IEA Report: Global Investment Rises for Renewables, Coal Power

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Global investment in energy is expected to rise about 2% in 2025, to about US$3.3 trillion, according to a new report from the International Energy Agency (IEA). Two-thirds of that projected spending, US$2.2 trillion, will go to renewable energy, nuclear power, electric grids, low-emissions fuels, energy efficiency and electrification, double the US$1.1 trillion that is slated to be invested in oil, natural gas and coal, the agency said in its report, "World Energy Investment 2025."

Global power-generation investments are expected to be just shy of US$1.5 trillion this year, according to the IEA forecast. Slightly more than 50% of that sum, about US$800 billion, will be invested in renewables, roughly double the level of investment in 2015, IEA said. Spending on electric grids is expected to hold steady at about 20%, or US$300 billion, a sum that has not meaningfully changed in the last decade.

Click on the image at right to see a graphic of projected global investment in the power-generation sector since 2015, with an estimate for 2025.

"Nuclear investment is making a comeback," rising 50% over the last five years to exceed US$70 billion this year, IEA wrote. The agency also noted that approvals of new-build gas-power generators are rising around the world.

What's also rising rapidly is the use of coal in power generation. IEA said that China greenlighted to almost 100 gigawatts (GW) of new coal-fired plants in 2024, and India a further 15 GW, pushing global approvals to their highest level in a decade.

The agency added that investment in coal supply is slated to continue rising this year, at a 4% rate, but that is less than the 6% average annual increase in investment over the prior five years. Nearly all the growth in coal investments last year came from China and India to meet domestic demand.

"World Energy Investment 2025" estimated that investments this year in electrification and other end-use technologies, such as heat pumps, will nearly double what they were a decade ago. "Boosted by strong electric vehicle (EV) sales, progress with building renovations and the electrification of industrial processes, demand-side investment is expected to total about US$800 billion in 2025," it predicted.

The IEA warned that a lack of grid investment could delay the transition to a low-carbon global economy. "Investment in grids is struggling to keep pace with the rise in power demand and renewables deployment," the report said. Each year, approximately US$400 billion is spent on grids worldwide, compared with around US$1 trillion on generation assets.

Maintaining electricity security amid rising electricity use, the IEA noted, "requires a rapid increase in grid spending, moving towards parity with the amount spent on generation. However, this is being held back by lengthy permitting procedures, tight supply chains for transformers and cables, and--especially in developing economies--by the poor financial condition of many utilities."

Worldwide spending on fossil fuels--oil, natural gas and coal--is expected to decline slightly this year, to about US$1 trillion. That's down sharply from a decade ago but an increase over spending levels five years ago, the report forecast. This sum includes upstream activities (exploration & production), as well as downstream activities (refining & marketing).

Click on the image at right to see a graphic of global investment in fossil fuels since 2015, and a projection for 2025.

Global upstream oil and gas investments are expected to come in at less than US$600 billion this year, down slightly from spending in 2024 and 2023, but up significantly from 2020 and 2021, when the world was grappling with the COVID-19 pandemic. Upstream fossil fuel investment this year is projected to be about 33% under investment levels a decade ago.

IEA cited a lower price environment and uncertainties over future demand as reasons for the 6% year-over-year pullback in upstream spending. It expects U.S. investment in tight oil formations to decline nearly 10% this year. Better efficiencies, technologies and experience are expected to keep costs in check and increase production this year.

Click on the image at right to see a graphic of global investment in upstream oil and gas since 2015, and a projection for 2025.

The "World Energy Investment 2025" report remarked, "Investment trends are being shaped by the onset of the 'Age of Electricity' and the rapid rise in electricity demand for industry, cooling, electric mobility, data centers and artificial intelligence (AI)."

A decade ago, it continued, investments in fossil fuel supply were 30% higher than those for electricity generation, grids and storage. Today, these positions are reversed, with investment in the electricity sector outstripping by 50% investment in fossil fuels.

The report emphasized the energy security benefits of renewables, both utility-scale and smaller scale. "Amid the geopolitical and economic uncertainties that are clouding the outlook for the energy world, we see energy security coming through as a key driver of the growth in global investment this year ... as countries and companies seek to insulate themselves from a wide range of risks," IEA Executive Director Fatih Birol said in a statement accompanying the June 5 release of the report.

Birol noted that some investors are taking a "wait and see" approach to new energy investments, given geopolitical, trade and economic uncertainties, but this reticence has yet to significantly impact plans for new investment.

"When the IEA published the first ever edition of its 'World Energy Investment' report nearly ten years ago, it showed energy investment in China in 2015 just edging ahead of that of the United States," Birol said. "Today, China is by far the largest energy investor globally, spending twice as much on energy as the European Union--and almost as much as the EU and United States combined."

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