/$5.7 trillion in annual investment needed for clean energy transition

$5.7 trillion in annual investment needed for clean energy transition

High fossil fuel prices, energy security concerns and the urgency of climate change underscore the need to move faster to a clean energy system, says the World Energy Transitions Outlook 2022

Released by the International Renewable Energy Agency (IRENA), the outlook sets out priority areas and actions that must be realized by 2030 to achieve net zero emissions by mid-century. It also takes stock of progress across all energy uses and shows the “inadequate pace and scale” of the renewables-based transition. According to IRENA, short-term interventions addressing the current energy crisis must be accompanied by a steadfast focus on the mid- and long-term goals of the energy transition.

“The energy transition is far from being on track and anything short of radical action in the coming years will diminish, even eliminate chances to meet our climate goals,” said Francesco La Camera, director-general of IRENA. “Recent developments have clearly demonstrated that high fossil fuel prices can result in energy poverty and loss of industrial competitiveness. Eighty per cent of the global population lives in countries that are net importers of fossil fuels. By contrast, renewables are available in all countries, offering a way out of import dependency and allowing countries to decouple economies from the costs of fossil fuels while driving economic growth and new jobs.”

The outlook sees investment needs of $5.7 trillion per year until 2030, including the imperative to redirect $700 billion annually away from fossil fuels to avoid stranded assets. Investing in the transition would add 85 million jobs worldwide in renewables and other transition-related technologies between today and 2030, surpassing losses of 12 million jobs in fossil fuel industries.

Renewables would have to scale up massively, from 14% of total energy today to around 40% in 2030. Global annual additions of renewable power would triple by 2030 as recommended by the Intergovernmental Panel on Climate Change (IPCC). At the same time, coal power would have to be replaced, fossil fuel assets phased out and infrastructure upgraded.

The outlook sees electrification and efficiency as key drivers of the energy transition, enabled by renewables, hydrogen and sustainable biomass. End-use decarbonization will take center stage, with many solutions available through electrification, green hydrogen and the direct use of renewables. Electromobility is seen as driver of energy transition progress, growing the sales of electric vehicles to a global fleet 20 times bigger than today.

However, a comprehensive set of cross-cutting, structural policies covering all technological avenues and just transition objectives is needed to achieve the necessary deployment levels by 2030. Particularly, the world’s largest energy consumers and carbon emitters from the G20 and G7 must show leadership and implement ambitious plans and investments domestically and abroad. They would need to support the global supply of 65% renewables in power generation by 2030.

Finally, enabling a rapid transition that complies with climate and development goals requires political commitment to support the highest level of international cooperation. A holistic global policy framework can bring countries together to enable international flow of finance, capacity and technologies.

How is hydropower included?

The report says hydropower continues to be the largest renewable power source in terms of installed capacity, at 1,230 GW in 2021. However, hydropower capacity needs to increase to 1,500 GW, 30% more than in 2020, and double to around 2,500 GW by 2050.

One of hydropower’s strengths is that it provides flexibility and reliable support for power systems with rising shares of variable renewable energy sources like wind and solar PV. However, IRENA acknowledges that, “Most regions of the world face difficulties in ensuring the accessibility and reliability of hydropower.”

The IRENA report also touches on pumped hydro storage technology, saying policies to integrate needed technologies should include financial support for flexible grids and pumped hydro.

Ocean power (wave and tidal) is also included in the report, as an “other renewable power technology,” like bioenergy, geothermal and solar thermal. However, these technologies account for less than 5% of the renewables market, so “strong R&D efforts will be needed in coming decades to bring their costs down and expand their share.”
By Elizabeth Ingram