estimated values for 2023.
100
200
300
400
500
600
700
800
2023e 2024 2025 2026 2027 2028 2029 2030 NZE 2030
Billion USD (2022)
Investment level with 2019-2023e CAGR Gap
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Power sector
Investment in battery storage is set for continued rapid growth in 2023, notably in utility-scale
battery systems
Battery storage investment by geography (left) and segment (right), 2016-2023e
IEA. CC BY 4.0.
Note: 2023e = estimated values for 2023.
Sources: IEA calculations based on Clean Horizon (2023), BNEF (2023), China Energy Storage Alliance (2023).
10
20
30
40
2016 2017 2018 2019 2020 2021 2022 2023e
Billion USD (2022)
United States China Europe OECD Pacific Other Utility-scale Behind-the-meter
2016 2017 2018 2019 2020 2021 2022 2023e
World Energy Investment 2023
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AGE | 53
Power sector
Investment in battery storage more than doubled in 2022, driven by institutional investment and
solar developers
The energy system is undergoing a major transformation towards a
more flexible grid that can respond to demand and price volatility. In
2022 expenditure on battery storage exceeded USD 20 billion, with
the United States, China, and Europe accounting for 90% of
spending. This concentration can be attributed to the technological
complexities of the value chain and the need for supportive policies
and market designs.
China has demonstrated its commitment to battery storage through
significant investments, such as the construction of the world's largest
battery storage peak-shaving power station
. China has also recently
established its first peak-shaving capacity market, which regulates
pricing limits for transactions and compensation for demand
response. In total, spending on battery storage in China tripled in
2022 to almost USD 8 billion. 2023 is expected to see this increase
to USD 14 billion on the back of favourable economics for utility-scale
battery storage and strong policy support.
In Europe, although hydro storage remains predominant, investment
in battery projects is rapidly gaining ground, reaching USD 5 billion in
2022. A
joint venture partnership between Next Energy (70%) and
Eelpower (30%), for example, could create up to USD 370 million in
investment opportunities.
Spending in the United States totalled USD 6 billion in 2022, 50%
more than the previous year. The expectation of increased benefits
under the Inflation Reduction Act (see next page) may affect the
timing of certain projects, but the environment is increasingly
supportive. Consequently, we expect battery storage investments to
more than double in the US to USD 13 billion in 2023.
Asia Pacific (excluding China) invested 27% more than last year,
reaching more than USD 1 billion in 2022, with 2023 investments
expected to triple. India’s government, for example, has
ambitious
targets for battery storage. The government is also supporting the
creation of a domestic value chain for the battery industry with
financial allocations of over USD 2 billion under the National
Programme on Advanced Chemistry Cell (ACC) Battery Storage.
Other developing countries have also shown growth, although the
absolute level of investment remains relatively low.
Capital costs for batteries increased in 2022 for the first time in a
decade due to various factors including tight supply chains for battery
metals and a sharp increase in demand. Despite the increase in
battery capital costs, a clear regional differentiation still exists: China
continues to see the lowest costs for utility-scale batteries, followed
by Europe and the United States.
World Energy Investment 2023
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Power sector
Impact of the US Inflation Reduction Act on battery storage
Collectively, the Inflation Reduction Act and the Bipartisan
Infrastructure Law offer an estimated USD 24 billion in federal
investment in EVs,
batteries and infrastructure, on top of tax
credits. The long-term regulatory certainty also provides critical
stability for private investors in the sector. We estimate that the
new federal support could reduce capital costs for battery storage
by almost
15%, providing a significant boost to US battery
storage investment, which is now expected to double in 2023.
The act also includes provisions that could complicate the timing
of investment, such as domestic sourcing requirements for
critical materials lik
e lithium that could prevent some battery
projects from benefiting. Several Chinese companies are
responding to this situation: CATL, for example, recently
announced a partnership with Ford to establish a USD 3.5 billion
plant in Michigan.
In Europe the act sparked fears that its local content
requirements would lead to private investment shifting away from
the continent. Major European players such as Volkswagen,
BMW and battery maker Northvolt announced new battery
manufacturing investments after the US act was adopted.
However, most of these announcements concern investment
plans predating the act, which have now been accelerated,
rather than displacing new European projects.
Moreover, the European Union is now
aiming to expand
available funding for net zero industries via its
Green Deal
Industrial Plan. The United States and European Union are also
planning to deepen their economic relationship while addressing
shared economic and national security challenges in the clean
energy transition.
Estimated impact of the US Inflation Reduction Act on
average US capital costs for battery storage (in 2022 costs)
IEA. BY CC 4.0.
Sources: IEA calculations based on BNEF (2023), Wood Mackenzie (2023) and
Lazard (2023).
200
400
600
800
1 000
1 200
1 400
Utility scale Behind the meter
USD/kW
Estimated cost reduction
World Energy Investment 2023
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AGE | 55
Power sector
Implications
World Energy Investment 2023
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Power sector
Global power sector investment is growing quickly but unevenly; secure and sustainable
development of the power sector will require much higher investment in EMDEs outside China
Investment in the power sector in 2021-2023e compared with investment for IEA scenarios in 2030
IEA. CC BY 4.0.
Notes: STEPS = IEA Stated Policies Scenario; APS = IEA Announced Pledges Scenario; NZE = IEA Net Zero Emissions by 2050 Scenario; CCUS = carbon capture and storage;
2023e = estimated values for 2023.
500
1 000
1 500
2 000
2 500
3 000
2021 2022 2023e 2030
STEPS
2030
APS
2030
NZE
Billion USD (2022)
200
400
600
800
1 000
1 200
2021 2022 2023e 2030
STEPS
2030
APS
2030
NZE
World
EMDEs excl. China
World Energy Investment 2023
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AGE | 57
Power sector
Despite positive signs, there’s much more to be done to get the power sector on track for a
1.5-degree scenario
Recent years have seen considerable growth in clean power
investment, and overall spending in generation, grids and storage
would need to rise by another 30% by 2030 to be consistent with
announced climate pledges (IEA Announced Pledges Scenario
[APS]). Aggregate investment trends offer reasons for optimism. The
rate of growth seen in power sector capital expenditure over the last
five years, if maintained, would be enough to surpass the 2030 figure
for the APS.
However, the aggregate numbers mask imbalances across
technologies and regions that would need to be addressed to ensure
secure and sustainable development of the power sector. And
today’s global investment would need to more than double by 2030
to get on track for a 1.5-degree stabilisation in global average
temperatures, as in the NZE Scenario.
In particular, despite some bright spots such as renewables in India,
power sector investment trends in most EMDEs (excluding China)
are well off track for scenarios that meet national or global sustainable
development goals. Our new analysis suggests that power sector
investment in EMDEs outside China could rise by 4% in 2023. It
would need to increase by around 20% each year to reach the level
projected in the NZE Scenario in 2030, with capital spending on
renewables growing at an exceptionally steep rate of 30% every year
(compared to 10% in advanced economies). The deficit in spending
on grids in many EMDEs is also striking, and difficult to resolve given
the financial condition of many utilities.
Elsewhere, the growth trends for power sector investment are more
encouraging. If China were to maintain its overall growth trend since
2019, this would be consistent with the investment level required in
2030 for the NZE Scenario, with advanced economies coming close.
Total power sector investment in China and advanced economies
would need to grow by 5% and 10% every year between 2024 and
2030, respectively. Maintaining such high growth rates throughout
the decade cannot of course be taken for granted, not least because
supply chains need to be expanded, permits secured, flexibility
requirements need to be managed and financing needs to be
mobilised.
Among the different technologies, the growth in global capital
expenditure in the last five years, if maintained, is on track for an NZE
Scenario only for a handful of technologies, led by solar PV and
battery storage. Investment growth in wind and hydropower would
need to increase considerably, and similarly in electricity grids
(especially given their enabling role for renewables penetration).
World Energy Investment 2023
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Fuel supply
Fuel supply
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Fuel supply
Overview
World Energy Investment 2023
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Fuel supply
Global investment in fuels rose in 2022 and is expected to return to pre-pandemic levels in 2023
Global investment in fuel supply, 2010-2023e
IEA. CC BY 4.0.
Notes: Oil, natural gas and coal include upstream and midstream investments. Low-emission fuels = modern bioenergy, low-emission hydrogen and hydrogen-based fuels.
2023e = estimated values for 2023.
200
400
600
800
1 000
1 200
1 400
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023e
Low-emission fuels
Coal
Natural gas
Oil
Billion USD (2022)
World Energy Investment 2023
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Fuel supply
Net income of the global oil and gas industry reached a record high of USD 4 trillion in 2022
Net income of the oil and gas industry, 2008-2022
IEA. CC BY 4.0.
Notes: Net income is calculated from oil and gas production at prevailing oil and gas prices (including subsidies) after operating costs but before taxes; “private companies” here
includes listed and non-listed companies.
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
National oil
companies
Private
companies
Billion USD (2022)
World Energy Investment 2023
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Fuel supply
Record income in the oil and gas sector was used to increase shareholder returns and pay
down debt, with only a fraction of free cash flow directed towards clean energy investments
Distribution of cash spending by the oil and gas industry, 2008-2022
IEA. CC BY 4.0.
Source: IEA analysis based on S&P Capital IQ.
20%
40%
60%
80%
100%
2008 2009
2010 2011 2012
2013
2014 2015
2016
2017
2018
2019 2020
2021
2022
Net debt repaid
Dividends plus
buybacks minus
issuances
Clean energy
capital expenditure
Oil and gas capital
expenditure
World Energy Investment 2023
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AGE | 63
Fuel supply
Ample revenues and high prices are pushing fossil fuel investment higher, but spending is
constrained by worries about costs and long-term demand
The year 2022 was an extraordinary year for fuel suppliers and
traders. Russia’s invasion of Ukraine drove natural gas prices to
record levels in many parts of the world and oil prices back up to
levels not seen since the mid-2010s. Net income from fossil fuel sales
also rose to levels never seen before, with the global oil and gas
industry earning around USD 4 trillion.
High prices have spurred an increase in fossil fuel investment: our
expectation, based on analysis of the announced spending plans of
all the large and medium-sized oil, gas and coal companies, is that
investment in new fossil fuel supply will rise by 6% in 2023 to
USD 950 billion.
Some of the windfall gains in 2022 are going back into traditional
areas of supply, with companies seeking out “advantaged” resources
that can be brought to market relatively quickly, at low cost and with
low emission intensities.
But many upstream projects are also facing cost pressures, as tight
markets for services and labour and increased raw material costs
erode the impact of increases in investment on real activity. Around
half of the increase in upstream oil and gas investment in 2023 is
likely to be a consequence of cost inflation.
There are significant variations by region and type of company. Only
Middle Eastern national oil companies (NOCs) are set to spend
meaningfully more in 2023 than they did in 2022, and they are the
only subset of the industry spending more than pre-pandemic levels.
Real spending on oil and gas supply by most European and North
American companies remains below where it was in 2019.
The headline increase in oil and gas spending represents less than
half of the cash flow that was available to the oil and gas industry.
Between 2010 and 2019, three-quarters of cash outflows (account
for capex, dividend and buybacks as well as net debt repaid) were
invested into supply. In 2022, this dropped to less than half, with the
other half used primarily for dividends, share buybacks and debt
repayment.
Hesitation about traditional oil and gas supply investments comes
from a variety of factors, including worries about costs, uncertainties
over longer-term demand, calls for the industry to step up its role in
tackling climate change, and pressures from many investors and
owners to focus on returns rather than production growth.
The latter consideration is particularly visible for tight oil and shale
gas operators. After a decade in which the shale industry failed to
World Energy Investment 2023
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Fuel supply
generate any positive free cash flows, companies are now being
rewarded for increasing value rather than volumes.
Conventional oil and gas resources approved for development in
2023 are likely to be around 25% more than in 2022 but still well
below the average level seen over the past decade. The increase in
2023 comes mainly from natural gas, reflecting market pressures as
well as the push to substitute the shortfall in Russian deliveries.
In the midstream sector, Russia’s cuts in pipeline gas deliveries to
Europe have prompted higher spending on LNG infrastructure. New
regasification capacity is coming into operation in the near term, but
new export facilities take longer to develop. Export projects already
under development have been supplemented by a steady stream of
new approvals during the energy crisis, promising a major 170 bcm
wave of new LNG liquefaction capacity in 2025-2027. A key dilemma
for investors in large, capital‐intensive gas supply projects is how to
reconcile strong near‐term demand growth with uncertain but
possibly declining longer-term demand.
Robust coal demand and high prices during the global energy crisis
are also feeding through into higher global investment. Coal
investment increased to USD 135 billion globally in 2022 and is
expected to rise to nearly USD 150 billion in 2023. Nearly 90% of this
investment takes place in the Asia Pacific region, notably in China
and India where both countries have looked to expand production
and develop new coal mines.
Elsewhere, nearly all coal investment is focused on maintaining or
boosting production from existing mines as concerns over climate
change, increased emphasis on environmental, social and corporate
governance, slow permitting and public opposition limit the
availability of finance for new coal mine development.
In aggregate, fossil fuel investments are now broadly aligned with the
Stated Policies Scenario (STEPS) in 2030, a scenario based on
today’s policy settings. However, if the current momentum behind
clean energy investment is maintained and clean energy deployment
scales up quickly, demand for oil, natural gas and coal would come
under much greater pressure. Benchmarking today’s investment
levels against scenarios that hit global climate goals illustrates a large
potential mismatch. Today’s fossil fuel investment spending is now
more than double the levels needed in the Net Zero Emissions by
2050 Scenario (NZE Scenario). The misalignment for coal is
particularly striking: today’s investments are nearly six times the 2030
requirements of the NZE Scenario.
World Energy Investment 2023
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Fuel supply
The surge in revenue in 2022 offers a major opportunity to scale up investment in low-emission
fuels; momentum is increasing, but remains well short of where it needs to be
The surge in oil and gas company revenue in 2022 opens up the
possibility for accelerated spending by fuel suppliers on energy
transitions. This relates not only to increasing investment in low-
emission fuels and technologies but also accelerating investment that
reduces the emissions intensity of existing fuel production.
Oil and gas industry spending in these areas is rising, and significant
new commitments are being made across the whole spectrum of
clean fuels. Oil and gas companies boosted their spending on
bioenergy to a record USD 11 billion in 2022 with a series of large
acquisitions of transport biofuel and biogas producers.
The sector’s commitments to carbon capture, utilisation and storage
(CCUS) and hydrogen are also growing; many of the largest projects
announced in 2022 were underpinned by the participation of oil and
gas majors and NOCs, several of which have ambitious capacity
targets for 2030. To date, only a handful of these projects have been
subject to a FID, meaning that annualised spending on hydrogen and
CCUS projects was around USD 1 billion in 2022.
Some NOCs have announced commitments to reduce supply chain
emissions, such as Sonatrach’s efforts to bring down flaring at Hassi
Messaoud and at its LNG export infrastructure.
Policies are increasingly supportive of these kinds of investment,
notably via the Inflation Reduction Act in the United States, and the
number of announced projects is rising, especially for clean hydrogen
and CCUS. But as total investment in low-emission sources of energy
(including clean electricity, clean fuels and CCUS) was less than 5%
of upstream investment by the oil and gas industry in 2022, much
larger shifts in capital allocation are needed to clean up existing
production and to position the oil and gas industry as part of the
solution to climate change. For example, to maintain its 30% share
of total capital spending on CCUS as seen in 2022, the oil and gas
industry under the NZE Scenario would have to spend around
USD 25 billion annually by 2030. Similarly, its spending levels on
hydrogen supply would need to reach USD 19 billion by 2030, based
on the current 12% share of investment in electrolyser projects.
This is a crucial topic for COP28 in Dubai. COP President Sultan
Al-Jaber has called on the oil and gas industry to “up its game, do
more and do it faster”. With this in mind, the IEA will be producing
new analysis on the role of the oil and gas industry in net zero
transitions in advance of COP28.
World Energy Investment 2023
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Fuel supply
Upstream oil and gas
World Energy Investment 2023
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Fuel supply
Upstream oil and gas investment rose by 11% in 2022 and is expected to rise by 7% to
USD 500 billion in 2023, but half of these increases are absorbed by rising costs
Total upstream oil and gas investment Annual change in upstream oil and gas investment
IEA. CC BY 4.0.
Notes: “Capital expenditure adjusted for cost inflation since 2019” adjusts capital expenditure for changes in finding and development costs using the IEA’s upstream investment cost
index that reflects the price of a basket of goods and services required to develop oil and gas fields. 2023e = estimated values for 2023.
Sources: financial report disclosure of a sample of 90 companies; cost index based on data from Bloomberg, FRED and IMF data.
200
400
600
2019
2020
2021 2022
2023e
Capital expenditure Capital expenditure adjusted for cost inflation since 2019
Billion USD (2022)
-30%
-15%
0%
15%
2019-20 2020-21 2021-22 2022-23e
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Fuel supply
Middle Eastern NOCs are the only segment of the industry spending more than before Covid-19
Change in upstream oil and gas capital investment relative to 2019 by company type, 2020-2023e
IEA. CC BY 4.0.
Note: 2023e = estimated values for 2023.
Sources: IEA analysis from annual reports and Rystad based on a sample of companies accounting for more than 70% of global production.
- 40
- 30
- 20
- 10
0
10
20
30
40
Middle
Eastern
NOCs
Independents Russian
NOCs
Latin
American
NOCs
Asian
NOCs
US
majors
Other
NOCs
European
majors
Billion USD (2022)
2020
2021
2022
2023e
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Fuel supply
The shale sector represents around a quarter of total upstream oil and gas investment even as
operators prioritise returns over production growth
Share of oil and gas investment by asset type, 2000-2023e
IEA. CC BY 4.0.
Note: “Other” includes coalbed methane, tight gas, coal-to-gas, extra-heavy oil and bitumen, gas-to-liquids, coal-to-liquids and kerogen oil. 2023 values are estimates.
Sources: IEA analysis from annual reports and Rystad.
20%
40%
60%
80%
100%
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
Onshore conventional
Other
Offshore conventional
Tight oil and shale gas
World Energy Investment 2023
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Fuel supply
Upstream companies are searching for “advantaged resources” amid rising pressures on costs
and renewed energy security considerations
Upstream oil and gas capital expenditure rose by 11% in 2022 and
our initial estimate is for a 7% increase in upstream spending in 2023,
to reach just over USD 500 billion.
Companies are filtering investment opportunities through an
increasingly demanding set of criteria. Advantaged investments need
to be competitive on cost, but also have low emission intensities.
Deepwater projects tend to score highly on these metrics and areas
like Guyana, the US Gulf Coast, Brazil and emerging producers like
Namibia (which has seen major discoveries in recent years) are
attracting a lot of investor interest.
Another priority is short development cycles.
It takes around three to
five years on average globally from when a conventional project
receives its FID to production starting. The use of standardised
designs and existing infrastructure could shorten this time as well as
reduce development costs, but despite increasing efforts by the
industry to do so, there is little evidence to date of a structural
reduction in these development timelines.
Another increasingly important consideration, in the light of the
energy crisis, is geopolitical risk. Among other characteristics,
companies and potential importers are also looking for “trustworthy
barrels”, especially where they can be delivered relatively quickly.
Even countries that are actively pursuing rapid energy transitions
have proved ready to view some upstream investments through this
energy security lens.
Part of the recent increase in spending reflects higher upstream
costs: adjusting for rising costs, the increase in activity is only around
half the headline increase in upstream investment. This increase in
upstream costs in 2022 is due to service companies’ higher margins,
the higher cost of drill pipes, casings, tubing and proppants, and, to
a lesser extent, higher labour, cement and electricity costs. The US
shale industry is experiencing a persistent labour shortage in the
Permian Basin, the main producing area, where it is has been
challenging
to fill mechanical and electrical positions with local
residents.
Tight or underdeveloped markets for services and equipment can
deter companies from reinvesting their windfall revenues back into
the upstream. This is also a feature of deepwater developments
where there are constraints on available rigs. Companies such as
Petrobras that have actively tendered in recent years for deepwater
drilling equipment and rigs have been in a position to move ahead
with their upstream ambitions – in Petrobras’ case its large offshore
pre-salt fields.
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Windfall gains in 2022 have led to increased investment, but trends differ markedly between
regions
Most large oil and gas companies have announced higher planned
spending on upstream projects in 2023 from the levels seen in 2022,
but only a handful are investing more in this area today than they did
prior to the Covid-19 pandemic.
There are major differences between regions. The increase in
spending is concentrated mainly among large Middle Eastern NOCs.
Notably, Saudi Aramco and ADNOC, invested considerably more in
2022 than in 2019 (prior to the Covid-19 pandemic) and plan to boost
investment further in 2023. Both companies are spending to meet
announced capacity expansion targets for 2027 – Saudi Aramco to
reach 13 million barrels per day (mb/d) and ADNOC 5 mb/d – and are
also looking to boost local supply chains and manufacturing capacity.
Since 2015 Saudi Aramco has been looking to source an increasing
share of its procurement domestically as part of the In-Kingdom Total
Value Add programme. As of 2022, 63% of Saudi Aramco’s spending
was directed to domestic suppliers, up from 35% in 2015 (the target
is to reach 75% by 2025). Saudi Aramco has announced a 30-60%
increase in capital expenditure for 2023, to reach a total of
USD 45-55 billion.
A number of NOCs in Asia announced increases in spending for 2023
on the back of robust revenues in 2022. In Southeast Asia, Malaysia’s
Petronas now plans to spend about USD 14 billion each year during
2023-2027, a rise of more than 40% compared with the average for
the last five years. Indonesia’s Pertamina and Thailand’s PTTEP
have also increased their planned expenditure for the coming years.
Natural gas is the prime target for the region’s NOCs given the
squeeze on supply and high prices during the energy crisis in 2022,
with Malaysia’s floating ZLNG project and Indonesia’s Tangguh UCC
project among those likely to move forward.
Upstream investment by Chinese NOCs is expected to be broadly
similar to levels seen in 2022 at around USD 60 billion per year.
China’s leading oil and gas companies are expanding their transition
investments but their core mandate remains to ensure oil and gas
security on their home market. Higher revenues may allow China’s
NOCs to target higher-cost domestic resources such as shale or
coalbed methane.
There is also a push by some Latin American companies to increase
upstream oil and gas spending in 2023. These could come under
pressure as some of the largest producers – including Petrobras and
Ecopetrol – could be tasked by new government administrations to
balance upstream investment with an increase in renewables and
downstream investment. Currently, exploration and production
account for three quarter of Petrobras’ total capital investment.
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US and European majors announced record profits in 2022, but have
not substantially modified the investment plans they made prior to the
energy crisis. One notable exception is BP, which recalibrated its
plans to cut upstream production by 40% and will now target a 25%
reduction in output by 2030. By and large the European majors have
been trading a lower multiple of share price to earnings compared
with their US counterparts, with European companies not getting
much credit thus far from investors for their higher transition-related
commitments.
For US tight oil and shale gas, the number of rigs in operation rose
steadily throughout the first half of 2022, but has since remained
around this level. Companies continue to emphasise capital discipline
and the importance of returning revenue to shareholders. Cost
inflation has also dampened the appetite to increase investment.
Investment in the shale sector in 2023 is expected to be similar to
2019 levels, although the number of wells drilled and completed is
likely to be substantially lower.
The oil and gas investment picture in Russia is subject to a high
degree of uncertainty, and as with many aspects of Russia’s energy
sector, has been noticeably less transparent over the last year, as
companies stopped providing much detail on their financial
performance or plans. The information that is available highlights
some of the strains, including regular complaints from companies
about higher taxes.
Investments in Russia’s upstream sector rebounded from Covid-19-
induced lows in 2020 but as Russia becomes increasingly shut off
from the global energy market, investments have sunk well below
levels seen in the pandemic-affected years of 2020 and 2021.
Rosneft managed to keep spending around 2021 levels, but the
company has not provided any information on its 2023 investments.
On noticeable exception is Gazprom which announced a 16%
increase in investment in 2023 from 2022 levels, focusing mainly on
the development of new production and gas processing centres as
well as the Power of Siberia pipeline. Other large Russian
companies, including Lukoil, Gazpromneft, Tatneft and Sibur,
announced at different points that their investment programmes are
under review, but have not disclosed any further information.
In the meantime, many of the upstream investments by western
companies in Russia are in legal limbo, with the investors having
announced their exits and written down the value of these
investments. They are also facing official restrictions on their ability
to divest from Russian assets. For the moment, there are few signs
of other non-western players stepping in to take their places.
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Midstream and downstream oil
and gas
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Investment in new LNG projects is picking up, with a long line of projects looking to move
ahead, but spending remains well below the levels seen in the 2010s
Sanctioned LNG export capacity Annual investment spending on sanctioned projects
IEA. CC BY 4.0.
Note: Investment spending is profiled assuming a three-to-six-year construction period. 2023e = estimated values for 2023.
200
400
600
800
1000
10
20
30
40
50
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
bcm per year
Billion USD (2022)
Middle East Russia Africa North America Australia Others Cumulative capacity (right axis)
20
40
60
80
100
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023e
bcm per year
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Interest in contracting for new LNG supply has risen following Russia’s invasion of Ukraine, but
European buyers are wary of long-term commitments
Despite key gas price benchmarks reaching record highs, 2022 was
far from a bumper year for investment in LNG. FIDs were made for
two projects in the United States (Plaquemines and Corpus Christi
Stage 3) and a small floating LNG project in Malaysia (ZLNG Sabah).
The total committed capital investment was USD 24 billion, similar to
levels in 2021. Investment in regasification facilities, however, saw a
large uptick in 2022 as EU-based companies announced, revived or
accelerated plans for around 130 bcm of new LNG import capacity,
including more than 20 projects based on floating storage
regasification units (FSRUs). Around 45 bcm of new regasification
capacity is expected to come online by the end of 2023, with
Germany the focal point.
The long-lived nature of gas infrastructure, alongside Europe’s 2050
climate target, has prompted a debate about the risk of lock-in or
stranded assets for new LNG import infrastructure. Regasification
terminals typically cost around USD 250/tonne of capacity, around a
fifth of the cost of liquefaction terminals. Long-term capacity rights are
usually held by private companies, who take the marketing risk and
can see utilisation rates vary substantially over the long term.
The recent flurry of investment in LNG import capacity in Europe has
not been matched by a parallel wave of long-term supply contracting.
Of the 100 bcm of new LNG term contracts signed in 2022, almost
half were by portfolio players, while buyers in Asia picked up a third,
leaving around 20% earmarked for Europe. This share is well above
historical levels, but total firm contracted volumes (around 70 bcm)
remain well below annual requirements: buyers in Europe have
mainly been relying on spot and flexible LNG to cover the shortfall left
by reduced Russian gas deliveries.
Two LNG export projects have so far seen a FID in 2023, both in the
United States: the USD 8 billion expansion of Plaquemines LNG
(contracted mainly to US portfolio players and independents), and the
USD 13 billion Port Arthur terminal (a large proportion of which is
contracted to Europe-focused players). There are additional projects
in North America – as well as Qatar’s North Field South expansion –
that have made progress towards an eventual FID; in the US alone
more than 20 pre-FID sale and purchase agreements (totalling
around 40 bcm) have been signed since Russia’s invasion of
Ukraine. Portfolio players have contracted around 40% of this total,
with Chinese and European buyers each signing up for around 20%.
The proliferation of LNG projects due to come online in the 2025-2027
period raises the possibility of cost inflation, as multiple projects
compete for a limited pool of specialised contractors. There will be
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trade-offs between value and speed, and the deadlines for some of
the approved projects may well slip further into the latter part of the
2020s.
Investing in LNG remains a complex value proposition, as there is a
near-term need for additional capacity but far less certainty about
future requirements, especially as an unprecedented wave of around
170 bcm of new capacity is due online between 2025 and 2027 (even
though some large projects such as Mozambique LNG and Arctic
LNG may be at risk of delay). Accelerated climate ambitions and
sensitivity to high gas prices also loom large in the backdrop: we
assess the net present value (NPV) of LNG plants currently under
construction at over USD 300 billion, assuming prices remain in the
range of around USD 9-11/MBtu over a 30-year economic lifetime
(consistent with STEPS prices). However, lowering the assumed gas
price by 20% would bring the NPV down to zero.
Investment in long-distance gas pipelines remained muted in 2022.
Russian state-controlled transport companies such as Gazprom and
Transneft have announced plans for double-digit growth in
investment for 2023; this reflects a sense of urgency to redirect export
flows from Europe to Asia, rather than to bring online new upstream
developments. However, there was no firm announcement from
Russia and China about new gas pipeline infrastructure, notably the
Power of Siberia 2 project, which would connect Russia’s major
existing fields in Western Siberia and the Yamal peninsula with
China. India remains the key market for new gas distribution network
investment, but high import prices and growing domestic competition
from electricity in the transport and industrial sectors have dampened
annual investment levels in the sector.
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Investment in oil refining continued to rise in 2022, but is expected to slow from 2023 onwards
Investment in oil refineries (greenfield and upgrades) by region and net refining capacity additions, 2015-2023e
IEA. CC BY 4.0.
Notes: Investment figures do not include maintenance capital expenditure. 2023e = estimated values for 2023.
- 1.0
- 0.5
0
0.5
1.0
1.5
2.0
2.5
3.0
- 20
- 10
0
10
20
30
40
50
60
2015 2016 2017 2018 2019 2020 2021 2022 2023e
North America
Central and South
America
Africa
Europe/Eurasia
Other Asia Pacific
Southeast Asia
China and India
Middle East
Net capacity addition
(right axis)
Billion USD (2022)
mb/d
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The current healthy margins may not necessarily translate into higher investment levels in the
coming years, highlighting the importance of demand-side measures to curb demand growth
The very tight oil product market in 2022 stemmed from a strong
rebound in oil product demand, a net reduction in refining capacity,
high natural gas prices and lower inventory levels. These factors
combined to push refining margins to record highs, especially for
middle distillates such as diesel and kerosene. Margins have
moderated since late 2022 due to weakened demand. Middle
distillate cracks in particular have eased further in early 2023 due to
the limited cuts in Russian diesel exports, and have been overtaken
by gasoline cracks in the Atlantic Basin. However, despite the recent
fall, refining margins remain healthy compared with past averages.
The effects of sanctions and embargoes on Russian oil trade flows
were a key variable in global oil markets. Shipments of Russian crude
oil to Europe declined visibly following the import ban in December
2022, but these were offset by the surge in imports into India and
China, keeping overall Russian export volumes stable. A similar
pattern is being observed in product trade flows following the
enforcement of the European products embargo in February 2023.
While Russian product exports to Europe are falling, some of the
volumes are being rerouted to Asia, Africa and the Republic of
Türkiye. Despite sustained volumes, Russia’s export revenues are
nonetheless dwindling. Export revenue in April 2023 is estimated at
USD 15 billion
compared with nearly USD 20 billion a year ago.
Thanks to healthy margins and tight market conditions, investment in
oil refineries (excluding maintenance spending) continued its growth
in 2022, reaching USD 40 billion. The increase was primarily driven
by the Middle East, China, India and North America, where several
large-capacity plants (e.g. the Al-Zour refinery in Kuwait, and the
Jieyang and Shenghong refineries in China) started operations or are
expected to come online in 2023. After the net reduction in capacity
in 2021, the refining industry increased its net capacity by around
0.4 mb/d in 2022 and is set to add a larger amount in 2023.
As the current wave of new capacity additions reaches completion,
investment is expected to wane in the coming years. Despite the
current healthy margins, it is likely to become increasingly
challenging to commit multi-billion dollar investment in new capacity
given lingering uncertainty around the long-term outlook for oil
demand. Rather, investment in new growth areas, such as
low-emission hydrogen, biofuels and petrochemicals, and plastic
recycling, is set to account for a larger share of overall investment by
refiners. Refining companies already represent
around 80% of
today’s renewable diesel production capacity and over half of the
planned projects. This highlights the risk of a potential tightening of
refined product supplies in the medium term and the importance of
demand-side and efficiency measures to ease such tensions.
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Oil and gas industry transitions
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Renewable power is the diversification option being pursued by the largest number of oil and
gas companies
Number of oil and gas companies with strategic plans and realised investments
IEA. CC BY 4.0.
Notes: Takes into account companies having made investments and/or strategic pledges. Low-emission hydrogen includes hydrogen from electrolysis and from fossil fuels with CCUS
Sources: IEA analysis using annual reports, BNEF and Clean Energy Pipeline.
10 20 30 40 50 60 70
Renewable power
CCUS and DACS
Hydrogen from electrolysis and
from fossil fuels with CCUS
Bioenergy
Power grids, storage
and EV charging
Number of companies
European majors US majors Independents Middle Eastern NOCs Other NOCs
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Clean energy investment by oil and gas companies doubled in 2022 to around USD 20 billion,
around 4% of their upstream capital investment and 0.5% of net income
Clean energy spending by technology Share of clean energy spending in upstream capex and net income
IEA. CC BY 4.0.
Notes: Spending in this figure includes mergers and acquisitions (investment figures in the rest of this chapter do not); Other = hydrogen, geothermal, small hydro and hybrid projects.
Sources: IEA analysis using annual reports, Clean Energy Pipeline, BNEF, Rystad and IJ Global.
.
5
10
15
20
25
2015 2016 2017 2018 2019 2020 2021 2022
Billion USD (2022)
Solar PV Wind CCUS Bioenergy Energy storage Other
1%
2%
3%
4%
5%
2015 2016 2017 2018 2019 2020 2021 2022
Upstream capex Net income
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Oil and gas companies’ investment in clean energy is increasing but remains small relative to
overall capital investment; bioenergy investment rose significantly in 2022
Our tracking of oil and gas company expenditure shows that around
4% of their upstream capital expenditure in 2022 went to areas
outside traditional supply, such as clean fuels, CCUS and clean
power. This was 3 percentage points higher than the respective share
in 2020. Bioenergy accounted for more than half of clean energy
spending by the industry in 2022 as oil and gas companies took major
stakes in several bioenergy producers. Our preliminary estimate is
that investment levels will remain broadly constant in 2023 although
much depends on the number and size of mergers and acquisitions.
There are wide company-by-company variations in this area, but an
increasing number of oil and gas companies have now made some
sort of commitment to reducing emissions or to diversify their
investment spend (typically European majors and independents).
The most common type of pledge relates to the emissions associated
with the companies’ own operations, whether directly (Scope 1) or
indirectly (Scope 2). Our assessment is that oil and gas industry
operations are responsible for
just under 15% of energy-related GHG
emissions today. Companies accounting for just under half of global
oil and gas production today have announced plans or targets to
reduce their Scope 1 and 2 emissions.
For many companies, the pick-up in non-core spending is aimed at
reducing the company’s own emissions. ExxonMobil, for example,
announced plans to spend
USD 17 billion on emission reduction
initiatives until 2027; of this, 40% will be directed to initiatives with
third parties (with a primary emphasis on CCUS, biofuels and
hydrogen), but the majority will be towards reducing the company’s
Scope 1 and 2 targets.
Reducing flaring and methane leaks has to be a core priority. The
methane emissions intensity of oil and gas production is edging
downwards, but the IEA’s Global Methane Tracker
underlines that
these leaks remain unacceptably high. Likewise, global gas flaring
decreased slightly in 2022, largely thanks to reductions in Nigeria,
Mexico and the United States, as well as consistent efforts from
Kazakhstan and Colombia, but almost 140 bcm of gas was
nonetheless wasted in a year when gas supplies were very tight and
prices exceptionally high.
There is a growing realisation that leading oil and gas companies’
active participation in emission reduction efforts is preferable to them
simply selling off their most carbon-intensive assets to meet emission
reduction goals. Analysis by the Environmental Defense Fund
highlights the general movement of upstream assets in recent years
towards companies with weaker climate commitments. From 2018 to
2021, more than twice as many deals moved assets away from
operators with net zero commitments than the reverse.
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Renewable power remains the main outlet for non-core oil and gas company spending, but
investment in clean fuels, such as bioenergy, hydrogen and CCUS, is picking up
The pipeline of clean energy investment projects that have oil and
gas industry participation is picking up. The past several years have
seen oil and gas companies – particularly European majors – build
up a portfolio of renewable assets through acquisitions, joint ventures
and direct investment. The early focus was on wind and solar
developments, and there have been large moves into offshore wind:
TotalEnergies announced in 2022 a project pipeline
of 6 GW of
offshore wind, taking the total to 11 GW, Shell also has around 9 GW
in the
pipeline and Equinor has ambitions to install 12-16 GW by 2030.
If realised, these capacity additions would rival those of pure-play
offshore wind developers such as
Ørsted over the same period. More
recently, oil and gas companies have increased their focus on
bioenergy, spending around USD 11 billion in 2022, mainly on the
acquisition of biomethane and biodiesel producers.
There is increasing policy support for CCUS, biogases and low-
emission hydrogen, all of which are a good match for the engineering
and project management strengths of oil and gas companies, as well
as their experience in handling liquids and gases.
Several oil and gas companies have announced large-scale
capital-intensive flagship projects in these sectors in recent years.
For example, in 2022 BP took a 40% stake in the hydrogen-focused
Western Green Energy Hub in Australia, set to be one of the largest
renewable projects in the world. This was followed by BP’s
USD 2 billion commitment to develop hydrogen, biofuels and
renewable energy around its refining operations in Valencia, Spain.
Shell in 2022 took a FID for an integrated hydrogen project in the
Netherlands – Holland Hydrogen I, one of the largest hydrogen
projects in Europe.
NOC activity in this area is also picking up. ADNOC is developing two
CO
2
recovery projects at existing gas plants and, along with BP and
Masdar (the state-owned renewable energy company in the United
Arab Emirates), is participating in the United Kingdom’s H2Teesside
project for hydrogen from natural gas with CCUS. In 2022 Saudi
Aramco announced plans for a CCUS hub with a target to reach
9 Mt CO
2
capacity by 2027. The company’s first sustainability report,
released in mid-2022, also contains a target to reach 11 Mt of
hydrogen production capacity by 2030. Petronas reached a FID on
the 3.3 Mt CO
2
Kasawari offshore CCUS project.
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Low-emission fuels
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Modern gaseous and liquid bioenergy saw a sharp uptick in investment spending in 2022, led
by advances in renewable diesel and biomethane
Average annual investment in biogases and transport biofuels Cumulative investment by region, 2010-2022
IEA. CC BY 4.0.
Note: Biomethane investment includes the cost of producing biogas as an interim step before upgrading to biomethane. 2023e = estimated values for 2023.
2
4
6
8
10
12
14
2010-14 2015-21 2022 2023e
Billion USD (2022)
Biodiesel Biogasoline Biogas Biomethane
10 20 30 40
United States
Brazil
China
Europe
Rest of world
Billion USD (2022)
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A flurry of acquisitions in recent years has seen the oil and gas industry take major stakes in
bioenergy producers
Global transport biofuel capacity expanded by 7% in 2022, its largest
annual increase in over a decade. Biorefineries focused on
renewable diesel made up the bulk of the growth, thanks to attractive
policies in the United States and Europe, while bioethanol capacity
saw notable increases in Brazil, Indonesia, India and China.
Biofuels investment saw a large uptick in 2022 as capacity additions
reached a decade high of around 260 kb/d. Large investments were
announced in renewable diesel refining, notably the Marathon-Neste
USD 1.2 billion joint venture
in California and Imperial’s
USD 720 million investment in Canada. Several large companies are
also making forays into sustainable aviation fuels; this underpinned
Neste’s USD 2.2 billion
expansion of its renewable fuels plant in
Rotterdam. In the European Union alone there are over 30 advanced
biorefinery projects in operation, and a further 10 are slated for
operation before 2025; several are developing sustainable aviation
fuels and renewable diesel production capabilities. The United States
is likely to lead growth in this sector in the near term, thanks to
generous fiscal incentives; the Inflation Reduction Act includes an
estimated USD 9.4 billion in tax credits and financial support for new
production capacity and biofuel infrastructure generally.
Through a series of acquisitions and new partnerships, oil and gas
majors are increasingly gaining a foothold in the biomethane industry.
BP bought Archaea Energy in late 2022 for USD 4 billion, Shell
acquired Denmark-based Nature Energy for USD 2 billion, and
Chevron bought biofuel-focused Renewable Energy Group in a
USD 3 billion acquisition (alongside the acquisition of Beyond6, a
compressed natural gas refuelling network). TotalEnergies has made
a series of smaller acquisitions, such as the purchase of Poland-
based biogas producer PGB, and entered into an agreement with
Veolia to produce biomethane from waste treatment plants.
Vigorous debate continues about the sustainability of different
feedstocks for bioenergy; currently around 90% of liquid biofuels and
the majority of biogases are derived from conventional food crop
feedstocks. The EU Renewable Energy Directive II foresees a 7%
cap on these feedstocks, favouring those derived from waste streams
instead. The cost of bioenergy feedstocks has also been rising in
recent years due to volatile crop prices and high demand for biofuels
as countries enact more ambitious blending mandates. There is a
possibility of a feedstock supply crunch
over the coming years, as
demand for vegetable oil and waste and residue oils and fats for
transport biofuels is expected to grow by nearly 60% to 80 Mt by
2027.
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Spending on electrolysis projects for hydrogen is growing fast, led by end uses in mobility, oil
refining and industry, especially for iron and steel
Investment in electrolysers by intended use Investment in electrolysers by region
IEA. CC BY 4.0.
Notes: 2022 values are estimated annualised spending on projects that are under construction and due to enter operation in 2023. Estimates are based on capital cost assumptions
and announced capacities of electricity input or hydrogen output volumes per project and include electrolysers for hydrogen supply used for energy purposes or as an alternative to
fossil fuel use in industry (such as chemical production and oil refining). “Mobility” includes projects for which the hydrogen output is intended for use in vehicles; hydrogen intended for
conversion to hydrogen-based fuels is included in “H
2
-based fuels”.
Sources: IEA analysis based on IEA hydrogen project database
and recent announcements.
0.2
0.4
0.6
0.8
2010 2012
2014
2016
2018
2020
2022
Billion USD (2022)
Industry or refining Mobility
Electricity storage
H₂
-based fuels or trade
Other
2010
2012
2014
2016
2018 2020 2022
Europe China United States Latin America Other
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Hydrogen spending is driven by major projects in China and Europe that are due to start up in
2023-2025; US policy incentives are yet to translate into FIDs
Global electrolyser capacity additions fell by one-third in 2022, yet
this trend does not reflect the amount of capital committed, nor does
it imply a slowdown stemming from weaker macroeconomic
conditions. A single 150 MW expansion in China in 2021 almost
equalled total new capacity in 2022, and no new additions of that size
began operation in 2022. Another major Chinese project – a 260 MW
facility at a refinery in Xinjiang – is scheduled to start in mid-2023.
Our estimate of spending on projects nonetheless shows significant
growth due to the ongoing construction of projects not yet in
operation.
Overall, there remains a positive expectation among hydrogen
developers that investment will grow exponentially in the near future,
driven by government incentives. However, it is too early to see any
boost to spending from recent flagship hydrogen policies in Europe
and the United States, for which rules are still being finalised.
A sign of the rising investment appetite for hydrogen projects in the
energy sector are the FIDs taken in 2022 for more industrial-scale
projects. All are linked to dedicated renewable electricity capacity.
The largest
among these, in Saudi Arabia, will have electrolyser
capacity of 2 GW in 2026 if completed to plan, eight times larger than
the next biggest in the world. As most of its output is intended for
export to users outside the Middle East, it is an example of the entry
of serious new players in low-emission hydrogen that are not driven
by local decarbonisation policies. Egypt, Oman and the United Arab
Emirates are also proposing to become exporters.
The next largest group of projects are all integrated into the use of
the hydrogen. Shell’s Holland Hydrogen I in the Netherlands and Air
Liquide’s Normand’Hy in France, at 200 MW each, will have
capacities ten times that of Europe’s biggest existing plant and are
aiming to supply existing refineries by 2025. The Shell FID was taken
without government support. In China,
Sinopec started constructing
a roughly 200 MW electrolyser in Inner Mongolia with associated
hydrogen storage to supply a coal-to-chemicals facility. State-owned
Dalian Capital Investment began building 60 MW of electrolysis
capacity that will run on seawater. In Sweden, an FID could be taken
in 2023 for the first new steel mill in Europe since the 1970s, equipped
with 720 MW of electrolysis, backed by a public loan guarantee.
Two projects for producing hydrogen from natural gas equipped with
CCUS also took FIDs in 2022. A Hydrogen Energy Complex
is under
construction by Air Products in Canada, to produce around 0.5 Mt of
hydrogen for power generation and other uses, with 95% of the CO
2
captured and stored from 2024. The capacity is equivalent to 3 GW
of electrolysis running 100% of the time. It has grant funding from the
federal and Alberta governments. In the United States,
financial close
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was reached in February 2023 on a facility in Texas to produce 0.2 Mt
of hydrogen for fertiliser production from 2025 with over 90% CO
2
capture. The capacity is equivalent to around 1.7 GW of electrolysis.
The destination of the captured CO
2
has not been yet disclosed.
While several similar projects are well advanced in Europe and the
Middle East, the more favourable investment environment in North
America has made it the leader in hydrogen production with CCUS.
Additional major FIDs in Europe and the United States are widely
expected to flow from major policy initiatives stemming from
post-pandemic stimulus funding, the ongoing energy crisis and
regional ambitions to secure value chains. Under the Important
Projects of Common European Interest (IPCEI) scheme, the
Commission approved EUR 10.6 billion in country-level support to
projects focused on technology and infrastructure
in 2022. For
example, the delayed 100 MW REFHYNE 2 project at a refinery in
Germany is on the IPCEI list and could take FID once funding is
clarified, as long as electrolyser manufacturing also scales up. The
United Kingdom’s
March 2023 budget promised GBP 20 billion over
20 years for electrolysis and CCUS-equipped hydrogen production;
408 MW of electrolysis projects were shortlisted in March 2023 for a
first GBP 340 million
funding round.
The biggest boost to investment is likely to stem from the 2022 US
Inflation Reduction Act
, coupled with the Hydrogen Hubs initiative
launched the year before. Among other provisions, the act provides
tax credits of up to USD 3/kg of hydrogen produced in line with certain
emission and other criteria, and up to USD 85/tonne of CO
2
stored
(noting, however, that this CCUS provision is worth the equivalent of
just under USD 1/kg of hydrogen and cannot be claimed in addition
to the hydrogen tax credit). The act also provides credits for
investment in the manufacturing of related equipment, plus grants
and loan guarantees for demonstration projects.
The pay-for-performance approach and magnitude of the tax credit
system compared to project-based funding competitions has led to
speculation that the act might lead to the relocation of projects to the
United States, especially electrolyser and component factories.
Uncertainty about the environmental requirements for hydrogen to
qualify for EU incentives has also fuelled this opinion. While many
new US projects have recently been announced, there is only
anecdotal evidence to date that these developers’ other projects
outside the United States no longer have their full commitment. In
early 2023 Johnson Matthey and Plug Power announced
an
electrolyser manufacturing partnership for a 5 GW factory by 2025
that would more than double existing US capacity and be five times
the size of the largest operational factory in the world today. However,
Plug Power has also announced an expansion in Korea and, of the
38 electrolyser factory plans announced with a capacity of over
1 GW, only six are in the United States, of which three were
announced after the passing of the Inflation Reduction Act. On
balance, the act is likely to raise international hydrogen investment
and pull its centre of gravity of towards North America in the near
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term, but this will depend on how EU countries respond and whether
developers, suppliers and service providers can service multiple
large projects in parallel.
Other notable announcements of public support include AUD 2 billion
in payments
for hydrogen production from renewable-based
electrolysis to 2030 and USD 1.6 billion granted by Japan to the
Hydrogen Energy Supply Chain in Australia. That project would
combine lignite, CCUS and seaborne shipping of hydrogen to Japan
from around 2029 if approved by Australian stakeholders. India
announced USD 11 million in funding available for consortiums
developing hydrogen projects. The European Commission published
a concept for a
European Hydrogen Bank that could contract with
hydrogen producers and consumers to fill the gap between
production costs and tolerable purchase prices, whether the producer
is in the European Union or outside. EUR 800 million is suggested for
an initial auction, echoing a similar model used by the German
initiative H2Global, which has a EUR 900 million initial budget and
launched an ammonia auction in 2022.
Several investments were also made into hydrogen-related
infrastructure. These include an FID by fertiliser company OCI to
expand by 200%
its 0.4 Mt ammonia import terminal in the
Netherlands by the end of 2023. In mid-2022 the US Department of
Energy Loan Program Office
finalised a USD 504 million loan
guarantee for an electrolysis and large-scale underground hydrogen
storage project.
In 2022 multilateral development banks indicated their willingness to
finance hydrogen projects. Announcements included: a
World Bank
and IFC facility for concessional finance for projects (Barbados,
Mexico and South Africa) and governments (Chile, India and
Namibia); an agreement for a potential loan of EUR 500 million from
the
European Investment Bank (EIB) to Namibia; and two loans from
the Inter-American Development Bank (USD 400 million) and World
Bank (up to USD 350 million) to Chile. Since these loans to Chile
were announced in November 2022, some
consolidation of projects
in the country appears to have begun, as fewer of the consortiums
shortlisted for public funding have progressed through to the
environmental assessment phase than expected. This outcome is
likely to be repeated in other countries as the long lists of announced
projects are winnowed by commercial, regulatory and public budget
hurdles.
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Since mid-2022, returns from a portfolio of 41 low-emission hydrogen firms have stabilised, but
their market capitalisation has suffered in line with lower valuations for technology firms
Monthly returns of hydrogen companies and funds Market capitalisation of hydrogen companies and funds
IEA. CC BY 4.0.
Notes: ETFs = exchange-traded funds; portfolio member tickers: 0051720D US, 288620 KS, 332142Z LN, 336260 KS, 702 HK, ACH NO, ADN US, AFC LN, ALHRS FP, AMMPF US,
BE US, BLDP CN, CASAL SW, CI SS, CWR LN, F3C GY, FCEL US, FHYD CN, GNCL IT, GREENH DC, H2O GY, HDF FP, HTOO US, HYON NO, HYPRO NO, HYSR US, HYZN
US, HZR AU, IMPC SS, ITM LN, LHYFE FP, MCPHY FP, NEL NO, NHHH CV, NXH CN, PCELL SS, PHE LN, PLUG US, PPS LN, PV1 AU, SPN AU, TECO NO, VIHD US, VYDR US.
Source: IEA calculations based on Bloomberg (2023).
100
200
300
400
500
2017 2018 2019 2020 2021 2022 2023
Arithmetic return (January 2017 = 100)
IEA global hydrogen portfolio
NASDAQ composite index
S&P cleantech
20
40
60
80
100
2017 2018 2019 2020 2021 2022 2023
IEA global hydrogen portfolio (USD billion)
Hydrogen ETFs (USD 10 million)
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Despite uncertainties facing some early-stage “pure play” hydrogen companies, funds that
raise money to invest in hydrogen projects have held their value over the past year
Unprecedented levels of investment in hydrogen companies have
been mobilised as near-term expectations for hydrogen projects have
risen. To track this trend, we assembled a portfolio of publicly traded
companies whose success depends on demand for low-emission
hydrogen growing. To try to be as representative as possible since
WEI 2022
, we have expanded the portfolio from 33 to 41 members.
These companies span a range of sectors, including electrolyser and
fuel cell manufacturing, low-emission hydrogen and ammonia project
development, hydrogen distribution infrastructure and hydrogen-
fuelled vehicles.
The total market capitalisation of the portfolio tracks some of the
major clean energy trends since 2019: initial hopes for high growth
were buoyed through the Covid-19 pandemic by expectations that
governments would ensure a quick recovery, but rising interest rates
in 2022 were compounded by the energy crisis and this led investors
to withdraw equity from sectors struggling to meet shareholder
requirements. By the end of February 2023, the market capitalisation
of the portfolio had dropped back to its level in November 2020.
Meanwhile, the monthly investor returns and revenues of this portfolio
are almost three times higher than five years ago, and they continue
to outperform more general cleantech indices. This suggests that
investors treat hydrogen stocks as high-tech innovative businesses
(as represented by the NASDAQ composite index), which gives them
preferential access to government programmes focused on future
competitiveness.
Even as the value of listed hydrogen companies has been adjusted
downwards, publicly traded dedicated hydrogen funds have
maintained their value. These funds are established to invest equity
in a blend of private companies and projects that are scaling up low-
emission hydrogen supply and use. Since 2022 these funds have
shifted their attention more towards projects, which they now expect
to yield higher returns relative to technology companies in the
medium term. For example, HydrogenOne Capital Growth has
invested EUR 17 million in the project developers Strohm and HH2E
since mid-2022. The unlisted Clean Hydrogen Infrastructure Fund,
which raised over USD 1 billion in early 2022, has not expanded
further but in early 2023 it took a 49% stake in a
new EUR 200
million
venture to develop hydrogen infrastructure in Nordic countries. Since
WEI 2022, United Hydrogen Limited joined these other investors; it
has a stronger focus on company ownership and, despite a lower
valuation at
USD 39 million, a goal of becoming the world’s largest
diversified hydrogen conglomerate. Funds are also being raised in
regions that have been less active to date: in April 2023, Avaada, a
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solar project developer, raised USD 1 billion from a Canadian
investment fund for hydrogen-related projects in India.
Start-ups working on hydrogen-related technologies and businesses
raised record amounts of early-stage and growth-stage equity in
2022. At USD 660 million, early-stage deals were only marginally
higher than in 2021, but this was over ten times higher than the
annual average of the previous five years. Notable deals included
those for Hysata
, an Australian electrolyser developer raising
USD 29 million, Hygenco, an Indian project developer raising
USD 24 million, and Levidian, a British developer of methane
cracking raising USD 13 million. Growth-stage funding rounds, which
tend to be much larger than early-stage, rose by 150% in 2022, to
USD 2.9 billion. This is an even more impressive achievement in light
of only a 1% increase overall in growth-stage equity funding for
energy firms. The largest deal, at over USD 300 million, was for
Monolith, a US developer of methane pyrolysis.
As the size of hydrogen projects grows, the share of start-ups that
are project developers, not technology owners, has risen. However,
growth-stage investment and acquisitions still tend to favour
technology companies. In an analysis
of 391 start-ups founded since
1990 with activities related to hydrogen, 70% were found to hold at
least one patent application. More than 80% of the growth-stage
investment in hydrogen start-ups since 2000 was in companies that
had already filed a patent application. Overall, 55% of all venture
capital funding for hydrogen start-ups went to the 117 companies that
had filed patent applications in the period 2011-2020.
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Recent FIDs for CCUS projects are set to push 2023 spending to a new record
Annualised historical and potential spending on advanced CCUS projects based on announced project timelines
IEA. CC BY 4.0.
Notes: Includes commercial capture and full-chain CCUS projects with a capacity of over 0.1 Mt CO
2
per year; projected spending represents the capital costs of projects with
announced capacities based on their planned FID and operational dates; spending is estimated where project-level cost data are unavailable; Other includes Africa, South and Central
America and the Middle East.
Source: IEA analysis based on IEA CCUS projects database
.
5
10
15
20
25
30
35
40
2010 2013 2016 2019 2022 2025 2028
Billion USD (2022)
Oil and gas supply Biofuels
Power generation Hydrogen production
Industry and refining
CO₂ infrastructure
Direct air capture
2010 2013 2016 2019 2022 2025 2028
North America Europe China
Asia Pacific
Middle East Other
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CCUS project announcements have been galvanised by public support packages in the United
States, which support the trend towards risk management by breaking up the value chain
When the Taizhou power station CCUS project enters operation – it
is scheduled to do so this year – it will become the third facility in
China since 2018 to capture more than 0.5 Mt CO
2
per year. One of
the other two plants, at the Qilu refinery, started operating just last
year, establishing China as the centre of CCUS investment recently.
However, the coming years will be dominated by significant growth in
investment in the United States, spurred by government support
policies that close the cost gap. Since November 2021, five US
projects that will each handle over 0.5 Mt CO
2
per year took FID. The
entry of these projects into the construction phase likely helped push
CCUS investment to a record USD 3.1 billion in 2022. They also
provide confidence that CCUS spending will continue to grow.
If all advanced projects take FID in line with their schedules, global
CCUS spending could reach USD 34 billion in 2025. This dramatic
potential ramp-up reflects the extent to which the CCUS project
pipeline has expanded recently. Over 180 projects
have been
announced since January 2022 along the CCUS value chain. CO
2
capture projects are shared between different sectors, with many
relating to hydrogen or bioethanol production. The higher unit cost of
projects in the power sector led to its roughly 50% share of total
possible investment in 2023-2028. The full project pipeline could
raise global CO
2
capture capacity from around 45 Mt CO
2
per year
today to over 300 Mt CO
2
per year by 2030. But this would still fall
short of the 1 200 Mt/yr envisaged by the NZE Scenario in that year.
While 30% of the announcements since the start of 2022 were in the
United States, the project pipeline is becoming more global. New
projects are planned in Bulgaria, Croatia, Libya, Portugal, Singapore
and Thailand, among others.
Most developers expect to rely on direct public support to make
projects profitable, in some cases via the backing of state-owned
enterprises. To date, FIDs have typically been enabled by grant
funding, and many recent announcements follow this pattern. Newly
available US grant support for developers of so-called H2Hubs
has
prompted CO
2
transport and storage projects that could link to
multiple CO
2
sources, not just hydrogen production. Among the
recent US FIDs is the Central Louisiana Regional Carbon Storage
project, which reached financial close in early 2023 on up to
10 Mt CO
2
of storage capacity.
This is reflective of a wider trend towards splitting the different parts
of the CCUS value chain into separate projects. While "full-chain"
projects (where CO
2
is transported from one capture facility to one
injection site, sometimes involving a single operator) were a natural
response to calls for demonstration projects, they suffer from high
investment needs, cross-chain risks and liabilities that are borne by
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a single developer. Breaking up the CCUS value chain can help
mitigate these hurdles. In 2022, projects to develop over 210 Mt of
new dedicated CO
2
storage capacity were announced, more than
double the amounts in 2020 and 2021. One of most advanced
projects under construction is Northern Lights, in Norway, which is
developing large-scale CO
2
storage that can accept CO
2
from
multiple sources that have incentives to reduce emissions. In May
2023, Denmark awarded
around USD 1.2 billion to meet the costs of
capturing 0.4 Mt CO
2
per year from biomass combustion for storage
at the Northern Lights site from 2026. Separately, pilot CO
2
injection
began offshore in Denmark in 2023.
Recent policy developments support this trend by offering financial
rewards for storage of CO
2
or production of clean products.
Mechanisms such as tax credits, contracts for difference and public
procurement create bankable demand for CO
2
transport and storage
services, which reduces the risks associated with infrastructure
development. Among these, the tax credits offered by the US
Inflation
Reduction Act – up to USD 85/t CO
2
stored or USD 3/kg of
hydrogen – are set to stimulate the most investment, supported by
proposed
emissions rules for power plants. A different model is found
in the European Commission’s proposed Net Zero Industry Act,
which links the production of fossil fuel to a requirement to develop
CO
2
storage capacity. The act’s suggested target of 50 Mt CO
2
of
available storage capacity by 2030 is ambitious but falls well short of
that required in the NZE Scenario. Together, these initiatives begin
to address a long-standing issue over where the responsibilities and
rents will lie in a commercial CCUS value chain.
Policies are also taking shape in some EMDEs. For example, in
March 2023 Indonesia issued
its first regulation governing the
procedures and responsibilities for proposed projects that integrate
CCUS with natural gas extraction and processing.
Fifteen projects
have been identified that could advance under this regulation.
Malaysia, where raw natural gas also has a high CO
2
content, has
signalled that it will also proceed along similar lines. CCUS is also
expected to play a key role in delivering the net zero emissions
pledges of many EMDEs, including in coal-related sectors, where
policy development has been slower.
Start-ups working with CCUS technologies raised more early-stage
and growth-stage funding in 2022 than in any previous year. Most of
the USD 440 million of early-stage equity went to the area of CO
2
capture, followed by hydrogen-based fuels that utilise CO
2
. Notable
growth-stage deals included a USD 318 million investment in Svante
by Chevron and co-investors including the Oil & Gas Climate
Initiative, and a USD 300 million investment in
Entropy; both are
Canadian firms with new CO
2
capture methods. Direct air capture
(DAC) developers continued to attract investment bets in 2022,
bolstered by US policy incentives. These included Climeworks
(USD 650 million),
Carbon Direct (USD 60 million), Mission Zero
(USD 5 million) and RepAir (USD 1.5 million). Paebbl, a Dutch start-
up making construction material from CO
2
, raised USD 8 million.
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Coal
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Global coal investment rose in 2022 – surpassing 2019 levels – and is set to rise again in 2023
Global investment in coal production by region, 2017-2023e
IEA. CC BY 4.0.
* Export-oriented countries = Australia, Indonesia, Russia, Colombia and South Africa.
Note: 2023e = estimated values for 2023.
20
40
60
80
100
120
140
160
2017 2018 2019 2020 2021
2022 2023e
Rest of world
Export-oriented
countries*
India
China
Billion USD (2022)
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Strong demand and high prices sent a powerful signal for new investment – especially in China
and India – although cost inflation has muted some of the impact on production capacity
Global coal demand reached an all-time high in 2022, with prices
rising to unprecedented levels in October 2021 and reaching record
highs on several occasions in 2022. Globally, coal investment
increased to USD 135 billion in 2022, a 20% increase on 2021 levels.
Almost 90% of investment occurred in the Asia Pacific region,
predominantly in China and India.
The majority of coal investment in 2022 was used to maintain
production at existing mines, with smaller amounts used to expand
production at brownfield developments. New greenfield projects are
limited in most parts of the world amid investor and company
concerns over the impacts of coal on climate change, environmental
social and corporate governance issues, slow permitting and public
opposition limiting the availability of finance. The exception to this is
China and India, where energy security concerns and power
shortages have led to the development of new mines as well as the
expansion of existing mines.
China saw power shortages in December 2020, mainly caused by a
lack of power capacity adequacy, and there were shortages and
rolling blackouts in 10 provinces over the summer of 2021, mainly
because of shortages in coal supply. The government has pledged to
avoid a repeat of these events and coal capacity has increased
substantially since October 2021. Annual mining capacity increased
by around 300 Mt per year in 2022, half from new mines and half from
expanding production at existing mines – more than the rest of the
world combined. The four major producing regions of Shanxi, Inner
Mongolia, Shaanxi and Xinjiang are the focus of investment and
capacity additions.
India’s government has been looking to reduce coal imports by
boosting domestic production and improving logistics. A key pillar of
the strategy is to task government-owned Coal India to increase
production both by its own means and by outsourcing it to “Mining
Developers cum Operators”. The strategy also aims to increase
commercial mining and a number of auctions for blocks have taken
place: since 2020, 87 mines have been awarded licences to
commence production, and a further 106 mines were offered in the
seventh round of auctions in March 2023.
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Coal industry profits in 2022 were mainly returned to shareholders or used to diversify into
other commodities, meaning increases in investment in 2023 are likely to be more muted
Coal producers announced large profits in 2022 despite higher
energy prices and other price pressures driving up production costs.
The largest share of these profits was returned to shareholders
through dividends and share buybacks. Profits were also used to help
producers diversify into other commodities and pay off debt. Some
companies also used profits to buy coal assets from other companies
looking to reduce their exposure to coal. For example, Glencore
purchased shares in the El Cerrejón coal mine from Anglo American
and BHP, and Thungela bought Idemitsu’s stake in Ensham mine in
Australia. Companies are also investing to reduce their Scope 1 and
2 emissions.
Global coal investment is expected to increase by around 10% in
2023 to just under USD 150 billion. In China, increases are likely to
be more muted following the large ramp-up seen since October 2021,
given the government’s goal of reaching peak coal demand before
2030. Investment to modernise mines will continue and overall coal
production is likely to stabilise before starting to decline. In India, the
government expects that total production in the country will surpass
1 billion tonnes by 2023-2024; Coal India alone targets to produce
1 billion tonnes by 2025-2026. Mining Developers cum Operators and
commercial operators will be important if India is to achieve its target.
Indonesia’s flexible export-oriented supply chain allowed it to ramp
up production quickly in response to recent price spikes, but this has
not required new large-scale investment. In Australia, investment
increased by around 10%, driven by high prices, but it is still at half
its 2012 level, in part given mounting development difficulties,
especially for greenfield projects.
In the United States, coal demand has been falling for more than a
decade. Some producers are looking to expand exports, particularly
for metallurgical coal, but a lack of finance and labour force, as well
as bottlenecks in the supply chain, have slowed investment and this
trend is likely to continue.
In Russia, producers are increasing their focus on eastern markets
following the country’s invasion of Ukraine. This will require
investment in new infrastructure, but the prospects for this are very
uncertain.
Logistical challenges and electricity loadshedding in South Africa
have been impeding new large-scale investment. The public
electricity utility Eskom is unable to finance coal mining itself given its
financial difficulties, while the private sector, Development Finance
Institutions and local banks are reluctant to finance coal in South
Africa.
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Critical minerals
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After the surge in 2021 and 2022, many critical mineral prices started to moderate in 2023 but
remain well above the historical averages
Price development for selected energy transition minerals and metals, 2016-2023
IEA. CC BY 4.0.
Notes: Assessment based on LME Lithium Carbonate Global Average, LME Nickel Cash, LME Cobalt Cash and LME Copper Grade A Cash prices; LCE = lithium carbonate
equivalent.
Source: S&P Global (2023).
10
20
30
40
50
60
70
80
Jan Jun Dec
Thousand USD/tonne LCE
Range 2016-2020 Average 2016-2020 2021 2022 2023
Lithium
5
10
15
20
25
30
35
40
Jan Jun Dec
Thousand USD/tonne
Nickel
10
20
30
40
50
60
70
80
90
100
Jan
Jun
Dec
Thousand USD/tonne
Cobalt
4
5
6
7
8
9
10
11
12
Jan
Jun
Dec
Thousand USD/tonne
Copper
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Investment in critical mineral mining rose by 30% in 2022 as strengthening momentum for
energy transitions offers prospects for robust demand growth
Capital expenditure on non-ferrous metal production by major mining companies, 2010-2022
IEA. CC BY 4.0.
Notes: Co = cobalt; Cu = copper; Ni = nickel; for diversified majors, capex on the production of iron ore, coal and other energy products is excluded.
Sources: IEA analysis based on company annual reports and S&P Global (2023).
10
20
30
40
50
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Billion USD (2022)
Lithium specialist
Tianqi Lithium
Pilbara Minerals
Mineral Resources
Ganfeng Lithium
SQM
Albemarle
Cu, Ni, Co focused
Zhejiang Huayou
China Molybdenum
Norilsk Nickel
KGHM
First Quantum Minerals
Southern Copper
Codelco
Diversified major
Glencore
Teck Resources
Freeport-McMoRan
Vale
Anglo American
BHP
Rio Tinto
Lithium specialists
Focused players (Cu, Ni, Co)
Diversified majors
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The need for continued investment in critical minerals development to support rapid energy
transitions remains firm, despite the recent fall in prices
Many of the critical minerals that are vital for clean energy
technologies registered broad-based price increases in 2021 and
early 2022, which had the effect of reversing a decade-long trend of
cost declines for solar panels, wind turbines and batteries. Except for
lithium, most prices started to moderate in the second half of 2022.
Expectations of China’s reopening underpinned a brief rally at the
end of 2022, but prices resumed their fall in 2023, including lithium,
on the back of weak consumption, new supply plans and concerns
over possible recession. The impact of EV subsidy reductions and
price cuts on conventional cars in China added to pressure on prices.
Nonetheless, prices remain well above their historical averages and
medium-term pressures persist as schedule delays or cost overruns
remain a possibility for many announced projects. Cobalt is a notable
exception, as the rapid adoption of lithium-ion phosphate in battery
chemistries is weighing on the demand outlook for cobalt.
Thanks to high prices and growing policy support (e.g. the US
Inflation Reduction Act and the EU Critical Raw Materials Act), many
mining companies are increasing investment in critical mineral
development. We have assessed the aggregate investment levels of
20 major mining companies that have a strong presence in
developing energy transition minerals. Following the 20% increase in
2021, investment spending recorded another sharp uptick of 30% in
2022. Companies specialising in lithium development increased their
spending by 50%, followed by those focusing on copper and nickel
development. Companies in China almost doubled their investment
spending in 2022. Exploration spending also continued its upward
march in 2022, largely driven by the record pace of growth in lithium
exploration, followed by copper and nickel. Canada and Australia led
this growth, especially in hard-rock lithium plays, but activities are
also growing in Africa and Brazil.
While the increase in investment and exploration spending will
translate into production growth in the coming years, the expected
rate of growth still does not match the pace of manufacturing capacity
additions for batteries, solar modules, electrolysers and so on. This
triggered concerns among automakers, battery cell makers and
equipment manufacturers about securing raw material supplies.
Long-term offtake agreements became a norm in the industry’s
procurement strategies and many companies started to be involved
directly in the raw material value chain in order to safeguard their
production pipelines. For example, in February 2023 General Motors
announced investment of USD 650 million in Lithium Americas
to
develop Nevada's Thacker Pass lithium mining project. In the same
month, LG Energy Solutions took a financial stake in Piedmont
Lithium to secure lithium from Canada.
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Implications
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Fossil fuel investment in 2023 is close to 2030 levels in the STEPS and more than double the
amount needed in 2030 in the NZE Scenario
Global investment in fuel supply, 2021-2023e, and in IEA scenarios in 2030
IEA. CC BY 4.0.
Notes: STEPS = Stated Policies Scenario; APS = Announced Pledges Scenario; NZE = Net Zero Emissions by 2050 Scenario. Low-emission fuels = modern bioenergy, low-emission
hydrogen and hydrogen-based fuels. 2023e = estimated values for 2023.
200
400
600
800
1 000
2021 2022 2023e STEPS APS NZE
Low-emission fuels
Coal
Natural gas
Oil
Billion USD (2022)
2030
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There are upside and downside risks to fossil fuel demand but if clean energy momentum is
maintained, far less fossil fuel investment will be needed
Oil and gas investment in 2023 is now about the level needed in 2030
in the STEPS, a scenario that reflects today’s policy settings. Oil and
gas demand in the STEPS rises by around 0.5% each year on
average from 2024 to 2030, much lower than the 1.3% annual
average increase in the 2010s. This depends on continued robust
global growth in clean energy investment – most notably solar PV
and electric cars – to arrest fossil fuel demand growth. If today’s
policy settings change or if some clean energy deployment does not
materialise globally at the anticipated pace and scale, future fossil
fuel demand growth would be greater than in STEPS and additional
oil and gas investment would be needed to balance markets.
Conversely, enhanced efforts to tackle climate change would
represent a major downside risk to fossil fuel demand and a
commercial risk for producers. Fossil fuel investment is now more
than double the amount needed in 2030 if the world is to limit the
long-term temperature rise to 1.5°C (the NZE Scenario). Today’s coal
investment is far above the levels required in the STEPS and six
times higher than the 2030 requirements in the NZE Scenario. This
creates the clear risk of locking in fossil fuel use and pushing the
1.5°C temperature limit out of reach.
Our scenarios illustrate the dynamic relationship between spending
on clean energy and fossil fuels. In the STEPS, investment in clean
energy grows to more than USD
2 trillion in 2030, meaning that for
every USD 1 spent on fossil fuels in 2030, USD 2 is spent on clean
energy. In the NZE Scenario, the ratio of clean-to-fossil investment is
more than nine-to-one in 2030.
The declines in fossil fuel demand in the NZE Scenario are sufficiently
steep that they can be met in aggregate without supply from any new
oil and gas fields. Still, investment in oil and gas is still required in
2030, both to minimise the emissions intensity of production and for
some low-cost extensions to existing fields. A strong policy push to
reduce oil and gas demand whilst scaling up investment in clean
energy is crucial to orderly, secure and rapid energy transitions.
Oil and gas companies can help drive the necessary reallocation of
capital by devoting more of their resources to clean energy including
to low-emission fuels. Investment in these fuels – such as bioenergy,
hydrogen and CCUS – is picking up but needs to increase nearly
twentyfold in the NZE Scenario. This may appear a daunting
challenge, but it is by no means out of reach of the financial and
technological resources of the oil and gas industry. The
USD 1.5 trillion returned to shareholders in the form of dividends and
buybacks from 2020 to 2022 could have fully covered the investment
requirements in all clean fuels in the NZE Scenario between 2023
and 2030.
World Energy Investment 2023
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Energy end use and efficiency
Energy end use and
efficiency
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Energy end use and efficiency
Global efficiency, electrification and end-use investment reached record levels in 2022, driven
by the buildings sector and strong EV sales, but the rise in spending could slow in 2023
Global investment in energy efficiency, electrification, and renewables for end uses by sector, 2016-2023e
IEA. CC BY 4.0.
Notes: Investments which are aimed at reducing energy consumption in buildings, industry, and transportation sectors are grouped under the end use category. They include energy
efficiency, electrification, and direct use of renewables for heating, cooling, or industrial processes. Energy efficiency investments refer to spending on new energy-efficient equipment
or refurbishments that decrease energy usage. Electrification encompasses electric vehicles in transportation and heat pumps in buildings and industrial sectors; 2023e = estimated
values for 2023.
100
200
300
400
500
600
700
2016 2017 2018 2019 2020 2021 2022 2023e
Billion USD (2022)
Buildings Transport Industry
World Energy Investment 2023
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The global energy crisis boosted spending on efficiency, electrification and end uses in 2022,
but efficiency investment faces headwinds in 2023
The global energy crisis boosted investment in energy efficiency,
electrification and end-use renewables by 16% in 2022, reaching new
highs across all three end-use sectors that are tracked in the World
Energy Investment report (buildings, transport, and industry).
The buildings sector experienced 11% growth in investment due to
government initiatives in Europe and the United States responding to
gas shortages, rising electricity prices and higher inflation. Emerging
market and developing economies (EMDEs) saw a 19% increase in
investment, with China being the only country experiencing a
decrease in energy efficiency investment due to continuing Covid-19
lockdowns and the real estate crisis. 2022 also saw double-digit
growth for heat pump installations.
Investment in electrification of the transport sector grew by 60% in
2022, with
EV sales hitting record levels, passing 10 million units
globally. Growth came from all parts of the world including EMDEs,
which have seen exponential growth from a low base. Maintaining
this trend in 2023 will depend on increased model availability,
investment in charging infrastructure, and a well-managed phase-
down of government incentives for EVs as upfront costs become
closer to internal combustion engine (ICE) models.
The industrial sector experienced high input prices, including gas and
electricity, leading some factories to curtail production and
investment in Europe and China. However, renewed activity in
EMDEs and the United States led to an 3% growth in energy
efficiency investment in the sector in 2022. While some of the
technologies needed for complete decarbonisation of industrial
processes are still being developed, high energy prices could lead to
new investment in industrial efficiency and electrification in 2023.
Investment in energy efficiency could face headwinds in 2023 across
all sectors. The global indicators that typically offer insights into
investment trends were sending mixed signals in the early stages of
the year. The European Union’s housing lending market has almost
ground to a halt in recent months. Inflation also remains high in many
regions. Much will depend on the extent to which robust government
interventions and regulatory policies in the United States and Europe
offer support for continued efficiency and end-use investment,
notably for the electrification of heat and transport. At this stage, we
anticipate that overall spending on energy efficiency, electrification
and end-use renewables will grow modestly by 4% in 2023, with
electrification remaining the most dynamic sector and efficiency
spending lagging behind.
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Energy end use and efficiency
Buildings
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Energy end use and efficiency
Energy efficiency spending on buildings rose in 2022, but the ongoing cost-of-living crisis and
economic uncertainty could reduce investment in 2023
Investment spending on energy efficiency and electrification by region in the buildings sector, 2016-2023e
IEA. CC BY 4.0.
Notes: Spending on electrification (e.g., Heat pumps) is included in the total spending, and represented as a share of total spending on the right axis; 2023e = estimated
values for 2023
0%
5%
10%
15%
20%
25%
30%
50
100
150
200
250
300
2016 2017 2018 2019 2020 2021 2022 2023e
Billion USD (2022)
Europe United States China Rest of world Share of electrification spending (right axis)
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Heat pump sales experienced double-digit growth for a second year in a row in many areas as
they start to replace fossil fuel-based heating systems
Rate of growth of heat pump sales in 2021 and 2022 (left) and market share of heat pumps in global heating system sales (right)
IEA. CC BY 4.0.
Notes: Air-to-water units include heat pump water heaters; total also includes ground- and water-source heat pumps.
Sources: IEA (2023), Global heat pump sales continue double-digit growth, based on data from AHRI, Assoclima, Assotermica, BDH, CHPA, ChinaIOL, EHPA, JRAIA, SPIUG
and Uniclima.
-10% 10% 30% 50%
China
US
Europe
Global
China
Japan
Europe
Global
Global
Air-to-air Air-to-water Total
2021 2022
0%
25%
50%
75%
100%
20212022 2021 2022 2021 2022 2021 2022 20212022
Poland Germany Italy France United
States
Fossil fuel-based heating systems Heat pumps
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Energy end use and efficiency
Investment in buildings energy efficiency in 2022 was underpinned by direct public investment
to tackle energy insecurity, alongside a cautious reopening of the global construction sector
In 2022 energy efficiency investment in the global buildings sector
increased by around 14% on 2021 levels, continuing the strong
growth trend of the past few years. Spending on efficiency is
projected to fall back in 2023 as the effects of increased borrowing
costs and economic uncertainty reduce market activity.
The total investment of around USD 285 billion in 2022 marks a
strong increase in efficiency spending and electrification from the
previous year and is the result of a continued effort, led by Europe, in
response to the energy crisis triggered by the Russian invasion of
Ukraine, along with policy- and price-driven increases in spending in
other countries, for example in the in the United States within the
Inflation Reduction Act
.
The increase in 2022 was in line with recent trends, but early signals
suggest a slowdown in spending in 2023 as the global economy
experiences increased uncertainty due to the continuing conflict in
Ukraine, the growing impacts of the cost of borrowing on construction
demand in economies across the world, uncertainty of credit
availability and lending, and several large government programmes
seeing curtailment.
The increased efficiency investment in 2022 was the result of
sustained spending in major markets such as the United States,
Germany and Italy. Over USD 33 billion was spent in the
United States through the continued funding of the Department. of
Energy efficiency programmes (e.g., weatherisation) or utility
demand-side management. Government led efficiency spending in
the United States is expected to further expand by USD 970 million
in 2023 through the newly created
State and Community Energy
Office under the Inflation Reduction Act. Budget allocation dedicated
to efficiency by the German government moderated in 2022 to around
USD 51 billion, which was accompanied by changes to the design of
some support programmes. The conditions for the federal funding for
efficient buildings programme (BEG) were adjusted in several stages,
starting from end of July 2022, to facilitate better access to funding
and streamline application processes. The KfW loan programmes
continued but the grants were discontinued, and single measures are
now only subsidised directly by BAFA, with reduced rates (on
average by 5% of the given measure) to allow more applicants to
benefit from available funds. A new subsidy scheme for “climate
friendly new construction” entered into force at the beginning of 2023,
introducing a expanded coverage of eligible expenses under the
BEG, including material costs for own work and a broader definition
of eligible investors.
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Energy end use and efficiency
The Italian Superbonus programme resulted in a near doubling of
investment in energy efficiency between 2021 and 2022 in Italy, from
USD 23 billion to around USD 57 billion
. However, the recent
announcement of major changes to the programme means spending
beyond 2023 is unclear and expected to fall. The maximum tax credit
rate has been lowered
from 110% to 90% and, as of 17 February
2023 homeowners applying for the bonus will no longer be able to
directly transfer eligible tax credits to a bank or directly to their
construction company to receive a discount on the final invoice.
Another major change affecting spending in 2022 resulted from a
10% reduction in real estate development investment in China
compared with 2021, resulting in a slowdown in the delivery of green
buildings. This slowdown is also expected to further affect the
delivery of buildings reaching China’s green standard, which were
initially set to be around 50% of all new dwellings by 2020 in the
country’s
13
th
Five-Year Plan. Likewise, France’s investment in
efficiency fell somewhat due to a slowdown in construction sector
output. The United Kingdom also saw a modest fall in efficiency
spending due to a slowing construction sector and changes to the
Affordable Warmth Scheme, although the government has added
USD 186 million under the Green Homes Grant scheme. Japan’s
focus on delivering new buildings that achieve the zero energy
housing (ZEH) standard and that approach ZEH has seen the
proportion of new green buildings
increase from 19% of construction
in 2018 to over 34% in 2021. Japan has a target of 63% of new
buildings achieving the ZEH standard by 2025.
Some emerging markets saw an overall increase in construction
activity and investment in buildings energy efficiency. India, for
example, doubled spending to USD 3.25 billion. Most countries,
however, only saw a modest increase in 2022, which was primarily
related to construction activity picking up from pandemic-level lows.
Overall, Europe experienced a very modest uptick of around 3%,
while Central and South America saw an increase of around 5% in
construction sector spending, which might hinder further investment
in energy efficiency for 2023.
International concessional finance continues to support investment in
the global building stock. For example, the European Bank for
Reconstruction and Development
committed over EUR 67.5 million
to Lithuania to finance energy efficiency renovations in residential
buildings, and EUR 40 million to support improving school buildings
efficiency in Albania. Financing through the International Finance
Corporation’s EDGE programme also continues to benefit energy
efficiency, including a USD 65
million green bond in South Africa and
a USD 60 million loan to support green mortgages in Peru.
Green products offered by commercial banks are also slowly gaining
traction, with 19 of the top 100 largest banks globally offering green
mortgages to their clients, although their level of utilisation and overall
impact remains unclear. Of these, five are located in the
United Kingdom where the market for green financial products has
been quite dynamic in recent years. In Hungary, the Magyar Nemzeti
Bank’s
Green Home Programme and Green Mortgage Bond
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Energy end use and efficiency
Purchase Programme were launched to provide refinancing against
green home loans at 0% interest and encourage the issuance of
higher-quality green mortgage bonds.
Addressing building fabric efficiency performance remains a major
part of spending, but recent efforts are directing investment towards
technologies that can more easily enable zero-carbon ready
buildings, such as heat pumps. Data for Europe
in 2022 suggest that
around 3 million heat pumps were installed in buildings, an increase
of almost 40% compared with the previous year. The European heat
pump market is estimated to be worth around USD 14 billion.
According to the latest IEA analysis, global heat pump sales grew by
11% in 2022 in unit terms, marking a second year of double-digit
growth for the central technology in the transition to secure and
sustainable heating.
In order for the growth of heat pump deployment to continue, it is
important to have secure and resilient supply chains. The global
market for heat pumps is dominated by companies with headquarters
in Japan and China, accounting for nearly 70% of the market. While
the five largest global manufacturers are based in the Asia Pacific
region, only about half of their production capacity is located there.
Supply chains are currently strained, particularly for crucial
components like chips. Manufacturers have already committed to
expanding heat pump production capacity, with investment totalling
more than EUR 4 billion as of November 2022. However, an
additional USD 15 billion in global investment would be needed to
close
the 60% gap that exist between the expected output from
announced projects and the 2030 Net Zero Emissions by 2050
Scenario needs for the technology. There are also new incentives
that are likely to drive further manufacturing announcements, such as
the Defense Production Act and Inflation Reduction Act in the United
States and the upcoming Net Zero Industry Act and European
Sovereignty Fund in the European Union.
As a result, investment in electrification is the most resilient area of
overall spending on buildings, increasing by about 4% in 2023, and
increases its share in the total. Efficiencies in technology costs mean
that every dollar spent goes further and we estimate a faster growth
of heat pumps in unit terms.
Fiscal stimulus measures from the pandemic period have also begun
to be wound down, and further reductions in government and private-
sector spending due to increased borrowing costs mean that 2023 is
likely to see a reduction in efficiency spending. Investment in global
energy efficiency in the building sector is projected to drop by up to
5% due to both construction market uncertainty in Asia, South
America and Europe, and changes to several large European
programmes. This potential change in direction for investment in the
buildings sector is problematic given that energy efficiency measures
not only reduce demand but also shield households and businesses
from the impacts of future fuel price volatility.
World Energy Investment 2023
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Energy end use and efficiency
Transport
World Energy Investment 2023
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Energy end use and efficiency
Sales of passenger EVs passed the 10 million mark for the first time in 2022…
Global trends in electric passenger light-duty vehicle markets, 2015-2023e
Global EV sales and market share Spending on EV Purchases
IEA. CC BY 4.0.
Note: EV includes battery electric and plug-in hybrid passenger vehicles; 2023e = estimated values for 2023.
Sources: IEA (2023), Global EV Outlook; Marklines.
3%
6%
9%
12%
15%
18%
21%
0
2
4
6
8
10
12
14
2016 2017 2018 2019 2020 2021 2022 2023e
Million units
Europe North America
Japan and Korea Other
Share of total sales
(right axis)
5%
10%
15%
20%
25%
30%
50
100
150
200
250
300
350
400
450
2016 2017
2018
2019 2020
2021
2022
Billion USD (2022)
Consumer spending Government spending
Government share of
spending (right axis)
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Energy end use and efficiency
…driving investment in road transport efficiency and electrification to record highs
Investment in energy efficiency, electrification, and hydrogen in the road transport sector
IEA. CC BY 4.0.
Note: 2023e = estimated values for 2023.
50
100
150
200
250
2017 2018 2019 2020 2021 2022 2023e
Billion USD (2022)
Electrification Energy efficiency Hydrogen
World Energy Investment 2023
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Energy end use and efficiency
Capital expenditure by listed battery manufacturing companies surged to USD 9 billion in
Q4 2022, sharply lifting production capacity
Global trends in the battery manufacturing industry, 2017-2025
IEA. CC BY 4.0.
Notes: Listed battery companies include LG Energy Solution, BYD, Contemporary Amperex Technology, Samsung SDI, Gotion High-tech, Eve Energy and Farasis Energy Gan Zhou;
2022 values are based on fully commissioned capacity; 2025 values are based on announced, under construction and fully commissioned capacity.
Sources: IEA calculations based on Benchmark Mineral Intelligence and Bloomberg Terminal (2023).
1
2
3
4
5
6
7
8
2022 2025 2030
TWh
China Europe United States Rest of world
Battery manufacturing capacity
2
4
6
8
10
100
200
300
400
2017 2018 2019 2020 2021 2022
Billion USD (2022)
Arithmetic return (Q4 2016 = 100)
Quarterly returns Capital expenditure (right axis)
Financial indicators for listed battery companies
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Energy end use and efficiency
With growth in sales and market share, profitability is consolidating for the largest EV
manufacturers but remains elusive for new entrants and smaller companies
Number of vehicles sold and profit margin of selected automakers in 2022
IEA. CC BY 4.0.
Notes: Margin reflects sales of both EVs and ICE vehicles; bubble size corresponds to market capitalisation.
Source: IEA analysis based on data from Bloomberg Terminal.
VOLKSWAGEN
GENERAL MOTORS
STELLANTIS
FORD
HYUNDAI
KIA
MERCEDES-BENZ
RENAULT
BYD
TESLA
NIO
XPENG
2
4
6
8
10
-40 -30 -20 -10 0 10 20 30
Numbers of vehicles sold (million)
Profit margin %
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Energy end use and efficiency
The future is electric: spending on EVs and battery manufacturing remains strong amid
uncertainties with volatile raw material costs and diminishing subsidies
Sales of electric cars saw yet another record year in 2022, even in
the context of supply chain disruptions, macroeconomic and
geopolitical shocks, high commodity and energy prices, and a global
contraction in the car market. Registrations of battery electric vehicles
(BEVs) and plug-in hybrid electric vehicles (PHEVs) surpassed
10 million, representing a 55% increase from 2021. This 10-million
figure is greater than the total number of cars sold in the entire
European Union (9.4 million vehicles) and half the number sold in
China in 2022. The percentage of electric cars in total car sales
increased from 9% in 2021 to 14% in 2022, which is more than five
times their share before the Covid-19 pandemic.
Europe provides an illustration of this trend: 2.7 million EVs were sold
in 2022, the 15% increase on 2021 representing slower year-on-year
growth compared with that seen in recent years. The tail end of
supply chain disruptions caused by the pandemic, high inflation and
weakening consumer confidence, and the instability caused by the
war in Ukraine compounded the challenge of maintaining high growth
rates as the European market matures. Fossil fuel subsidies aimed
at shielding consumers from peak oil prices, delays in implementing
low-emission zones and uncertainty over the European 2035 ICE ban
may also have played a role.
In 2022 China saw an 80% increase in EV sales compared with 2021,
reaching 6.2 million vehicles. The country accounted for almost 60%
of all new electric car registrations worldwide, and for the first time in
2022 it had over 50% of all the electric cars on the world’s roads,
totalling 13.8 million. This impressive growth can be attributed to
consistent policy support for early adopters, and the extension of
incentives until the end of 2022, which were originally planned to be
phased out in 2020. However, sales fell in January 2023 as the
central government decided to end a 10-year-old national subsidy
for
EV purchases, before rebounding somewhat in February. How this
will affect the market for the rest of 2023 remains unclear.
Sales in the United States surged by 50% in 2022 as compared with
2021, registering robust growth for the second consecutive year after
a slump in 2019-2020. Overall, the country accounted for 10% of the
global growth in electric car sales, as model availability grew and
incentives remained strong. The trend is expected to be sustained
and even to accelerate in 2023, largely supported by a regulatory
boost. For instance, several EV manufacturers announced plans to
invest USD 28 billion in North American EV supply chains, as the
Inflation Reduction Act ties purchase subsidies to vehicles
manufactured domestically.
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The three regions described above represent more than 95% of new
EV sales globally. From a low base, 2022 also saw increased sales
in some other parts of the world, especially in Asia, where countries
such as India saw sales tripling, and Viet Nam where sales went from
close to zero in 2021 to 7 000 units in 2022 and where a quadrupling
is expected for 2023. The penetration of EVs in EMDE markets faces
challenges stemming from the lower ability to pay and the limited
availability of affordable EV models, as many are geared towards
higher-end consumers, such as SUVs. Smaller electromobility
models, such as two- and three-wheelers are relatively more
successful in these countries.
On the financing side, as government blanket subsidies are tending
to wind down, new types of financial products are being designed to
encourage EV adoption. For instance, interest-free loans with a
repayment term of up to 10 years are available in Australia. Lower-
income households in France will have access to interest-free loans
for a two-year trial period starting in 2023 if they wish to switch to
EVs. The Canada Infrastructure Bank has been offering low or zero-
interest loans for the purchase of zero-emission buses since 2022,
with repayments sourced from the savings generated by lower
operating costs. Additionally, Slovenia offers subsidised loans for
people interested in purchasing an EV through its Eco Fund
programme.
For the first time in recent years the average price of a battery pack
has seen an increase, at about 2% in 2022, reflecting a broader trend
of chip and material shortages, as well as increasing commodity
prices. However, the trend seemed to be reversing in early 2023 with
lithium prices
easing and capex investment by battery manufacturers
remaining at high levels to reach close to USD 9 billion in the last
quarter of 2022. In response to continuing demand growth and
incentives offered by governments, which are gradually switching
from consumers to charging infrastructure and battery manufacturing,
record investment in new battery manufacturing capacity were made
in 2022, increasing available capacity by 60% compared with 2021,
and reaching close to 1.6 TWh. If all announcements were to
materialise, 2.5 TWh of new capacity could be available by 2025 and
6.8 TWh of total capacity would be commissioned by 2030, three-
quarters in China, but partly as a result of the Inflation Reduction Act,
a growing share is in the United States.
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Industry
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Investment in the industrial sector remained stable in 2022 as China continued to experience
supply chain constraints, while the United States and India picked up
Energy efficiency investment in the industrial sector, 2016-2023e, and cost index for selected raw materials, 2016-2022
IEA. CC BY 4.0.
Note: EV includes battery electric and plug-in hybrid passenger vehicles; 2023e = estimated values for 2023.
Source: IEA calculations based on data from Oxford Institute of Economics and Statistics Global Economics database.
100
150
200
250
300
2016 2017 2018 2019 2020 2021 2022
Steel Europe Steel United States
Steel China Aluminium
Copper Iron
Price index of selected industrial raw materials
2016=100
10
20
30
40
50
Billon USD (2022)
China Europe North America India Other
Industry energy efficiency and
other end-use investments
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High energy prices and policy support in key markets are putting a floor under industrial
efficiency investments
Investment in energy efficiency and electrification in the industrial
sector grew modestly in 2022, consolidating the record gains
experienced in 2021, despite an adverse macroeconomic
environment.
Industrial output came under pressure in China as strict Covid-19-
related restrictions remained in force for a large part of 2022. Steel
production fell by 16% from 2020, while cement fell even more
sharply. A recovery in construction activity is held back by an
overhang in the stock of buildings as a result of the housing bubble.
We estimate that industrial energy efficiency investment in China was
down by 14% year-on-year. The lifting of Covid restrictions and the
slow revival of economic demand in the last quarter of 2022 should
be conducive to a strong rebound in the early months of 2023.
In Europe the war in Ukraine and sky-high gas prices forced industry
to adapt and to cut its natural gas demand by over 25 bcm
compared
with 2021 levels. Half of this reduction came from production
curtailment, for instance in the steel sector where factories produced
25% less than before the Russian invasion. As gas is a key
component in the production of ammonia, the fertiliser industry was
probably the most affected by the price rise, resulting
in
approximately 70% of capacity being taken offline at some point
during the past year. Another 7 bcm of savings came from gas to oil
switching, and only 3 bcm from energy efficiency measures.
Industrial processes that require high temperatures are more
challenging to replace with cleaner energy sources. However, some
large European industrial businesses have already announced plans
to accelerate investment in energy efficiency and green electrification
as a result of volatility in energy prices. For now, however, capex by
major industrial companies has remained stable in Europe.
The story is different in the United States, where the enactment of the
Inflation Reduction Act is set to generate renewed tailwinds for
industrial efficiency and abatement. The legislation contains a wide
variety of incentives for industrial decarbonisation, making clean
technology investments financially accessible for carbon-intensive
sectors, such as steel, cement and chemicals manufacturing. The act
includes a 10-year clean hydrogen production tax credit for facilities
constructed before 1 January 2033, charting the path for competitive
zero-emission steel production. The act also provides essential
incentives to decarbonise cement manufacturing and provides for
government priority purchasing of green products, sending a strong
long-term message to the industry. A strong rebound in production in
China, India and Southeast Asia is anticipated for 2023 compared
with other parts of the world.
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The EU Green Deal Industrial Plan and the Net Zero Industry Act
In February 2023 the European Commission presented a Green
Deal Industrial Plan
in a multipronged effort to meet its clean
energy transition commitments, respond to the US Inflation
Reduction Act and address the continent’s high reliance on China
for clean energy technologies. The strategy has four main pillars:
1) a predictable and simplified regulatory environment, 2) quicker
access to finance, 3) enhanced skills, and 4) open trade for
resilient supply chains.
As part of the first pillar, the Net Zero Industry Act, proposed in
March 2023, aims to provide a regulatory environment suited to
the scale-up of the net zero industry, with the overall target of
domestically manufacturing at least 40% of Europe’s clean
energy technology by annual deployment by 2030. Additionally,
the act sets out ambitious 2030 manufacturing targets for eight
strategic net zero technologies: solar PV and thermal, batteries,
heat pumps and geothermal technologies, electrolysers and fuel
cells, sustainable biogas/biomethane technologies, CCUS, and
grid technologies. In addition, other technologies such as
advanced nuclear and small modular reactors, stand to benefit
from the act’s measures, but are not assigned 2030 targets. To
achieve the targets, the act introduces specific policy measures,
including fast-tracking permitting for net zero technologies by
establishing “one-stop shops”, including supply chain criteria in
public tenders to favour
diversification, and investment in the
upskilling of the European labour force.
Contrary to the Inflation Reduction Act, however, the Net Zero
Industry Act does not provide direct funding or subsidy schemes
to spur domestic manufacturing (Article 15 highlights that further
support can be made available via resources from the European
Investment Bank Group or other international financial institutions
including the European Bank for Reconstruction and
Development). According to the second pillar of the Green Deal
Industrial Plan, most of the cost is expected to be shouldered by
member states, at least partially through a redirection of ETS
revenues. The plan grants more flexibility for member states to
support clean manufacturing, including through higher notification
thresholds for state aid and the possibility to allocate targeted aid
for major new production projects in strategic net zero value
chains. The realisation of the EU act’s targets would, however,
come at a cost. For most of the technologies listed, importing from
third countries is much cheaper than EU production. For example,
estimates point to an extra cost of USD 11.9 billion to meet the
act’s target of 550 GWh of domestically produced batteries by
2030, compared to a scenario where demand is entirely met by
batteries made in China.
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Energy end use and efficiency
Implications
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Energy end use and efficiency
Spending on energy efficiency and electrification is reaching new highs thanks to dynamic
growth in electrification of the transport sector
Global investment in energy efficiency, electrification and renewables for end uses and energy demand for end uses compared with annual average
investment needs in 2030, by scenario
IEA. CC BY 4.0.
Notes:.APS = Announced Pledges Scenario; NZE = Net Zero Emissions by 2050 Scenario; STEPS = Stated Policies Scenario; includes end-use renewables in the buildings and
industrial sectors; 2023e = estimated values for 2023.
350
370
390
410
430
450
470
300
600
900
1 200
1 500
1 800
2 100
2019 2020 2021 2022 2023e 2030
STEPS
2030
APS
2030
NZE
Billion USD (2022)
Transport
(electrification)
Transport (energy
efficiency)
Industry (end uses
and electrification)
Industry (energy
efficiency)
Buildings (end uses
and electrification)
Buildings (energy
efficiency)
Energy demand from
end uses (right axis)
EJ
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But there are some clouds on the horizon, notably for efficiency spending: overall investment
would need to triple by the end of the decade to keep the 1.5-degree target in sight.
The rapid progress made on EVs sales, heat pumps and energy
efficiency investments in 2022 and the transformative legislation
passed in the United States and Europe as a response to the global
energy crisis means than the world has taken steps in the right
direction towards achieving the investment levels for efficiency,
electrification and end-use spending required to hit climate goals.
Last year we reported that investment in these sectors needed to
quadruple from 2021 levels by 2030, but we are now able to show
that “only” a tripling of annual investment by 2030 would put the world
on track with the NZE Scenario, while the gap with announced
pledges (the APS) has come down to a 2.5-time increase.
The size of the gap is largest in emerging and developing economies
(outside China), where annual investment in end uses is 10 times
higher than today in the NZE Scenario in 2030. This reflects the need
for a sharp rise in EV sales in such a scenario, alongside wide-
ranging investment in more efficient industrial processes, transport
and buildings, for example a huge increase in zero carbon ready
buildings in response to rapid urbanisation. This tenfold increase
compares with less than a twofold increase in China and a two and a
half-time rise in advanced economies.
In terms of sectors, annual investment in the transport sector is five
times higher than today by 2030 in the NZE Scenario. This level is
achievable if the growth of electric vehicles sales observed in the last
two years persists, and if investment in charging infrastructure
follows, but ensuring such consistent and broad-based growth
remains an enormous task.
The incentives for continued investment in energy efficiency in the
building and industry sectors will continue to depend on long-term,
predictable, and ambitious signals from policy makers as well as a
favourable macroeconomic outlook. The current headwinds in the
construction sector, high energy prices in the industrial sector, high
inflation and tightened access to finance all complicate the prospects
for achieving a consistent ramp-up in spending in these areas. By
2030, investment in energy efficiency in the building sector in the NZE
Scenario is seven times what it is today as mandatory building codes
and retrofit mandates become the norm globally and investment in
energy efficiency and electrification of the industrial sector doubles.
Ensuring the long-term viability of incentive mechanisms will be
crucial, especially as many countries face fiscal constraints in a
higher interest rates environment. Although the use of capital markets
and commercial finance is quite at an early stage in this space, it will
have to play an increasing role in providing access to larger pools of
finance for energy efficiency investments.
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R&D and technology
innovation
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Did the world spend enough on clean energy innovation when money was cheap?
The market and policy context for energy innovation is changing. On
the one hand, macro conditions are getting tougher, with rising
interest rates and other headwinds typified by the collapse in 2023 of
Silicon Valley Bank (SVB), a US-based provider of finance to
innovative start-ups. On the other hand, policy support in many
countries is stepping up as governments respond to the energy crisis
and seek more resilient and diversified clean energy supply chains.
The US Inflation Reduction Act, for example, provides a huge boost
to clean energy innovation funding.
This government stimulus for clean energy innovation comes at a
time when financing for innovative small companies is under severe
pressure and co-operation on technology between some major
economies is increasingly shaped by geopolitical considerations.
Concerns that investors will retreat from riskier bets on new
technologies are legitimate. Overall, the world may regret not
spending more on clean energy R&D and early-stage innovators
when capital was cheap over the past 15 years.
The fallout from the failure of SVB shows how inflation can rapidly hit
start-up funding, which is the mechanism by which many ideas are
tested and, if successful, launched on the market. It highlights how
fragile the balance between the financial needs of innovative start-
ups and the financial entities that provide their capital can become at
times of stress. In 2022 the value of non-venture capital (VC) assets
in the portfolios of many large financers fell as interest rates rose and
revenue forecasts were revised down. This increased the share of
VC assets in portfolios above the institutional targets of these
financers (so-called limited partners), who began to withdraw from
VC funds and indicate that they would invest less in the near future.
A nervous atmosphere has permeated a previously buoyant part of
the innovation system.
However, there are bright spots relating to clean energy innovation.
Government policies provide investors with confidence that effective
new technologies can find receptive buyers for clean energy
products. Early-stage VC investment into clean energy start-ups
reached a new high of USD 6.7 billion in 2022.
In real terms, public spending on energy R&D grew by 10% in 2022,
an outcome largely driven by growth in China, while increases in
other regions were offset by inflation. Expectations for public funding
for pre-commercial technologies soared with the passing of the US
Inflation Reduction Act, especially in areas such as hydrogen, CCUS
and critical minerals. The advent of new industrial strategies and the
priority attached to reshoring clean energy supply chains will have
multiple implications for innovation, reinforcing policy support in key
countries while also having the potential to fragment aspects of
international technology learning.
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Spending on energy R&D
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Government spending on energy R&D continued to rise in 2022, as marked growth in China
outpaced modest progress in other regions
Government spending on energy R&D, 2015-2022
IEA. CC BY 4.0.
Notes: Includes spending on demonstration projects (i.e. RD&D) wherever reported by governments as defined in IEA documentation
; 2022 is a preliminary estimate
based on data available by mid-May 2022; state-owned enterprise funds comprise a significant share of the Chinese total, for which the 2022 estimate is based on
reported company spending where available; IEA estimates for countries including India and Russia include state-owned enterprise R&D, which was not included in WEI 2022
; the IEA
Secretariat has estimated US data from public sources.
Source: IEA Energy Technology RD&D Budgets: Overview.
5
10
15
20
25
30
35
40
45
50
2015 2016 2017 2018 2019 2020 2021 2022
Billion USD (2022)
Rest of world
Japan, Korea, Australia
and New Zealand
Europe
North America
China
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Growth in direct public R&D spending is being supplemented by a jump in support for projects
that will indirectly catalyse innovation
Globally, public spending on energy R&D rose by 10% in in 2022, to
nearly USD 44 billion according to our estimates, with 80% devoted
to clean energy topics. This continues a trend that has buoyed
innovation in recent years despite macroeconomic uncertainty.
However, growth in China masks sluggishness elsewhere. China’s
14th Five-Year Plan (2021-2025) includes a planned increase
in
energy R&D spending of 7% per year, which we estimate it to have
exceeded, based on policy statements and recent filings by Chinese
state-owned enterprises. This maintains China’s status as the largest
public spender on energy R&D. Australia, Belgium and Norway have
also reported notable increases, but they do not offset an overall dip
of 1.5% in real terms among those IEA countries for which 2022 data
are available. Such a stagnation does not bode well for countries that
are seeking to invigorate their competitiveness in clean energy supply
chains and manage inflationary pressures.
However, while some governments are struggling to increase direct
R&D funding – we estimate that it fell 3% in the United States in 2022,
for example – most attention in the past year has focused on some
major policy packages for countercyclical investment. These could
significantly accelerate the competitiveness of pre-commercial clean
energy technologies but also, in some cases, could erect barriers to
knowledge sharing between regions.
The US Inflation Reduction Act
, adopted in August 2022, is perhaps
the largest single boost to clean energy innovation funding in recent
history. Its mix of direct R&D funding and support for the scale-up of
near-commercial technologies and induced innovation (i.e. creation
of a more lucrative and less risky market, thereby incentivising
companies to develop better products) is expected to raise the pace
of technology development. Direct R&D funding in the act includes
USD 2 billion for improvements to federal laboratories up to 2027,
which is likely to be additional to normal annual expropriations. An
easier path to scaling up will be supported by USD 3.6 billion to
guarantee up to USD 40 billion of loans to innovative technology
projects, 50% grants to demonstration projects for industrial
decarbonisation by 2026, and tax credits up to 2045 that offer up to
USD 180/t CO
2
that is captured from the atmosphere and
geologically stored. Induced innovation is likely to be spurred
dramatically by a wide range of tax credits and rebates for the
domestic manufacturing of clean energy equipment, low-emission
fuel production, home retrofits and vehicle purchases. These
incentives are additional to the Infrastructure Investment and Jobs
Act measures described in
WEI 2022, for which the rules and
numerous calls for projects have since been published. There are
indications from companies that the levels of support will be sufficient
to make otherwise uncompetitive technologies attractive.
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In the European Union, a similar package of measures will take shape
as countries implement the Net Zero Industry Act and
Green Deal
Industrial Plan. These include targets for EU-based manufacturing of
clean energy technologies, public procurement guidelines and
endorsement of certain regulatory exemptions granted to clean
energy technology projects. However, while the financing for these
strategies is not yet clear, a more long-standing EU programme, the
Innovation Fund, awarded EUR 1.8 billion of direct funding to
17 large projects in mid-2022. These cover batteries, hydrogen, solar
and wind. As a response to the ongoing energy crisis, the budget for
the fund’s next round has been doubled to EUR 3 billion.
Individual countries are also expanding indirect innovation support by
directing attention to supply chains. Canada’s 2023 budget proposes
a 30% tax credit and a halving of corporate income tax for makers of
clean energy equipment and higher credits for hydrogen and CCUS
projects. Germany has taken a lead in establishing
funds for large,
early commercial hydrogen projects as a means of stimulating the
market. Italy’s
Recovery and Resilience Plan allocates EUR 2 billion
for investments to 2026 to pursue Italian leadership in selected
energy technology areas, including financial support for clean energy
start-ups. France
published calls for projects under its EUR 1 billion
fund for building solar PV and floating wind sectors. In 2022 Australia
unveiled a Critical Minerals Accelerator Initiative for projects that build
new supply chains.
New programmes for research and demonstration were also
announced over the past year. Funding for new nuclear reactor
designs was boosted by higher budgets in France, where
EUR 1 billion was
made available to 2030, and the United Kingdom,
which plans to spend GBP 0.4 billion. Canada’s 2023 budget
proposes an additional CAD 0.5 billion for its main clean energy
research programme. In December 2022 Germany announced over
EUR 150 million for battery research projects, including for
digitalisation and recycling techniques. In China, a national
innovation platform is
proposed to unite university and industry R&D
efforts to implement the development plan for large-scale
commercialisation of new energy storage technologies by 2030,
complemented by new policies in Guangdong and Inner Mongolia.
The Sixth Assessment Report of the Intergovernmental Panel on
Climate Change concluded that clean energy innovation systems in
EMDEs need strengthening. In late 2022 India advanced its plan for
hydrogen, one of its strategic innovation priorities, with a
USD 11 million
call for proposals from regional consortiums, while its
Green Hydrogen Mission earmarked USD 200 million for R&D and
pilot projects. Indonesia signed an agreement with Japan to
accelerate technological innovations relating to hydrogen, ammonia
and CCUS. Also in 2022, the United Kingdom
expanded its six-year
GBP 1 billion fund for energy R&D projects in EMDEs to include
hydrogen and critical mineral topics. Brazil
launched processes in
2023 for new strategies for innovation in general and electricity sector
innovation specifically.
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Corporate energy R&D spending rose by 10% in 2022, returning to its pre-Covid trajectory, but
it did not keep pace with higher revenues
Spending on energy R&D by listed companies (left) and R&D budgets as a share of revenues (right), by sector of activity, 2015-2022
IEA. CC BY 4.0.
Notes: Values for 2022 are estimates based on reported data at the time of drafting; includes only publicly reported R&D expenditure by companies active in sectors that are
dependent on energy technologies, including energy efficiency technologies where possible, based on the Bloomberg Industry Classification System; automotive includes technologies
for fuel economy, alternative fuels and alternative drivetrains; fuel cells are included with hydrogen; to allocate R&D spending for companies active in multiple sectors, shares of
revenue per sector are used in the absence of other information; values may include both capitalised and non-capitalised costs, including for product development; the right-hand
figure considers the top 20 companies earning over half of their revenues in each sector, and represents average R&D spending as a share of revenues weighted by the sectoral R&D
spending of each company.
Source: IEA analysis based on data from Bloomberg (2023).
20
40
60
80
100
120
140
2015 2016 2017 2018 2019 2020 2021 2022
Billion USD (2022)
Automotive Electricity generation, supply and networks
Oil and gas
Renewables Coal
Thermal power and combustion equipment
Batteries, hydrogen and energy storage Nuclear
0%
1%
2%
3%
4%
5%
6%
7%
2016-2018 2019-2021 2022
R&D spending as a share of revenues
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Corporate spending on R&D keeps rising in most “hard-to-decarbonise” sectors
R&D spending by globally listed companies in heavy and long-distance transport (left) and industry (middle, right) by activity, 2015-2022
IEA. CC BY 4.0.
Notes: Values for 2022 are estimates based on reported data at the time of drafting; classifications are based on the Bloomberg Industry Classification System; trucks include
recreational vehicles, but not industrial vehicles. Year-on-year changes can result from new companies entering the dataset or companies ceasing operations, as well as changes in
R&D spending. Some changes compared to WEI 2022
relate to avoiding double-counting of parent and subsidiary companies.
Source: IEA analysis based on data from Bloomberg (2023).
4
8
12
16
20
2015 2016 2017 2018 2019 2020 2021 2022
Billion USD (2022)
Aviation Trucks Shipping Rail
10
20
30
40
50
60
2015 2017 2019 2021
Chemicals Iron and steel
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2015 2017 2019 2021
Cement Pulp and paper
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Public-sector credit for corporate R&D can sustain innovation during times of macroeconomic
uncertainty, steering it towards clean energy, as illustrated by European Investment Bank loans
EIB loans to companies for energy-related R&D, by sector, 2009-2022
IEA. CC BY 4.0.
Notes: “Other” includes cement, energy efficiency, energy storage, hydrogen, marine transport, fossil fuels and rail.
Source: IEA analysis based on data provided to the IEA by the European Investment Bank.
1
2
3
4
5
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Billion EUR (2022)
Automotive Electricity Renewables Steel Aviation Other
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Companies are reacting to the competitive pressures of energy transitions by funding more
R&D and higher revenues in 2022 offer a further opportunity to support clean innovation
Preliminary data show positive news for the R&D outlays of listed
companies in energy-related sectors. The 10% year-on-year growth
in 2022 was high relative to recent years despite economic
uncertainty and higher costs of capital. While the trends and
competitive pressures vary across sectors, in the aggregate this can
be interpreted as a response of companies to the threats and
opportunities of the energy transition. As the technological basis of
these sectors shifts, R&D is a central strategy for growing, or simply
maintaining, market share. The shift in the automotive market is
already very pronounced and increasingly globalised, and it is the
growth in this segment of energy R&D that steers the overall trend.
A bumper year for energy sector corporate revenues in 2022 offers a
further chance to increase spending. This was not yet reflected in
research budgets, reflecting the fact that these are typically set in
advance and that high energy prices were unanticipated. Therefore,
a major opportunity arises for energy companies to increase clean
energy R&D budgets in 2023 and beyond, even if just to keep the
average ratio of R&D to revenue stable. There is also a good strategic
case for a spending increase in areas like clean energy
manufacturing: the ability to pair internal R&D with new public funding
sources for energy innovation can make this capital more productive
in an environment of greater capital discipline.
Outside the typical scope of the energy sector, corporate R&D is
rising in so-called hard-to-decarbonise sectors. This is a positive
signal that companies in the industrial sectors are embracing the
challenge of rapidly changing their long-standing technological
practices. Most spending in these sectors is by Chinese firms. With
no uptick in R&D spending yet, the long-distance transport sectors
(aviation, rail, shipping and trucks) remain outliers, however.
In times of economic uncertainty, governments can adopt measures
to protect corporate R&D budgets from the threat of cuts arising from
lower revenues or more expensive capital. This can bolster
competitiveness through a downturn and can also be a chance to
direct companies towards specific policy priorities. Since 2020 the
EIB has extended EUR 7 billion in loans to support the energy-related
R&D programmes of 45 firms. In 2022 new energy R&D credit from
the EIB reached its highest value since 2013, when such loans were
a response to the global financial crisis. The recent focus is less on
the automotive electrification than in 2012-2017 and more on
renewable energy and industrial decarbonisation. Germany’s federal
R&D tax credit, launched in 2020, has so far attracted applications
from over 2 000 mechanical engineering projects, among 14 000
overall. The US Infrastructure Investment and Jobs Act delays the
need to amortise corporate R&D until 2025.
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VC funding of early-stage energy
technology companies
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Early-stage equity funding for energy start-ups is booming, led by clean mobility and
renewables, but 2023 could be leaner for later-stage deals
VC investment in energy start-ups, by technology area, for early-stage and growth-stage deals, 2004-2023e
IEA. CC BY 4.0.
Notes: 2023e is an estimate based on Q1 data; early-stage deals are defined as seed, Series A and Series B deals; very large deals in these categories – above a value equal to the
90th percentile growth equity deals in that sector and year – are excluded and reclassified as growth-stage investments; industry includes start-ups developing alternative routes to
materials such as building materials, steel and chemicals; mobility includes technologies specific to alternative powertrains, their infrastructure and vehicles, but not generic shared
mobility, logistics or autonomous vehicle technology; “Other” includes CCUS, nuclear, critical minerals and heat generation; fossil fuels cover start-ups whose businesses aim to make
fossil fuel use cheaper or otherwise more attractive, including fossil fuel extraction and fuel economy of hydrocarbon combustion vehicles; a review of the data classifications for
WEI 2023 has modified trends published by the IEA in prior years
Source: IEA analysis based on Cleantech Group (2023) and Crunchbase
(2023).
1
2
3
4
5
6
7
8
9
10
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023e
Billion USD (2022)
Renewables Energy efficiency Industry
Energy storage and batteries Mobility Hydrogen and fuel cells
Other power and grids Fossil fuels Other
Early stage
5
10
15
20
25
30
35
40
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023e
Billion USD (2022)
Growth stage
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Most VC funding for energy technologies has flowed to US-based start-ups, with Europe having
a strong presence in hydrogen and China active in mobility and batteries
Early- and growth-stage equity investment in energy start-ups by region and technology area, 2020-2022
IEA. CC BY 4.0.
Note: Regions are presented according to the headquarters of the start-up receiving investment.
Source: IEA analysis based on Cleantech Group (2023) and Crunchbase (2023).
0% 20% 40% 60% 80% 100%
Energy efficiency
Energy storage and batteries
Fossil fuels
Hydrogen and fuel cells
Industry
Mobility
Other power and grids
Renewables
China India Australia Rest of the world United Kingdom Other Europe Canada United States
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Most of the recent VC investment boom in energy is for companies working on hardware
improvements, but more than 25% went to less risky digital technology and project developers
Share of early and growth-stage VC investment in energy start-ups, by type of start-up, 2004-2023
IEA. CC BY 4.0.
Note: 2023 data are for Q1 only.
Source: IEA analysis based on Cleantech Group (2023) and Crunchbase (2023).
0%
20%
40%
60%
80%
100%
2004 2007 2010 2013 2016 2019 2022
Hardware Digital Project development
Early stage
0%
20%
40%
60%
80%
100%
2004 2007 2010 2013 2016 2019 2022
Growth stage
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Energy has outperformed other VC segments since 2021, particularly for early-stage equity
funding for start-ups, which has experienced growth while VC investment has fallen in general
Growth in global VC investment by sector of start-ups, 2010-2023
IEA. CC BY 4.0.
Note: 2023 trend is based on the rate of change between Q1 2022 and Q1 2023.
Source: IEA analysis based on Cleantech Group (2023) and Crunchbase (2023).
20
40
60
80
100
120
140
2010 2012 2014 2016 2018 2020 2022
Agriculture and food Biotechnology Medical Digital All Energy
Early stage
Index (2021 = 100)
20
40
60
80
100
120
140
2010 2012 2014 2016 2018 2020 2022
Growth stage
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Clean energy continues to outperform other VC segments, demonstrating investor confidence
in energy transitions, but it is not escaping the slowdown in the wider technology sector
For energy start-ups, 2022 was the biggest year to date for early-
stage equity funding, with increases in most clean energy technology
areas. Most notably, start-ups in CO
2
capture, energy efficiency,
nuclear and renewables nearly doubled or more than doubled their
2021 level of funding, which was already much higher than the
average for the preceding decade. This type of funding supports
entrepreneurs with technology testing and design, and plays a critical
role in honing good ideas and adapting them to market opportunities.
Growth-stage funding, which requires more capital but funds less
risky innovation, rose by only 1% in 2022 and was very weak in
Q1 2023. If Q1 is a good guide to the annual trend, the value of
growth-stage deals for energy start-ups could fall by nearly 60% in
2023.
Prevailing macroeconomic conditions have dented the amount of
capital available and raised the cost of scaling up nascent
businesses. This is despite higher fossil fuel prices in 2022 that could
have pushed many clean energy start-ups closer to market. With
ongoing restraint in the banking sector, investment is not expected to
bounce back quickly. Limited partners, the primary backers of VC
funds, will continue to rebalance their portfolios to manage risk
exposure, leaving more intense competition between start-ups for
early-stage funding. In addition, banking services and loans are likely
to become more costly for small, innovative firms. While the
downward cycle for technology companies in North America was
underway before the collapse of Silicon Valley Bank, the trends have
now become more pronounced. It is expected that start-ups will have
to survive longer between funding rounds or before an “exit”
(becoming a public listed company or being acquired by a larger firm),
with less access to bridging capital. For hardware start-ups, there will
be difficult decisions relating to retention of research staff and
investment in prototyping and testing.
However, the prospect of lower growth-stage investment is not
reflected in the early-stage trend. Deals in Q1 2023, if maintained,
indicate that early-stage VC funding in 2023 could continue to grow
strongly. In addition, clean energy is set to continue to outperform
other segments for which VC investment has fallen dramatically since
2021, a sign of how much clean energy VC investing has matured.
Much of the need for clean energy technology innovation relates to
the development of hardware solutions, yet growth in early-stage
funding for energy start-ups developing hardware is flat. For growth-
stage investment, VC funding for hardware companies fell in 2022.
While funding for hardware developers remained dominant, at almost
75%, their share of early- and growth-stage deals tends to shift with
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changing risk perceptions. In the aftermath of the “cleantech bust” in
2010-2011, the share of funding for hardware dropped dramatically,
to around 65% of early- and growth-stage equity investment in energy
start-ups at its lowest point. Hardware products can take many years
of VC funding to be developed to meet customers’ needs, but these
start-ups can achieve high valuations and pay-offs for investors. By
contrast, energy software and project development companies can
have a quicker path to market but offer lower returns. The share of
hardware climbed up again in 2020-2021, but has declined in 2022-
2023, likely reflecting lower willingness among VC funds to make
large, long-term bets. As an indicator, the proportion of energy VC
going to digital, hardware and project development can help track
investor preferences and the investment climate for solving hardware
challenges. In a given technology area, the share represented by
project developers can indicate technology and policy maturity.
Regionally, start-ups based in the United States raised more than
those in other regions in every technology area between 2020 and
2022. The investors in the vast majority of these deals were US-
based. While China, Europe and India have consistently represented
growing shares of the total as investment has increased in recent
years, this is not evenly spread between funding stages or
technologies. When looking at early-stage investment only, European
start-ups attracted 29% of the global total, but this falls to 22% for
growth-stage funding. China has become a major location for the
scale-up of energy storage and electric vehicle companies, but barely
registers in the data for energy efficiency and power grid
technologies. Indian start-ups are most present in renewable energy
and mobility technologies, especially electric two/three-wheelers and
charging.
Among hardware technologies, early-stage funding was mostly
directed to electric vehicle start-ups, but these represented a much
lower share of the total in 2022 than in the past five years. This is
potentially due to the greater challenges facing start-ups looking to
break into a more mature electric vehicle market. Gains were made
in areas including nuclear (exemplified by Newcleo
raising
USD 294 million), batteries (exemplified by Greater Bay Technology,
USD 150 million, Verkor USD 118 million, and Lithion Recycling
USD 116 million), geothermal (exemplified by Quaise raising
USD 52 million), and heating and cooling (exemplified by Exergyn
and Submer raising USD 33 million apiece).
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Corporate VC investment in clean energy start-ups remains high, with a higher contribution in
2022 from electricity, oil and gas, and heavy industry companies
Corporate VC investment in energy start-ups, by sector of corporate investor, 2010-2022
IEA. CC BY 4.0.
Notes: Includes early- and growth-stage deals; includes only investment by private-sector investors; where there are several investors, deal value is evenly split across them; ICT =
information and communications technology; Industry includes chemicals, cement, commodities, construction (excluding real estate), iron and steel, and other equipment suppliers;
Power sector includes independent power producers, and electricity and renewables equipment and services; “Other” includes food, health, research and mining; values are slightly
lower than in WEI 2022
due to some reclassifications by the IEA of start-ups and investors.
Source: IEA analysis based on Cleantech Group (2023) and Crunchbase (2023).
1
2
3
4
5
6
7
8
9
2010 2011 2012 2013 2014 2015 2016 2017 2018
2019
2020 2021
2022
USD billion (2022)
Other
Energy storage and
batteries
Industry
Transport
ICT and electronics
Oil and gas
Power sector
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Higher strategic corporate investment in energy start-ups indicates how firms are seeking to
stay competitive or break into a fast-moving landscape
Corporate venture capital (CVC) investment in clean energy start-ups
stayed at historic highs in 2022, exceeding USD 8 billion. With the
technological landscape changing rapidly, companies increasingly
use CVC investments in start-ups to enter new technology areas. The
increase in 2022 was led by investors from the industrial, electricity
and energy storage sectors.
Mirroring our findings about the high share of energy VC funding for
firms developing digital products between 2013 and 2020, CVC
investment in energy start-ups by ICT firms grew markedly from 2016
(as these start-ups became closer to the market). However, the ICT
sector’s share of energy-related CVC was not maintained and in 2022
there was a more even spread of CVC among corporate sectors than
previously. Industry sectors like chemicals, construction materials,
and iron and steel are playing a larger role in CVC investment in clean
energy start-ups with hardware products.
While CVC remains lower than corporate R&D budgets, it has been
growing quickly since 2015. In an energy sector that anticipates
disruption from mass-produced, modular and quick-to-scale
technologies, CVC can be particularly attractive as a lower-cost and
quicker means of acquiring knowledge, new technologies and
business models. The nimbleness of start-ups and the “optionality”
for investors can be particularly valuable under conditions of
uncertainty, competition and budget pressures.
For start-ups, CVC complements other sources of funding and can
accelerate scaling up by providing access to corporate experience
and resources, especially for manufacturing, as well as access to
consumers around the world. This is most evident in the case of fossil
fuel companies, which increased their energy-related CVC activity in
2022. Oil and gas companies invested USD 2 billion between 2020
and 2022, mostly in CCUS, energy efficiency and renewable energy
developers. Start-ups must weigh the benefits of CVC against the
possibility that their agility and rapid growth ambitions may not always
fit with the strategies of the firms that take stakes in them.
Notable investments in 2022 included equity from Chevron and the
Oil & Gas Climate Initiative into Svante
, a Canadian CO
2
capture firm
that raised USD 318 million of growth equity, and Sinopec’s
participation in a USD 130 million growth-stage round for Kuntian
New Energy, a Chinese battery component maker. Equinor invested
in Solid Power, a US solid-state battery firm. Repsol invested in
Enerkem, a Canadian waste-to-energy company. Eni invested in C-
Zero, a US natural gas-to-hydrogen start-up. Gerdau and Asahi Kasei
invested in Plant Prefab, a Dutch maker of efficient buildings. Holcim
invested in Blue Planet, a CO
2
mineralisation start-up.
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Implications
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R&D and technology innovation
Energy innovation investment has largely remained resilient to shocks in a turbulent 2022, but
more tests lie ahead and capital availability varies between regions and types of innovation
The latest investment data for energy R&D and innovation are
broadly positive, and reflect some of the themes running through the
chapters of this report. The impacts of the Russian invasion of
Ukraine are yet to become fully apparent, with government support
for clean energy helping it to buck macroeconomic trends so far. In
innovation, this is most evident in the resilience of VC funding for
clean energy, despite a downturn in VC funding for technology start-
ups more generally. Similarly, corporate R&D spending data echo the
findings for capital expenditure in the energy sector: there is little
evidence from 2022 that spending will rise in line with higher
revenues, but there is a strong case for an increase in, for example,
oil and gas company R&D in coming years.
Any outlook for clean energy innovation globally must accommodate
several competing drivers that have become more pronounced in the
past year. Firstly, any reduction in bilateral co-operation and trade
between major regions restricts flows of knowledge, thereby slowing
the advance of the technology frontier. Secondly, regulatory
preferences for more local supply chains could lead equipment
suppliers, such as vehicle manufacturers, to relax their efforts to keep
up with technological developments abroad. Thirdly, and in contrast
with the previous two points, hindrances may be counteracted by
industrial policies inspired by competition in international clean
energy value chains. By projecting stronger market signals over the
medium term, industrial policies can steer significant new capital to
selected technology challenges, which spurs eligible innovators to
compete with each other to secure contracts and win market share.
Regional differences are set to widen, not converge
Unlike in some other areas of energy investment, China’s share of
innovation spending does not tower over global spending. Public
R&D spending is quite even across China, Europe and North
America, while VC investment is more concentrated in the United
States, followed by Europe. These three regions, plus Japan and
Korea for R&D spending, play an outsized role in energy innovation
compared with their future energy investment needs.
The NZE Scenario requires over half of clean energy investment to
be in EMDEs. However, in 2022 EMDEs (excluding China) accounted
for just 5% of public energy R&D, 3% of corporate energy R&D (by
country of headquarters) and 5% of energy VC (by country of start-
up).
Government support is crucially important for stimulating R&D
investment, and policy incentives for clean energy innovation are
expanding impressively in the regions that are already leaders. Costs
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R&D and technology innovation
of capital are diverging between advanced economies and EMDEs in
a way that could entrench this difference at a time when innovation
co-operation between regions appears more challenging.
Innovation in EMDEs is typically more targeted to their specific social,
economic and climatic contexts. In addition, it can help to position
them in clean energy technology value chains
, thereby boosting
economic growth and accelerating global efforts towards climate
goals. Advanced economies and multilateral development banks
have a role to play in ensuring that investment opportunities for
energy innovators are as global as possible, even as competition
intensifies in areas from batteries to energy management software,
hydrogen, heavy industry, heat pumps and air conditioning.
The scope of energy innovation investment is expanding,
signalling more VC appetite for hardware developers
The recent surge in VC investment in clean energy has been
accompanied by a high share of bets on hardware-focused start-ups.
However, the innovation efforts devoted to digital solutions seen
during 2013-2019, which drew the world’s biggest IT companies into
energy-related research, remain important. Rather, the share of
hardware has risen along with a broadening range of hardware areas
attracting funding from public and private sources. Investors in clean
energy technologies now cover aerospace, critical minerals, direct air
capture, industrial feedstocks and manufacturing techniques.
Demonstration project funding grabs headlines, but
underlying innovation systems also need attention
In the coming years, editions of World Energy Investment will track
how the major government funding announcements translate into
public budgets, project awards, project expenditure and then
technology improvements. For first-of-a-kind demonstration projects,
the extent to which tax credits and performance incentives attract
private capital will be watched closely. The magnitude of this
spending, especially with many incentives in the US Inflation
Reduction Act being uncapped, will ensure publicity for these
projects.
However, energy transitions depend just as heavily on functioning
innovation systems that channel appropriate types of capital to
researchers and entrepreneurs as they develop new ideas. Effective
innovation systems balance public spending, intellectual property
rights, knowledge networks, market opportunities and incentives for
the private sector to put capital at risk. For a decade, cheap capital
has lowered barriers to investment in long-term, risky bets and
thereby concealed weaknesses in innovation systems. With the cost
of money set to rise, the health of these systems will be a more critical
determinant of whether new technology ideas continue to flow in line
with the “learning curve” assumptions of decarbonisation scenarios.
There is plenty that governments can do to nurture good ideas and
give them the highest chance of being available to apply for the next
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R&D and technology innovation
waves of VC or demonstration funding in 5 or 10 years’ time. This
includes guiding the brightest minds towards key policy challenges
for clean energy technologies.
More than in other parts of the energy sector, innovation investment
reflects the balance between long-term thinking (to mitigate the risks
of long-term unsustainability and uncompetitiveness) and near-term
shocks. Despite positive outlooks in some areas (such as public R&D
and demonstration funding, and fundraising by project developers),
others face headwinds (including the cost of capital for early-stage
hardware start-ups, and international knowledge flows). All
stakeholders in successful energy transitions are therefore bound by
a need to address weaknesses and keep the investment balance in
favour of seeking long-term opportunities.
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Sustainable finance
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Overview
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The energy crisis led fossil fuel companies to significantly outperform the benchmark last year,
although renewables proved resilient following years of strong returns
Monthly returns of energy-related sample portfolios, 2013-2023 (left) and Q4 2021-Q1 2023 (right)
IEA. CC BY 4.0.
Note: MSCI ACWI = MSCI All Country World Index.
Source: IEA analysis based on data from Bloomberg (2023).
50
100
150
200
250
300
350
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Arithmetic return (Q4 2012 = 100)
Global listed renewables Global listed fossil fuels MSCI ACWI
50
100
150
2022
2023
(Q4 2021 = 100)
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Investing in clean energy has faced challenges due to the strong performance of fossil fuels in
2022, but the continuing development of sustainable finance regulation can act as a tailwind
The financial community has a critical role to play in the massive
ramp-up of clean energy spending needed to meet climate goals and
the orderly reallocation of capital away from fossil fuels. The
proliferation of sustainable finance practices is a strong indicator of
this direction of travel, with a growing number of financial institutions
pledging to align their financing with net zero scenarios.
Last year represented a major challenge to these practices, with the
Russian invasion of Ukraine causing fossil fuel companies to
significantly outperform the market. This put short-term pressure on
investment strategies that underweighted or excluded these entities.
Despite this, signs from European and North American shareholder
voting season (March-June) show that actors within the financial
community remain concerned about climate risks and the
implications of rapid transitions for fossil fuel assets. Climate-related
proposals, particularly on emissions targets,
are up compared to last
year – although the test will be how many win a majority vote. There
are also more proposals to cut off or phase out fossil fuel financing at
banks and insurers, although last year all nine such proposals that
went to vote in the United States
failed to receive support above 20%,
and the current energy security climate is likely to soften support.
The continuing appetite for sustainable finance practices in such a
challenging market demonstrates the important foundation laid by
regulators globally. Regulators are strengthening sustainable finance
architecture by issuing clear definitions of green or sustainable
activities and guidelines to prevent “greenwashing”, while mandating
granular sustainability disclosures and reflective risk and opportunity
assessments. Some of the major trends and developments are:
Green taxonomies: In 2022 green taxonomies were introduced in
South Korea, Indonesia, South Africa, Colombia, Sri Lanka and
Georgia. Mexico also announced a new taxonomy in March 2023,
with several other countries announcing that taxonomies are under
development, as in Australia. Meanwhile China, one of the largest
green finance markets, published the Green Bond Principles in July
2022 and later the Common Ground Taxonomy, which outlines
commonalities with the EU taxonomy.
Transparency and labelling: There has been growing concern
around the use of “ESG” (environmental, social and governance),
“sustainable” and “green” terminology on financial products and the
data that go into it. Regulators from at least 13 jurisdictions
have
proposed or introduced disclosure requirements on ESG or
sustainable funds to improve labelling. Regulators have also looked
at individual companies, with cases brought against DWS (Germany)
and Goldman Sachs (United States) over the alleged misleading of
investors in green or ESG investments. Regulators are also
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increasingly looking at ESG data and ratings providers; Japan, the
United Kingdom and the European Union are publishing either codes
of conduct or proposing future regulation for ratings providers.
Disclosures: The proliferation of non-financial reporting standards
and regulation generally emphasises emission and climate risk
disclosures. The International Sustainability Standards Board issued
two voluntary standards on climate-related reporting – IFSR 1 and 2
– in June 2022, becoming effective in January 2024. EU sustainable
finance regulations also advanced with the Corporate Sustainability
Reporting Directive, which will require large and listed companies to
report on, among other things, their environmental risks,
opportunities and impacts. The Sustainable Finance Disclosures
Regulation (SFDR) also entered its second phase in early 2023
whereby sustainability disclosures and reporting on climate and
environmental impacts became mandatory for financial market
participants. A report by ISS
also found that countries in Asia –
notably Malaysia, Singapore, India and Japan – had been particularly
active in introducing sustainable finance-related regulation, including
around disclosures, sustainable lending and stewardship practices.
Climate stress testing: A growing number of central banks are
conducting climate stress tests and in at least 18 jurisdictions banks
either are or will soon be subject to requirements to implement such
testing. A climate risk stress test by the European Central Bank
conducted in 2022 found that around 60% of the 104 participant
banks did not have a climate stress testing framework in place, and
that about
two-thirds of banks’ income from non-financial corporate
customers stemmed from greenhouse gas-intensive industries. The
Network for Greening the Financial System, which provides central
banks and supervisors with climate scenarios and guidance for such
tests, found that there are multiple different approaches to stress
testing across jurisdictions and encouraged greater co-ordination.
Equally, they highlighted that the lack of availability and comparability
was reducing the quality of stress testing. As a result, stress tests
currently serve primarily as learning exercises, with no immediate
requirement for follow ups, but they show that banks stand to
experience notably higher credit losses under a disorderly transition.
Achieving the NZE Scenario requires clean energy spending to rise
nearly threefold by 2030, with an estimated 65% of this needing to
come from the private sector. Sustainability-related regulation and
guidance act as a tailwind for these investments. This chapter
explores the alignment between growth in sustainable finance and
clean energy investment, particularly in relation to EMDEs, which
account for 55% of clean energy investment by 2030 under the NZE
Scenario. While the emphasis here is on private investment,
numerous other public finance initiatives are also underway that are
likely to support an increase in clean energy spending. Notably, these
include the Bridgetown Initiative
announced by Barbados Prime
Minister Mia Mottley at COP27, which proposes several steps to
reform development and climate finance.
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Sustainable investing
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The value of assets in funds globally fell during 2022, although sustainable funds showed more
resilience and have rebounded in early 2023 despite major outflows from some large ESG funds
Trends in sustainable fund and ESG exchange-traded funds (ETF) flows, Q1 2022-Q1 2023
IEA. CC BY 4.0.
Notes: ESGU = iShares ESG Aware MSCI USA ETF; ESGD = iShares ESG Aware MSCI EAFE ETF; ESGV = Vanguard ESG US Stock ETF; ICLN = iShares Global Clean Energy
ETF; VSGX = Vanguard ESG International Stock ETF; ETF = exchange-traded fund.
Sources: IEA analysis based on data from Refinitiv (2023), Morningstar (2022, 2023).
0
20
40
60
80
100
120
0.5
1.0
1.5
2.0
2.5
3.0
Q1
2022
Q2
2022
Q3
2022
Q4
2022
Q1
2023
Index Q1 2022 = 100
Trillion USD (2022)
Sustainable funds assets right axis
Sustainable funds (right axis) All funds (right axis)
Sustainable fund flows
0
10
20
30
40
50
- 45%
- 30%
- 15%
0%
15%
30%
Q1
2022
Q2
2022
Q3
2022
Q4
2022
Q1
2023
Billion USD (2022)
ESGU ESGD
ESGV ICLN
VSGX Total Net Assets
Top 5 ESG exchange
-traded fund flows
(right axis)
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Sustainable funds weathered a challenging year despite the pressure on investment strategies
that limited exposure to high-performing fossil fuels
After years of inflows, in 2022 ESG funds recorded their first net
outflows since 2011. Outflows were particularly heavy in the first half
of the year, as fossil fuel prices spiked and concerns around inflation,
interest rates and recession hit the market as a whole. How these
pressures impacted ESG funds varied significantly according to their
chosen approach. Funds that focused on screening – which often
involves underweighting or excluding fossil fuel companies and
overweighting high-performing sectors with lower ESG risks like
technology – faced particularly tough questions around their
performance compared to the market.
Large one-off outflows from ESG ETFs in early 2023 have also
highlighted the impact of concentration risk within certain areas of
sustainable investing. In March, nearly USD 4 billion was withdrawn
from iShares ESG Aware MSCI USA ETF (ESGU), the largest ESG
ETF, contributing to a 38% fall in the ETF’s asset value in Q1. This
quarter also saw withdrawals from other major funds, including iShares
Global Clean Energy ETF, which saw a USD 260 million outflow
triggering a 5% loss in asset value. Several analysts
have attributed
these outflows to risk rebalancing by institutional investors who own
large portions of these funds. In 2022
Bloomberg estimated that
roughly 22% of new investment in ESG ETFs went to just 10 funds,
and most of these investments were made as one-off allocations. This
indicates that choices among certain large investors or by key funds or
indexes that ETFs track can skew trends within the market.
Despite these challenges, sustainable funds generally proved resilient
against market conditions, based on quarterly reviews by Morningstar
.
Throughout the year and into the first quarter of 2023, the valuation of
sustainable funds saw less volatility than all funds globally, and thanks
to a rebound in equity valuations in early 2023, sustainable funds have
almost returned to levels seen in early 2022.
The impact these trends have on alignment with investment under the
NZE Scenario is mixed. The correlation between a push for
sustainable investment practices and a reduction in fossil fuel
spending is clear, but questions remain over the extent to which
sustainable investing is driving the necessary increase in clean energy
investment. For example, the EU SFDR groups funds into three broad
categories based on their level of sustainability. Article 9 funds are the
most ambitious, whereby funds demonstrate they have a “sustainable
investment objective”. In Q4 2022 there was a
series of
reclassifications, with 40% of Article 9 funds downgraded to the less
ambitious Article 8, where funds must “promote environmental or
social characteristics”. Notably, these included the iShares Global
Clean Energy ETF, suggesting that Article 9 alignment is not a
prerequisite to supporting the energy transition.
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Institutional capital is heavily concentrated in advanced economies with only a small share
being allocated to EMDEs…
Pension asset regional spread and allocations to EMDEs at selected pensions
IEA. CC BY 4.0.
Notes: The seven countries that make up the majority of pension assets are Australia, Canada, Japan, the Netherlands, Switzerland, the United Kingdom and the United States;
NBIM = Norges Bank Investment Management; ABP = Stichting Pensioenfonds; CPP = Canada Pension Plan; these four funds were selected based on their inclusion in an
OECD survey
on pension fund assets in developing countries.
Sources: OECD, Pension Markets in Focus; World Bank, World Development Indicators; Annual report from NBIM, ABP, CPP and PGGM.
10
20
30
40
50
60
2013 2015 2017 2019 2021
Trillion USD (2021)
Advanced economies EMDEs
Pension assets
Assets from seven
countries make
up the vast majority
of funds in advanced
300
600
900
1 200
1 500
NBIM ABP CPP PGGM
Billion USD (2021)
Regional split at selected pensions
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… and increasing these allocations is complicated by the lack of accessible investable assets
Characteristics of indexes in selected EMDEs and leading benchmark providers
IEA. CC BY 4.0.
Notes: EMDE indexes were selected based on the size of the local stock markets and availability of data; benchmark indexes do not include MSCI, the third major provider, because
constituent country data were not publicly available.
Sources: IEA analysis based on data from Refinitiv; World Bank, World Development Indicators; Index factsheets from S&P and FTSE Russell.
20%
40%
60%
80%
2
4
6
8
SSE
(China)
Hang
Seng
(Hong
Kong)
Nifty 500
(India)
TASI
(Saudi
Arabia)
Bovespa
(Brazil)
Constituent market cap (trillion USD)
Fossil fuels Power
Other Energy and utilities
Selected EMDE indexes
as share (right axis)
3%
6%
9%
12%
4
8
12
16
FTSE S&P FTSE S&P FTSE S&P
Global Emerging
markets
Frontier
markets
Constituent market cap (trillion USD)
Advanced economies China
Other EMDEs Energy and utilities
Leading benchmarks by market type
as share (right axis)
72 trn
54 trn
30 bn
570 bn
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Structural issues and the limited pool of investable assets are preventing capital from flowing
to key areas needed to meet the Net Zero Emissions by 2050 Scenario
In the NZE Scenario, clean energy investment in EMDEs triples by
2030, by which time it accounts for over half of the global total. This
represents a sharp break from current trends; clean energy
investment in EMDEs has risen by only around 30% in the past five
years (most of which has been in China).
The imbalances are unsurprising when you consider that around 80%
of financial assets are held in advanced economies, according to
estimates by the Financial Stability Board
. Looking at pension funds,
which can provide a valuable source of patient capital, seven
advanced economies accounted for nearly 90% of global pension
assets in 2021 (latest data available). An
OECD survey found that
only around 8% of surveyed pension assets were allocated to
developing countries and 85% of these assets came from just four
funds.
1
According to these funds’ latest reporting, allocations to
EMDEs totalled roughly USD 300 billion in 2021, or 11% of their
combined portfolios. These allocations may have fallen over 2022
due to changing risk perceptions in the wake of Russia’s invasion of
Ukraine and the subsequent energy crisis, and the worsening
macroeconomic environment in many EMDEs.
1
The survey did not include US, UK or Japanese pensions, which are some of the largest globally.
One of the major constraints on further investment in EMDEs from
such institutions is the lack of projects that meet their size and liquidity
requirements. Entities from EMDEs (excluding China) account for
less than 15%
of the global market capitalisation of listed companies.
Indexes tracking the 10 largest EMDE stock exchanges, excluding
Saudi Arabia whose exchange is dominated by Aramco, show that
energy and utility companies on average account for 15% of the
indexes by market capitalisation, and within this fossil fuel companies
are on average two and a half times larger than power companies.
Combined with their different risk–return profiles, this puts power
companies at a disadvantage when seeking to attract investment.
The difficulty of accessing investable projects is also visible when
reviewing major equity indexes. Indexes play a key role as
benchmarks and as the basis for passive investment, which has
risen
in popularity in recent years. Indexes are generally split into
developed, emerging and frontier market categories, and although
performance of the latter two has been relatively similar, many
mainstream investors will limit their exposure to frontier markets.
There are currently 40 EMDEs
2
included in emerging or frontier
indexes from the top three index providers, but frontier market
2
Based on the IEA categorisation. Please see glossary in methodology for further details.
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indexes are on average less than 5% the size of their emerging
market peers, based on net market capitalisation. Frontier market
indexes also tend to be a lot more concentrated. For example, the
top 10 constituents account for 37% of the S&P Frontier BMI Index,
compared to 14% in the Global BMI Index. This therefore limits the
number of companies that investors can access within these riskier
markets.
Performance of key emerging and frontier benchmarks
IEA. CC BY 4.0.
Source: IEA analysis based on data from Bloomberg (2023).
When looking at climate-aligned benchmarks, the investable
universe in EMDEs shrinks even further. MSCI’s Emerging Markets
Climate Paris Aligned Index includes only 427 constituents compared
with 1 377 in their Emerging Markets Index that it is based on. There
is no Paris aligned version of MSCI’s Frontier Markets Index, which
makes it very challenging for investors to access these markets while
also pursuing a strategy based on Paris-alignment. Even without the
index challenge, there is a risk that the move to decarbonise financial
portfolios will disadvantage EMDEs since ESG and climate-related
data are less widely available in these markets. For example, of the
nearly 5 000 companies that have committed to set science-based
targets, only 16% are in EMDEs (and 29% of those are China). Where
ESG scores do exist, the IMF recently found
that listed EMDE firms
tend to have lower scores on average than their advanced economy
peers and that allocations to EMDEs by ESG funds are lower than
non-ESG funds.
All of these limitations restrict the amount of equity investment from
large institutional capital into clean energy in EMDEs. Such capital
can play a key role in supporting on-balance sheet financing,
refinancing or the acquisition of existing assets. Institutional investors
need to balance regional and sector risk across their portfolios, which
is always likely to act as a ceiling on their investment in clean energy
in EMDEs. Further efforts to increase the pool of listed clean assets
in EMDEs would support diversification, but these must happen in
tandem with other strategies to reduce perceived and actual risk in
those markets. Public capital, as well as concessional tools such as
guarantees or blended finance approaches, will play a key role here.
Over the longer term, growing domestic institutional capital will also
be vital. This has the advantage of not creating a currency mismatch
and is also likely to be better aligned given the smaller size of many
domestic finance sources in EMDEs.
50
75
100
125
150
Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22 Jan-23
Monthly returns (January 2020=100)
S&P Frontier BMI S&P Emerging BMI FTSE Frontier Index FTSE Emerging Index
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Sustainable debt issuances
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Labelled sustainable debt issuances fell in 2022 for the first time, but were still significantly
higher than in 2020, including from issuers of corporate energy and utility debt
Sustainable debt issuances by type, 2016-Q1 2023
IEA. CC BY 4.0.
Source: IEA analysis based on data from Bloomberg (2023).
25%
50%
75%
100%
400
800
1 200
1 600
2016 2017 2018 2019 2020 2021 2022 Q1 2023
Billion USD (2022)
Sustainability-
linked debt
Sustainability
bond
Green loan
Green bond
Energy and
utilities as share
of corporate
issuances
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Advanced economies continue to dominate issuances, and in EMDEs (excluding China) most
issuances are still in foreign currency, primarily USD and EUR
Sustainable debt issuances by region and currency, 2020-2023
IEA. CC BY 4.0.
Sources: IEA analysis based on data from Bloomberg and Refinitiv (2023).
0
300
600
900
1200
1500
1800
2020 2021 2022 Q1
2023
Billion USD (2022)
Advanced economies China Other EMDEs
By region
20%
40%
60%
80%
100%
2020 2021 2022 2023 2020 2021 2022 2023 2020 2021 2022 2023
Domestic Foreign
By currency
Advanced
economies
China
Other
EMDEs
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Despite a difficult year, early indications show a positive outlook for sustainable issuances in
2023, including in the growing green-labelled loan space
Labelled sustainable debt issuances remained significantly higher in
2022 than the 2016-2020 average, but saw a decline in issuances for
the first time since their inception. This reflected trends across the
fixed income market, with sustainable issuances holding steady at
5% of the global market
in both 2021 and 2022. Green bonds still
make up the largest share of issuances at 40%, closely followed by
sustainability-linked bonds, despite questions around their real-world
impact (see Box below). Although corporate issuances in the energy
and utility sectors fell slightly from 2021 levels, they were nearly
double the level seen in 2020, showing the general upward trend.
Advanced economies still account for over 80% of issuances,
although China has been the second largest issuer since 2021.
Issuances in other EMDEs marginally increased from 8% in 2020 to
10% in 2022. Where EMDE issuances do occur, they are still
dominated by hard currency, making them more appealing to
international investors but exposing them to foreign exchange risk.
Trends in Europe, China and the United States indicate that 2023 is
likely to see a continuing high level of issuances. In Europe, the
European Central Bank – the largest buyer of corporate bonds – has
committed to tilt its corporate bond purchases to green, which is likely
to result in higher spreads for heavy emitters, and further
demonstrate the pricing benefits of green issuances. Meanwhile the
release of China’s Green Bond Principles in July 2022 and the
Common Ground Taxonomy that outlines commonalities with the EU
taxonomy is likely to spur further growth in China’s green bond
market. Green bond issuances in the United States are also likely to
be boosted by the Inflation Reduction Act, as incentives drive clean
energy project development. Alongside these regulatory tailwinds,
higher interest rates are likely to push more towards sustainable debt
issuances due to the possibility of a “greenium”, i.e. a pricing benefit
based on the issuance’s green credentials.
An interesting development is that labelled green loans had been
relatively static since 2019, totalling between USD 90-100 billion, but
rose by nearly 20% in 2022 as more sectors outside energy and
utilities began adopting them. Green loans play an important role in
part because they are smaller instruments than bonds and hence
have a wide array of uses, including in EMDEs. Despite the rise in
green loans, banks are still providing more support to fossil fuels. A
report from Bloomberg
found that in 2021 (latest available data),
banks lent 81 cents for financing low-carbon energy supply for every
one dollar they provided to fossil fuels. The report found large
regional variations based on supply conditions and regulations,
ranging from a ratio of 2.6:1 in Europe to 0.1:1 in Africa and the
Middle East.
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Sustainability-linked bonds
Sustainability-linked bonds (SLBs) provide a flexible way for
companies or governments to access the green debt market,
especially those in sectors that are difficult to decarbonise or
those that need to implement organisation-wide
decarbonisation measures
. These bonds are like traditional
bonds but have a unique structure where the interest paid to
bondholders can vary based on the issuer’s achievement of
certain sustainability targets, such as reducing emissions
intensity or absolute emissions reductions.
Unlike green bonds, SLBs do not require strict reporting on the
use of proceeds, making them available to a wider range of
companies and governments who may otherwise struggle to
identify enough projects that would meet the use of proceeds
limitations. SLBs have been used by a wide variety of industries
including fossil fuel power operators, notably in China, and
utilities in Europe. Chile and Uruguay
piloted the issuance of
sovereign SLBs linked to GHG reduction targets.
SLBs can serve as valuable source of t
ransition finance,
although there have been occasional instances where concerns
have been raised regarding the perceived justification of the
financial benefits enjoyed by issuers, for instance in the case
where the specified sustainability targets
are already met at the time of issuance. Or when companies with
higher emission profiles use these bonds
while having less
ambitious decarbonisation targets than their peers.
Analysis has also shown
that, on average, the savings from
reductions in the cost of debt tended to exceed the maximum
potential penalty that issuers would need to pay in case of failure
of the sustainability performance target. The credibility
of SLBs
would benefit from standardisation and clearer regulation, through
initiatives such as the ICMA Sustainability-Linked Bonds Principles
that help hold governments and companies to their climate
commitments.
SLB issuance by sector and country, 2019-2022
IEA. CC BY 4.0.
Source: IEA analysis based on data from BNEF (2023).
15
30
45
60
75
2019
2020 2021 2022
Transport Utilities North America Europe
Industry Fossil fuels Other EMDEs China
Power generation
Renewable energy
SLBs issuance by sector
Billion USD (2022)
15
30
45
60
75
2019 2020 2021 2022
SLBs issuance by geography
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Finance
After a slow start, sovereigns issuances have more than doubled since 2020, providing a useful
tool to raise lower-cost capital and to drive sustainable practices within local capital markets
The first sovereign green bonds were issued in 2017 by Poland and
France, and since then there have been 41 new issuers, many of
whose bonds have been oversubscribed. Sovereigns have grown
from 4% of total sustainable debt issuances in 2017 to 7% in 2022.
Much of the growth has been in hard currency, and European
governments make up over half of issuances. There is significant
potential for further growth, with sustainable debt issuances between
2017 and 2021 accounting for only 0.5% of total sovereign issuances
.
The long tenors and pricing advantages of sustainable debt make
them a useful tool for governments. The longest green bond issuance
came from Singapore in August 2022 when the government raised
SGD 2.4 billion (USD 1.7 billion) with a 50-year tenor. As with
corporate issuances, most sovereign green bonds have attracted
lower yields than comparable vanilla bonds. This can be particularly
valuable in middle-income countries that do not have easy access to
concessional debt but where the debt burden remains high.
Despite their benefits, challenges remain. “Use of proceeds” bonds
have been slower to take hold with sovereigns because of concerns
around fungibility. Public finance management practices, sometimes
enshrined in law, may preclude the use of funds for a specific
purpose. This is driving the rise of sustainability or sustainability-
linked bonds, which provide more flexibility.
Sovereign sustainable debt issuances, 2017-Q1 2023
IEA. CC BY 4.0.
Sources: IEA analysis based on data from Bloomberg and Refinitiv (2023).
Beyond providing a useful source of public finance, sovereign
issuances play a key development role for local capital markets.
Notably, 38 countries that have issued sovereign green or
sustainable bonds have also announced green bond frameworks in
line with the International Capital Market Association principles. Often
facing higher levels of scrutiny, sovereign issuances are able to
demonstrate best practices, such as the use of external reviewers,
mandatory impact assessments, and rules on the share of capital
raised that can be used for refinancing versus new investments.
4%
8%
12%
16%
20%
25
50
75
100
125
2017 2018 2019 2020 2021 2022 Q1 2023
Billion USD (2022)
Other EMDEs
China
Advanced
economies
Sovereigns as
share of
sustainable
debt (right axis)
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Finance
Sovereign green bonds in EMDEs have benefited from a greenium, demonstrating their value
as a tool for governments that already have high debt burdens
Yield curve of sovereign bonds from selected emerging and developing countries
IEA. CC BY 4.0.
Sources: IEA analysis based on data from Refinitiv and Bloomberg (2023).
7.0%
7.1%
7.2%
7.3%
7.4%
7.5%
0 5 10 15
Duration
Yield
Yield
curve
8%
10%
12%
14%
16%
0 2 4 6 8
Yield (as of 27 February 2023)
Duration
9.5%
10.0%
10.5%
11.0%
11.5%
12.0%
12.5%
0 2 4 6
Duration
Nigeria
Colombia
India
Green
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Finance
Sovereign bonds can have knock-on effects for green corporate bonds and domestic currency
financing from both local and international sources
EMDE governments have used green bonds to raise local currency
financing for infrastructure projects, and even without an investment-
grade rating, they have benefited from the greenium. Green bonds
are likely to be most applicable to countries that have reasonable
debt sustainability and have a growing domestic capital market.
Nigeria: The Nigerian government launched the Green Bond Market
Development Programme in 2017. So far, under the programme
there have been two sovereign issuances with a combined value of
NGN 25.7 billion (USD ~70 million) and four corporate issuances
totalling NGN 32.7 billion (USD ~72 million). The 2017 sovereign
green bond was the first of its kind in Africa and was followed by a
second in 2019. Both bonds achieved a greenium and were used to
support projects in renewable energy, primarily rooftop solar and
rural electrification, and afforestation. However, questions have been
raised about the implementation of projects and reporting has not
been made available on the environmental impact of the bond
proceeds. Ensuring best practices on reporting is likely to increase
confidence in the market, particularly among international investors.
Colombia: In September 2021 the Colombian government released
a national green taxonomy, followed by a COP 750 billion
(USD 200 million) green bond. Originally planned at COP 500 billion,
the bond was upsized after being 4.6 times oversubscribed by
investors. At the time of issuance, it was estimated that the bond
secured a greenium of 7 basis points (bps). A second sovereign
green bond was issued a month later, with the government estimating
a 15 bps greenium. Roughly 40% of the bond investors were
domestic, demonstrating their comfort with this type of instrument
and having knock-on positive effects for corporate green issuances.
Proceeds from the bonds will support the development of sustainable
transport systems and renewables, among other environmental
goals.
India: In late 2022 the Indian government launched the country’s first
green bond – an INR 80 billion (USD 1 billion) deal divided equally
into a 5-year and a 10-year tranche. The deal was 4 times
oversubscribed, and a month after the initial offering, both tranches
were reopened for a further INR 40 billion (USD 500 million). The
proceeds will be spent on a variety of renewable power projects, low-
emissions hydrogen, public transport and afforestation. Both the
initial offerings and the reopening attracted a greenium of 5-6 bps,
although these have reduced over time due to illiquidity in the market.
Alongside pricing, one of the primary benefits of these instruments is
tapping into new financing sources. Many of the corporate green
bond issuances in India have previously been in US dollars, and it is
likely that the government is hoping the sovereign issuances will help
develop a local market. The majority of investors were domestic, with
foreign investors seemingly deterred by the currency risk.
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Acknowledgements
This report was prepared by the Energy Investment Unit in the Energy
Supply and Investment Outlook (ESIO) Division of the Directorate of
Sustainability, Technology and Outlooks (STO). It was designed and
directed by Tim Gould, Chief Energy Economist, and Jonathan
Coppel, Head of the Energy Investment Unit. Tanguy de Bienassis
coordinated the report and led the section on end use and efficiency.
Lucila Arboleya, David Fischer and Alana Rawlins Bilbao led the
analysis of the power sector. Christophe McGlade, Paul Grimal and
Peter Zeniewski were the main authors of the section on fuel supply;
Simon Bennett led the R&D and technology innovation section;
Emma Gordon led the section on energy finance; Ryszard Pospiech
co-ordinated modelling and data across sectors. Musa Erdogan
contributed to the overview and data visualisation. Eleni Tsoukala
provided essential administrative support.
The report benefited greatly from contributions from other experts
within the IEA: Carlos Alvarez (coal), Heymi Bahar (renewables),
Jose Miguel Bermudez Menendez (hydrogen), Piotr Bojek
(renewables), Stéphanie Bouckaert (demand modelling), Eric
Buisson (critical minerals), Clara Camarasa (buildings), Elizabeth
Connelly (transport), France d'Agrain (cross-cutting support), Chiara
Delmastro (buildings), Michael Drtil (power), Stavroula
Evangelopoulou (hydrogen), Mathilde Fajardy (CCUS), Alexandre
Gouy (batteries), Ian Hamilton (buildings), Jérôme Hilaire (oil and
gas), Paul Hugues (industry), Marco Iarocci (industry), Tae-Yoon Kim
(refining & critical minerals), Silvia Laera (buildings), Jean-Baptiste
Le Marois (R&D and technology innovation), Suzy Leprince (R&D
and technology innovation), Yannick Monschauer (heat pumps),
Aloys Nghiem (R&D and technology innovation), Sungjin Oh
(buildings), Francesco Pavan (hydrogen), Apostolos Petropoulos
(transport), Amalia Pizarro (R&D and technology innovation),
Cornelia Schenk (buildings), Siddharth Singh (cross-cutting support),
Jacob Teter (transport), Brent Wanner (power).
Internal reviewers:
Alessandro Blasi, Toril Bosoni, Laura Cozzi, Dan Dorner, Rebecca
Gaghen, Kevin Lane, Gergely Molnar, Brian Motherway, Uwe
Remme, Thomas Spencer and Daniel Wetzel.
Thanks also to Jad Mouawad, Curtis Brainard, Poeli Bojorquez,
Astrid Dumond, Jethro Mullen, Isabelle Nonain-Semelin and Therese
Walsh of the Communications and Digital Office. Justin French-
Brooks edited the manuscript and Charner Ramsey designed the
cover.
This report could not have been achieved without the support and co-
operation provided by donors to the IEA Clean Energy Transitions
Programme (CETP) that endorsed the 2022 Joint Commitment,
notably: Australia, Belgium, Canada, Denmark, France, Germany,
World Energy Investment 2023
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Annex
Ireland, Italy, Japan, the Netherlands, Spain, Sweden, Switzerland,
United Kingdom, United States and the European Commission, on
behalf of the European Union. The financial assistance of the
European Union was provided as part of its funding of the Clean
Energy Transitions in Emerging Economies (CETEE) program within
the CETP.
Many experts from outside of the IEA provided input, commented on
the underlying analytical work, and reviewed the report. Their
comments and suggestions were of great value. They include:
Marina Albuquerque
BTG Pactual
Antoni Ballabriga
BBVA
Harmeet Bawa
Hitachi Energy
Nathan Bock
Chevron
Rina Bohle Zeller
Vestas, Denmark
Barbara Buchner
Climate Policy Initiative
Mick Buffier
Glencore
Anne-Sophie Castelnau
ING
Ryan Castilloux
Adamas Intelligence
Kanika Chawla
SE 4 All
Michael Chen
Oxford Institute for Energy Studies
Deirdre Cooper
Ninety-One
Charlie Donovan
Impax Asset Management
Masayuki Fujiki
MUFG, Japan
Charlotte Gardes
International Monetary Fund
Pablo Gonzalez Gascon
Iberdrola
Francesca Gostinelli
ENEL
Adil Hanifa
EBRD
Lucy Heintz
Actis
Jim Henderson
Oxford Institute for Energy Studies,
United Kingdom
Andrew Herscowitz
U.S. International Development
Finance Corporation
Ronan Hodge
GFANZ
Sean Kidney
Climate Bonds Initiative
Francisco Laveron
Iberdrola
Evan Li
HSBC
Akos Losz
Columbia University
Elchin Mammadov
MSCI
Antonio Merino Garcia
Repsol
Irene Monasterolo
EDHEC Business School
Peter Morris
Minerals Council, Australia
World Energy Investment 2023
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Annex
Arjun N. Murti
Baysa Naran
Warburg Pincus LLC
Climate Policy Initiative
Tiago Oliveira
EBRD
Filippo Ricchetti
Eni
Simone Ruiz-Vergote
MSCI
John Scott
Zurich Insurance Group
Gireesh Shrimali
Oxford University
Bjarne Steffen
ETH Zurich
Jonathan Stein
Hess Corporation
Akhilesh Tilotia
National Investment and
Infrastructure Fund
Swami Venkataraman
Moody's Investors Service
Namita Vikas
Gerhard Wagner
auctusESG
Swisscanto
Rachel Williams
Oxford University
Betsy Winnike
Boston Counsulting Group
Kelvin Wong
DBS Bank
Ryo Yamasaki
Mizuho Financial Group
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Annex
Abbreviations and acronyms
ADNOC
Abu Dhabi National Oil Company
APS
Announced Pledges Scenario
BEV
Battery-Electric Vehicles
CAGR
Compound Annual Growth Rate
CCGT
Combined-Cycle Gas Turbine
CCUS
Carbon Capture, Utilisation and Storage
CO
2
Carbon Dioxide
CVC
Corporate Venture Capital
DAC
Direct Air Capture
EMDE
Emerging Markets and Developing Economies
ESG
Environmental, Social, and Governance
ETF
Exchange-Traded Fund
ETS
Emissions Trading Scheme
EUR
Euro
EV
Electric Vehicle
FID
Final Investment Decision
FSRU
Floating Storage Regasification Unit
GBP
British Pound Sterling
GHG
Greenhouse Gas
ICE
International Combustion Engine
ICT
Information and Communications Technology
IPCEI
Important Projects of Common European Interest
IT
Information Technology
LCE
Lithium Carbonate Equivalent
LCOE
Levelized Cost of Electricity
LNG
Liquified Natural Gas
MENA
Middle East and North Africa
NOC
National Oil Companies
NZE
Net Zero By 2050 Scenario
OCGT
Open-Cycle Gas Turbine
OECD
Organisation For Economic Co-Operation and Development
OPEC
Organization of The Petroleum Exporting Countries
PACE
Property-Assessed Clean Energy
PHEV
Plug-In Hybrid Electric Vehicle
PV
Photovoltaic
R&D
Research and Development
RD&D
Research, Development and Demonstration
SES
Solid Energy Systems
SOE
State-Owned Entity
STEPS
Stated Policies Scenario
USD
United States Dollar
VC
Venture Capital
WEI
World Energy Investment
Units of measure
g
Gram
GW
Gigawatt
GWh
Gigawatt Hour
kg
Kilogram
mb/d
Million Barrels of Oil per Day
MBtu
Million British Thermal Units
Mt
Million Tonnes
World Energy Investment 2023
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MW
Megawatt
MWh
Megawatt Hour
TWh
Terawatt Hour
Annex
International Energy Agency (IEA)
This work reflects the views of the IEA Secretariat but does not
necessarily reflect those of the IEA’s individual member countries or
of any particular funder or collaborator. The work does not
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IEA makes no representation or warranty, express or implied, in
respect of the work’s contents (including its completeness or
accuracy) and shall not be responsible for any use of, or reliance
on, the work.
Subject
to the IEA’s Notice for CC-licenced
Content, this work is
licenced under a Creative Commons Attribution 4.0 International
Licence.
This document and any map included herein are without prejudice
to the status of or sovereignty over any territory, to the delimitation
of international frontiers and boundaries and to the name of any
territory, city or area.
Unless otherwise indicated, all material presented in figures and
tables is derived from IEA data and analysis.
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