$44trn investment required for successful energy transition by 2030 

By Clara Nwachukwu 

Given the slow pace of progress, cumulative investments of up to $44 trillion would be required by 2023 to prioritise the energy transition, according to the World Energy Transitions Outlook Preview 2023.

Such a huge investment is essential because the global energy transition is said to be “off-track” and “aggravated by the effects of global crises,” which calls for “a fundamental course correction”.

The Preview was released yesterday by the International Renewable Energy Agency (IRENA), at the Berlin Energy Transition Dialogue (BETD), in Germany.

It warned 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.

Specifically, the report said: “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.” 

It reiterated that “A successful energy transition demands bold, transformative measures reflecting the urgency of the present situation.

“Investment and comprehensive policies across the globe and all sectors must grow renewables and instigate the structural changes required for the predominantly renewables-based energy transition.”

Noting that although global investment in energy transition technologies reached a new record of $1.3 trillion in 2022, the Preview said yearly investments must more than quadruple to over $5 trillion to stay on the 1.5°C pathway.

It maintained that “Any new investment decisions should be carefully assessed to simultaneously drive the transition and reduce the risk of stranded assets.”

Investment and comprehensive policies across the globe and all sectors must grow renewables and instigate the structural changes required for the predominantly renewables-based energy transition.

Higher stakes

In his opinion, IRENA’s Director-General, Francesco La Camera said: “The stakes could not be higher. A profound and systemic transformation of the global energy system must occur in under 30 years, underscoring the need for a new approach to accelerate the energy transition.”

He said further that “Pursuing fossil fuel and sectoral mitigation measures is necessary but insufficient to shift to an energy system fit for the dominance of renewables,” adding that “the emphasis must shift from supply to demand, towards overcoming the structural obstacles impeding progress.”

According to him, IRENA’s Preview outlines three priority pillars of the energy transition — the physical infrastructure, policy and regulatory enablers and well-skilled workforce, requiring significant investment and new ways of co-operation in which all actors can engage in the transition and play an optimal role.”

Below expectations

The Preview stressed it noted that about 41% of planned investment by 2050 remains targeted at fossil fuels.

Therefore, it urged that around $1 trillion of planned annual fossil fuel investment by 2030 must be redirected towards transition technologies and infrastructure to keep the 1.5°C target within reach.

Furthermore, public sector intervention is required to channel investments towards countries in a more equitable way.

According to the report, in 2022, 85% of global renewable energy investment benefitted less than 50% of the world’s population.

Africa for instance accounted for only one per cent of additional capacity in 2022.

IRENA’s Global Landscape of Renewable Energy Finance 2023 confirms that regions home to about 120 developing and emerging markets continue to receive comparatively little investment.

The Preview shows that the scale and extent of change falls far short of the 1.5°C pathway.

However, it admitted that progress has been made, notably in the power sector where renewables account for 40% of installed power generation globally, contributing to an unprecedented 83% of global power additions in 2022.

“But to keep 1.5°C alive, deployment levels must grow from some 3,000 gigawatt (GW) today to over 10,000 GW in 2030, an average of 1,000 GW annually.

“Deployment is also limited to certain parts of the world. China, the European Union and the United States accounted for two-thirds of all additions last year, leaving developing nations further behind,” it added.

As a result, La Camera insisted that “We must rewrite the way international co-operation works. Achieving the energy transition requires stronger international collaboration, including collective efforts to channel more funds to developing countries.

“A fundamental shift in the support to developing nations must put more focus on energy access and climate adaptation. Moving forward, multilateral financial institutions need to direct more funds, at better terms, towards energy transition projects and build the physical infrastructure that is needed to sustain the development of a new energy system.” 

IRENA’s World Energy Transitions Outlook (WETO) provides an energy transition pathway in line with Paris Agreement goals, limiting global temperature rise to 1.5°C.

The forthcoming 2023 edition will contribute to the first Global Stocktake concluding at COP28 in the United Arab Emirates and will propose effective ways to accelerate progress over the next five years towards 2030. 

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