IRENA chief warns $35trn of investment needed to fuel urgent energy transition
Francesco La Camera, IRENA’s director general, says that the global energy transition is ‘off-track’ and urgent action is needed to hit the 1.5C pathway.
A top official from the International Renewable Energy Agency (IRENA) has warned that the global energy transition is off-track, aggravated by the effects of global crises, and that bold, transformative measures are needed for a fundamental course correction in the energy transition.
Speaking during the introduction of the World Energy Transitions Outlook 2023 at the Berlin Energy Transition Dialogue (BETD), Francesco La Camera, IRENA’s director general, asserted that a successful energy transition needed investment and comprehensive policies across the globe. He highlighted that all sectors must grow renewables and instigate the structural changes required for the global energy transition, which will be predominantly renewables-powered.
“The stakes could not be higher. A profound and systemic transformation of the global energy system must occur in under 30 years, underscoring the need for a new approach to accelerate the energy transition. Pursuing fossil fuel and sectoral mitigation measures is necessary but insufficient to shift to an energy system fit for the dominance of renewables,” he said.
“The emphasis must shift from supply to demand, toward overcoming the structural obstacles impeding progress. IRENA’s Preview outlines three priority pillars of the energy transition, the physical infrastructure, policy and regulatory enablers and well-skilled workforce, requiring significant investment and new ways of co-operation in which all actors can engage in the transition and play an optimal role.”
The Preview showed that the scale and extent of change falls far short of the 1.5°C pathway, IRENA warned. While progress has been made, notably in the power sector where renewables account for 40% of installed power generation globally, contributing to an unprecedented 83% of global power additions in 2022.
In order to keep the 1.5°C pathway alive, deployment levels must grow from some 3,000 gigawatt (GW) today to over 10,000 GW by 2030, an average of 1,000 GW annually. Deployment is also limited to certain parts of the world. China, the European Union and the United States accounted for two-thirds of all additions last year, leaving developing nations further behind.
IRENA: Annual energy transition investments must quadruple
As such, although global investment in the energy transition reached a new world record of US$1.3 trillion in 2022, yearly investments must quadruple to more than $5 trillion to stay on the 1.5°C pathway. By 2030, cumulative investments must amount to $44 trillion, with transition technologies representing 80% of the total – or $35 trillion, the IRENA report added, pointing out that the priority needed to be efficiency, electrification, grid expansion, and flexibility.
Any new investment decisions should be carefully assessed to simultaneously drive the transition and reduce the risk of stranded assets, he stated.
Some 41% of planned investment by 2050 remains targeted at fossil fuels, the report pointed out. Around $1 trillion of planned annual fossil fuel investment by 2030 must be redirected towards transition technologies and infrastructure to keep the 1.5°C target within reach.
Furthermore, public sector intervention is required to channel investments towards countries in a more equitable way, Camera said. In 2022, 85% of global renewable energy investment benefitted less than 50% of the world’s population. Africa accounted for only 1% of additional capacity in 2022.
IRENA’s Global landscape of renewable energy finance 2023 confirms that regions home to about 120 developing and emerging markets continue to receive comparatively little investment, he added.
“We must rewrite the way international cooperation works. Achieving the energy transition requires stronger international collaboration, including collective efforts to channel more funds to developing countries. A fundamental shift in the support to developing nations must put more focus on energy access and climate adaptation.
“Moving forward, multilateral financial institutions need to direct more funds, at better terms, towards energy transition projects and build the physical infrastructure that is needed to sustain the development of a new energy system,” he concluded.
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