The global energy transition is “off-track”, aggravated by the effects of world-wide crises, says the International Renewable Energy Agency (IRENA) in a new report. A renewables investment of $35 trillion by 2030 is needed for a successful energy transition.
The agency’s new World Energy Transitions Outlook Preview warns of a dramatic lack of progress, and calls for strategic shift in the energy transition to sustain a 1.5°C climate target.
IRENA is an inter-governmental organisation that promotes the adoption of renewables.
The report noted that progress has been made, notably in the power sector where renewables now 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 GW today to more than 10,000 GW in 2030, an average of more than 1,000 GW annually.
Deployment has so far been limited to certain parts of the world. China, the European Union and the US accounted for two-thirds of all additions in 2022, leaving developing nations further behind, said IRENA.
The report 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.
IRENA 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. Pursuing fossil fuel and sectoral mitigation measures is necessary but insufficient to shift to an energy system fit for the dominance of renewables.”
“The emphasis must shift from supply to demand, towards overcoming the structural obstacles impeding progress. 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.”
Although global investment in energy transition technologies reached a new record of $1.3 trillion in 2022, yearly investments must more than quadruple to more than $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.
Any new investment decisions should be carefully assessed to drive the transition and reduce the risk of stranded assets simultaneously. Some 41% of planned investment by 2050 remains targeted at fossil fuels. Around $1 trillion of planned annual fossil fuel investment by 2030 must be redirected towards transition technologies and infrastructure to keep the Paris Agreement’s 1.5°C target within reach.
Public sector intervention is required to channel investments towards countries in a more equitable way. In 2022, 85% of global renewable energy investment benefited less than 50% of the world’s population. Africa accounted for only 1% of additional capacity in 2022. IRENA’s Global Landscape of Renewable Energy Finance 2023 report confirms that regions that are home to around 120 developing and emerging markets continue to receive comparatively little investment, said the agency.
La Camera added: “We must rewrite the way international cooperation works. Achieving the energy transition requires stronger international collaboration, including collective efforts to channel more funds to developing countries."
He concluded: "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 to build the physical infrastructure that is needed to sustain the development of a new energy system.”