Investment in Asia in clean power production, electrification and hydrogen supercharged the global energy transition spend to record levels last year, accounting for almost half of record $755bn capital spend, according to latest calculus from BloombergNEF (BNEF).
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Worldwide investment in renewables, nuclear, energy storage, and electrified transport and heat tallied up to $731bn, up 27% on last year’s total, said the analyst group in Energy Transition Investment Trends 2022, with hydrogen, carbon capture and storage, and sustainable materials making up the remaining $24bn.
But this unprecedented channelling of capital, the report found, would still need to triple to $2.1trn a year through to 2025 and double again to over $2.1trn between 2026-2030, to underpin reaching net zero globally by 2050, in line with a temperature rise 1.75℃ above pre-industrial levels, as scoped-out in the 2015 Paris climate agreement.
Wind and solar power sectors continue to be top of the table in global investment terms, seeing a new industrial best-ever of $366bn committed in 2021, up 6.5% on the year before. Electrified transport - encompassing electric vehicles and charging infrastructure – saw the second-largest sector spend, with $273bn invested.
“The global commodities crunch has created new challenges for the clean energy sector, raising input costs for key technologies like solar modules, wind turbines and battery packs,” said Albert Cheung, head of analysis at BloombergNEF.
“Against this backdrop, a 27% increase in energy transition investment in 2021 is an encouraging sign that investors, governments and businesses are more committed than ever to the low-carbon transition, and see it as part of the solution for the current turmoil in energy markets.”
Matthias Kimmel, head of energy economics at BNEF, said: “The world is rapidly running out of carbon budget to meet the goals of the Paris Agreement. The energy transition is well underway, and moving faster than ever, but governments will need to mobilise much more finance in the next few years if we are to get on track for net zero by 2050.”
The report – BNEF’s annual accounting of the financial commitments of businesses, banks and investment houses, governments, and end-users to their transitions to clean energy operations – highlights that record sums were invested in all three major geographic regions: Asia Pacific (APAC); Europe, Middle East & Africa (EMEA); and the Americas.
At £368bn, APAC was both the largest region for investment at that with the greatest growth (38% ) last year. APAC countries now hold down four of the top ten places in BNEF’s energy transition investment league table. Energy transition spending in EMEA climbed by 16% in 2021, to $236bn, while the Americas saw investment grow by 21% to $150bn.
China again held the title for the largest single country-level energy transition spend, with commitments of $266bn notched up in the last 12 months. The US was second in 2021 with $114bn, and the EU bloc of member states’ investment was over $154bn.
Germany, the UK and France rounded out the top five countries for energy transition investment last year.
On top of the topline $755bn energy transition spend, BNEF in its report also calculated climate-tech corporate finance growing to $165bn in 2021 – a category of investment involving new equity financing raised from public markets or private investors that is expected to be used to scale up these companies’ operations and further develop their technologies.
Claire Curry, head of technology and innovation at BNEF, said: “There has never been more capital available to companies tackling the hardest aspects of the climate challenge.
“It is true that we have solutions ready to deploy today, but there is still the need for continued innovation. All forms of corporate finance will play an important role in helping develop and scale climate-tech in the coming decade.”