Energy Transition: worldwide investment in renewables reaches new record high in 2021

Global investment in energy transition amounted to more than 755 billion U.S. dollars, the equivalent of 675 billion euro, in 2021 – a new record. This is according to the new report Energy Transition Investment Trends 2022 by analysts at Bloomberg New Energy Finance (BNEF).

BNEF noted growth in almost every area they consider as part of the energy transition, including renewables, energy storage, electrified transportation, electrified heat and hydrogen, as well as nuclear. Only in carbon capture and storage (CCS) a decline in investment was recorded, although many new projects were announced during the year.

The report shows the volume corporations, financial institutions, governments and end users invested in energy transition. Renewable energy remained the largest investment sector. It reached a new record level of $366 billion, the equivalent of 327 billion euro, in 2021 (up 6.5% on the year).

The second largest sector, with investments of US$273 billion (€244 billion), is electrified transport. BNEF considered spending on both electric vehicles and related infrastructure. With electric vehicle sales on the rise, this sector grew at a rate of 77% in 2021. It could overtake renewables in 2022. Hydrogen, CCS and all other sectors came to an investment volume of $24 billion (€21 billion) last year.

At 368 billion U.S. dollars (329 billion euro), almost half of the investments were made in the Asia-Pacific region. This region was also the leader in terms of growth adding up to an increase of 38%.

In Europe, the Middle East and Africa (EMEA), the volume rose by 16% to 236 billion U.S. dollars (211 billion euro), and in North and Latin America by 21% to 150 billion U.S. dollars (134 billion euro). China was again the largest single country for energy transition investments, with $266 billion (€238 billion) in 2021. The United States was second with US$114 billion (€102 billion). EU member states invested a combined $154 billion (138 billion euro). Germany, the United Kingdom and France round out the top five countries for energy transition investment in 2021, and Asia-Pacific countries now occupy four of the top ten spots for energy transition investment – China, Japan, India and South Korea

As strong as the growth in investment was last year, it is by no means sufficient to achieve the global climate targets. In the New Energy Outlook (NEO) 2021, BNEF outlined three alternative scenarios for reaching global zero by 2050 with global warming of 1.75 degrees. Based on this report, it can be inferred that investments will need to triple over the next four years compared to 2021 in order to achieve any of the three scenarios. After that, investments will need to double again, to an average of $4.2 trillion ($3.8 trillion) between 2026 and 2030. At current growth rates, the analysts believe the electrified transport sector has the best chance of achieving this level of investment; other sectors are less likely to succeed.

The energy transition is well underway and progressing faster than ever before, according to BNEF. But governments will need to mobilize much more funding in the coming years in order to make significant progress toward the net zero goals by 2050