The world needs $35 trillion in investment for a successful energy transition, warns the International Renewable Energy Agency (IRENA).
IRENA’s latest report, dubbed the World Energy Transitions Outlook 2023 Preview, has noted that the world is currently off-track in achieving a successful energy transition, noting that the current scale and extent of change is far short of the 1.5°C pathway needed to address the global climate crisis.
While the power sector has made progress, with renewables accounting for 40% of installed power generation globally and contributing to 83% of global power additions in 2022, deployment levels must grow from 3,000 GW to over 10,000 GW in 2030 to keep 1.5°C alive.
However, deployment is limited to certain parts of the world, with China, the European Union, and the United States accounting for two-thirds of all additions in 2022, leaving developing nations further behind.
Francesco La Camera, Director General of IRENA, emphasised that “pursuing fossil fuel and sectoral mitigation measures is necessary but insufficient to shift to an energy system fit for the dominance of renewables.” The report calls for a new approach, with the emphasis shifting from supply to demand and overcoming structural obstacles impeding progress.
The report also warns that a lack of progress further increases investment needs and calls for a systematic change in the volume and type of investments to prioritise the energy transition.
Although global investment in energy transition technologies reached a record $1.3 trillion in 2022, yearly investments must more than quadruple to over $5 trillion to stay on the 1.5°C pathway. By 2030, cumulative investments must amount to $44 trillion, with transition technologies representing 80% of the total or $35 trillion, prioritising efficiency, electrification, grid expansion, and flexibility.
The report also calls for public sector intervention to channel investments towards countries in a more equitable way. In 2022, 85% of global renewable energy investment benefitted less than 50% of the world’s population, with Africa accounting for only 1% of additional capacity. The report suggests a fundamental shift in the support to developing nations, putting more focus on energy access and climate adaptation.