Investments in Solar Power Eclipse Oil For First Time, IEA Says

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By Will Horner

Investments in solar power this year are on course to overtake spending on oil production for the first time, the foremost example of a widening gap between booming renewable energy funding and stagnating fossil fuel industries, according to the International Energy Agency.

More than $1 billion a day is expected to be invested in solar power this year, more than the total spending expected for new upstream oil projects, the Paris-based energy forecaster said in its annual World Energy Investment report.

Booming investments in solar power make it the biggest beneficiary of mushrooming spending on low-carbon emission energy projects which has included government initiatives such as U.S. President Biden’s Inflation Reduction Act as well as similar projects in Europe and China.

A total of $2.8 trillion will be invested in global energy supplies this year compared to $2.6 trillion in 2022, the IEA said. Clean energy investments comprise $1.7 trillion of the total while spending on fossil fuels makes up the remainder.

The latest figures mark a sharp divergence from prepandemic levels. For every $1 spent on fossil fuel energy this year, $1.70 will be invested into clean energy technologies when five years ago that ratio stood at around 1:1, the IEA said.

Clean energy spending has fast-outpaced spending on fossil fuels in recent years. While the $369 billion earmarked by the Inflation Reduction Act and other schemes has helped, the diminishing cost of renewable energy projects as well as soaring prices for fossil fuels has also supported the trend.

Meanwhile, despite raking in record profits thanks to soaring oil and gas prices, fossil fuel companies have shown reluctance to invest in new projects in a world in which demand for them appears to be approaching its peak.

“A new clean global energy economy is emerging,” said Fatih Birol, the IEA’s executive director, in an interview. “There has been a substantial increase in a short period of time–I would consider this to be a dramatic shift.”

Investments in clean energy and fossil fuels were largely neck-and-neck in the years leading up to the pandemic, but have diverged sharply since. While spending on fossil fuels has edged higher over the last three years it remains lower than prepandemic levels.

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