EVs Race Ahead of Renewables in Transition Investment
Feb 21, 2024
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BNEF experts discuss global investment trends in clean energy transition, highlighting record-breaking $1.5 trillion investments. Topics include clean energy supply chains, net-zero targets, and climate tech equity financing. Insightful analysis on sectors like electrified transport, renewables, hydrogen, and battery metals. Predictions indicate a rise in clean energy supply chain investments from $135 billion to $250 billion by 2025.
Investment in electrified transport sector, especially electric vehicles, surpassed renewable energy sector investment in 2023.
Clean energy supply chain investment is rapidly increasing, with focus on battery, solar, wind, and hydrogen technologies.
Deep dives
Record growth in energy transition investment
In 2022, energy transition investment reached a record $1.5 trillion, marking continuous and rapid annual growth. The energy transition investment includes spending on clean technology and infrastructure, such as renewable energy plants and electric vehicles. The total investment in 2023 reached $1.8 trillion, up 17% from the previous year and almost double the investment in 2020. The electrified transport sector, including electric vehicles and charging infrastructure, received the largest investment of $634 billion, surpassing the renewable energy sector. The wind sector also had a record year of investment, despite project cancellations in the offshore wind sector.
China leads in energy transition investment
China remains the largest market for energy transition investment, accounting for 38% of the total investment in 2023. The United States is the second-largest market, investing about $300 billion compared to China's $676 billion. However, the gap between the two countries has slightly closed due to the effects of the Inflation Reduction Act in the US. Other countries in the top 10, including European countries, Brazil, India, and Japan, also showed growth in energy transition investment. Europe, the US, and the UK together accounted for most of the global growth in investment.
Clean energy supply chain investment on the rise
Investment in clean energy supply chains has been steadily increasing, almost tripling from $46 billion in 2020 to $135 billion in 2023. This investment focuses on factories and infrastructure supporting battery, solar, wind, and hydrogen technologies, as well as mining and refining battery metals. Battery and solar factories account for the majority of investment, with about 80-90% of the total. The trend is shifting from China as other regions, especially Europe and the US, are increasing their investment in clean energy supply chains. The report predicts an increase to $250 billion by 2025.
Decline in climate tech equity financing
Climate tech equity financing saw a decline in 2023, with a 34% drop to $84 billion, following a 24% drop in 2022. This decline is mainly attributed to the lower public market valuations of clean energy companies, resulting in fewer IPOs and reverse mergers. China, the largest market for equity financing in the clean energy industry, raised about $25 billion in 2023. The decline in equity financing contrasts with the increasing trend in debt issuance for the energy transition, which reached $824 billion in 2023.
At the beginning of each year, BloombergNEF releases the Energy Transition Investment Trends report, its definitive resource on global investment in the low-carbon energy transition. Since the report’s inception a decade ago, investment levels have steadily risen, breaking the $1 trillion mark in 2021 and reaching a record $1.5 trillion in 2022. Was 2023 another record year for energy transition investment, and which sectors saw the most notable growth or decline?
On today’s show, Dana is joined by BNEF’s Deputy CEO, Albert Cheung, and Head of Technology and Innovation, Mark Daly. They discuss financing global supply chains, which clean energy technologies are on track for meeting net-zero targets, and whether climate tech equity financing has rebounded from recent lows.
Complementary BNEF research on the trends driving the transition to a lower-carbon economy can be found at BNEF<GO> on the Bloomberg Terminal, on bnef.com or on the BNEF mobile app.