G20 nations, currently with 90% of the world’s renewable capacity can triple it by 2030 through swift policy implementation. However, it is crucial as well for other nations, especially those in the developing world, to boost their renewable energy investments to fulfill its growing demand.
Theglobal commitment to renewable energydeploymentshould reach$8.3 trillionbetween 2023 and 2030to align to achieve a net-zero status by 2050. In the first half (1H) of 2023, the worldwide investments reached to $358 billion— i.e. a 22% increase from the same period in the previous year. However, this falls considerably short of the necessary amount to progress toward net zero.
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Solar investment breaks records
The outstanding performance of the first half of 2023 primarily comes from solar energy.The year witnessed a significant drop in prices for solar photovoltaic (PV) modules, decreasing by almost 50% year-on-year.About $239 billion was dedicated to investments in both large- and small-scale solar energy, as shown in Figure 1. This represented a remarkable 43% increase compared to the same period in 2022.
Thanks toChina for contributing approximately half of the investments in solar during this period. The U.S. followed at a considerable distance, with a record-breaking $25.5 billion invested in 1H 2023. In Europe, several countries witnessed increased investments due to Russia’s Ukraine invasion.
In contrast to the solar investment, there was an 8% decline in wind power investment compared to 1H 2022. Falling equipment costs and a smaller proportion of large projects still awaiting financing contribute to this decline.
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Altogether, China has retained its position as the largest market in the first half of 2023, attracting $177 billion in new renewable energy investments. The U.S. secured $36 billion, while Germany received $11.9 billion.
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Insufficient renewable energy investments for net-zero
Presently,over 3,000 companies globally have committed to setting emissions reduction strategies through initiatives like the Science Based Targets.
However, it requires not only focus on the importance of renewable energy technologies but also technologies facilitating zero-carbon initiatives. This includes residential heating, carbon capture and storage, green-hydrogen-based fuels, and industrial large-scale decarbonization.
As shown in Figure 2, the global energy investment in clean energy has shown a considerable increase between 2015 and 2023 although the investment in fossil fuels has also gained some consideration since COVID-19.
Currently, suppliers in B2B value chains are encountering stricter emissions-reduction requirements as more customers pursue net-zero strategies. These developments are likely to speed up the adoption of cleaner materials, such as low-emissions steel in the automotive industry.
Many leaders are prioritizing the establishment of environmentally sustainable businesses. McKinsey for example reports92% of executives foresee future businesses, within five years, addressing sustainability to some degree.
McKinseyalso assessed that achieving net-zero emissions by 2050 needs a 60% surge in capital expenditure on physical assets compared to present levels. The mandated investments are estimated at $9.2 trillion annually until 2050, with $6.5 trillion directed towards low-emissions assets and supporting infrastructure.
The increasing demand for net-zero solutions has the potential to create over $12 trillion in annual sales by 2030. This considers 11 different sectors, including transport ($2.3 -$2.7 trillion per year), power ($1.0- $1.5 trillion), and waste ($300-$400 billion) (see Figure 3).
Scaling up of renewable-electricity
To align with the COP28 target, tripling global renewable capacity by 2030 from 2022 levels relies on effective policy implementation.
While it might require many years and substantial governmental support, the backing for the net-zero agenda could facilitate a more rapid expansion of the next wave of green businesses.
In 2023, the global renewable electricity capacity additions surged by nearly 50%, reaching an impressive 510 GW (see Figure 4). That marks the fastest growth rate in the past two decades.
The forecast under existing policies and market conditions anticipatesglobal renewable capacity to reach 7,300 GW by 2028. However, this will encounter some challenges related to policy uncertainties, grid infrastructure, and financing, particularly in developing countries.
Challenges in renewable energy investments persists
The forecasted new renewable capacity between 2023 and 2028 will surpass the cumulative installations since the first commercial renewable energy power plant overa century ago. The economic attractiveness of these technologies and the presence of supportive policy environments fuel this growth.
Between 2023 and 2028, China is projected to deploy nearly four times more renewable electricity capacity than the EU and five times more than the U.S. as shown in Figure 5. The country is already on track to achieve its national 2030 targets for wind and solar PV installations in 2025.
Solar PV and onshore wind additions in the U.S., the EU, India, and Brazil are projected to be at least doubled by 2028 compared to the previous five years. However,the experts believe that in the global case, the projections until 2028 remain insufficient in addressing the reliance on fossil fuelsand aligning with the goals of the Paris Agreement.
Related: Solar energy facts: a win-win for businesses and the planet
Although the escalating demand for zero-carbon technologies, materials, and services is creating a fertile ground for companies to embark on innovative green ventures, the journey towards achieving net zero demands substantial and swift changes. It demands transformative strategies in the pursuit of a greener and more resilient global landscape.
