Investments in Renewables Reach New High in 2022 But Need Massive Increase

Solar farm

Global investments in energy transition technologies achieved a historic milestone by reaching a record high of $1.3 trillion in 2022, a 19% increase over 2021 and a 50% jump from the pre-pandemic levels of 2019, according to the International Renewable Energy Agency (IRENA).

Despite the record-high investments, it is crucial to note that annual investments must increase over four-fold to stay on course toward the 1.5°C scenario, the agency said in a report.

The world must aim for average annual investments of $5.7 trillion between 2021 and 2030 and $3.7 trillion between 2031 and 2050 to successfully transition to sustainable energy sources, the report said.

Despite facing various economic, social, and geopolitical obstacles, the world’s investments in renewable energy generation have maintained an upward trajectory that started in 2018.


The latest data indicates that investments in this sector hit a new high in 2021, reaching $430 billion, representing a 24% surge from the previous year. Furthermore, in 2022, these investments experienced an additional 16% boost, nearing $500 billion.

Despite the overall growth in annual renewable energy generation investments, IRENA said it is important that these investments have been primarily concentrated in the power sector. Between 2013 and 2020, power generation assets received, on average, 90% of renewable investments each year and as much as 97% in 2021 and 2022.

Solar most popular with investors

Within the power sector, solar and wind technologies have consistently been the most popular choices for investors. Solar photovoltaic alone attracted 43% of total investments in 2020, followed by onshore and offshore wind, which attracted 35% and 12%, respectively.

The private sector has been the primary source of global investments in renewable energy, contributing roughly 75% of the total investments between 2013 and 2020. The balance between public and private investments varies depending on the technology and context.

Generally, a smaller portion of public finance is allocated to renewable energy technologies that are commercially viable and highly competitive, which makes them attractive to private investors. For example, in 2020, private finance accounted for 83% of commitments in solar photovoltaics. Conversely, geothermal and hydropower tend to rely mostly on public finance, with only 32% and 3% of investments in these technologies, respectively, coming from private investors in 2020.

This disparity, IRENA said, reflects the different risk-return profiles of various renewable energy technologies and the need for targeted policies to address market barriers and mobilize private capital.

Recently, in a report, renewable energy company Masdar found that decarbonization budgets are a significant source of concern, with less than a third of executives from ‘hard-to-abate’ industries saying they have adequate budgets to finance their decarbonization efforts. Masdar said reducing emissions in hard-to-abate industries like cement, steel, aluminum, petrochemicals, shipping, aviation, heavy industry, and manufacturing was crucial in the effort to mitigate climate change.

Fossil fuel financing

Despite the urgent need for an energy transition that aligns with the 1.5°C Scenario, redirecting $700 billion annually from fossil fuels to energy-transition-related technologies, fossil fuel investments have continued to increase.

In 2020, global fossil fuel investments declined by 22%, falling from the $1 trillion invested in 2019, largely because of the COVID-19 pandemic’s effect on the energy market. However, the bounce-back in 2021 was swift, with fossil fuel investments rising by 15% to $897 billion. Preliminary data for 2022 indicate that fossil fuel investments may have nearly recovered to their pre-pandemic levels, reaching $953 billion.

Despite the urgency to address climate change and shift to renewable energy, most investments in the energy sector continue to support new oil and gas projects rather than clean energy. An estimated $570 billion per year is projected to be spent on new oil and gas development and exploration until 2030, a significant obstacle to achieving a sustainable and low-carbon energy future.

Over the six years following the Paris Climate Agreement, some of the largest multinational banks increased their investments in fossil fuels, averaging about $750 billion annually. The world’s 60 biggest commercial banks collectively invested more than $4.6 trillion in fossil fuels between 2015 and 2021, with over a quarter of this coming from US banks alone.

According to data from 2013 to 2020, global spending on fossil fuel subsidies amounted to $2.9 trillion. These subsidies provide direct and indirect financial assistance to the fossil fuel industry, which allows it to remain competitive against cleaner and more sustainable energy sources.

Total corporate funding worldwide in the solar sector, including venture capital and private equity (VC), debt financing, and public market financing, came to $24.1 billion, a decline of 13% compared to the $27.8 billion raised in 2021, according to Mercom’s Annual and Q4 2022 Solar Funding and M&A Report.