(Bloomberg) —
Data is like milk: It doesn’t stay fresh for long. What’s true of major economic data, such as gross domestic product, is also true of data on climate technology finance.
BloombergNEF late last month updated its Energy Transition Investment Trends report, a 100-page almanac of the cleaning and greening of major industries. It provided new insights into what we thought was going on in prior years — and suggests what to keep an eye on in 2024. Here are five of the most interesting and timely findings.
1. Objects in mirror may be larger than they appear
Last April Bloomberg Green published a story saying 2022 was the first year that investment in the energy transition leaped across 12 zeroes. But it turns out that was wrong.
That $1.1 trillion invested in the energy transition in 2022? Today, it looks more like it was $1.5 trillion, setting the stage for the 2023 grand total of $1.8 trillion, BloombergNEF reported. The amount first exceeded $1 trillion in 2021.
Last year brought even greater recognition of the power grid’s centrality to renewable power. All the wind turbines and solar arrays in the world can’t overtake fossil energy if they don’t plug into anything. And the so-called interconnection queue has been sufficiently slow to raise concerns about electrons (and investment) potentially going to waste.
For 2023, analysts included grid investment as energy transition. That added $310 billion to BNEF’s energy transition tally, and consequently an average of $290 billion to the prior three years.
“We’ve had investment in power grids for 100 years,” said Albert Cheung, deputy chief executive officer of BloombergNEF. “But the story of power grids being central to the energy transition has really emerged over the last three or four years.”
2. Cutting your own emissions matters. A lot
It’s more and more visible from the numbers. The swell of consumer demand for electric cars and renewable power shows up unambiguously in finance flows. It’s making small companies bigger and attracting new ideas and capital.
The world put $634 billion toward electric vehicles and charging tech in 2023, or 85% of its total investment in clean technologies that consume energy, according to BloombergNEF. It drew more spending than renewables for the first time.
Batteries continue to grow, too. In Europe, utility- and household-scale energy storage rose 64% last year, to $8.4 billion, after Russia’s war in Ukraine caused energy prices to spike. Household bills soared with them, and many discovered that solar power with battery storage suddenly made sense.
“Consumers vote with their feet,” Cheung said. “If suddenly there’s an economic tipping point that makes technologies make sense, consumers do respond to that.”
Heat pump spending fell 4% in 2023, to $63 billion, despite growth in Europe. Much harder to track are lifestyle trends, such as cutting meat consumption, that don’t show up in data the way capital expenses do.
Baysa Naran, a manager in Climate Policy Initiative’s London office, leads its annual Landscape of Climate Finance report (which also updates its prior analyses with new data). The group found that nearly a third of private spending on climate came from households, she said.
3. Blow, wind, blow
Higher interest rates, supply chain turbulence and other headaches (looking at you, Jones Act) generated a small library of stories in the last year about trouble in the wind industry.
Yet wind investment in 2023 hit a new peak of $217 billion. Offshore wind grew to $77 billion, while onshore spending dropped 17% below 2022, to $140 billion.
This new record would appear to exceed expectations of a wind apocalypse. What gives?
Developers and customers who had negotiated their price levels, but not yet locked them in, saw deals fall apart when myriad pressures pushed costs up. But a next round of deals incorporated the new and still-competitive prices into new agreements, promising continued growth in the industry.
4. Goodbye 1.5C, hello again net zero?
There’s a reason the world is going through an energy transition, and it’s important when data-diving not to lose sight of it: eliminating greenhouse gas emissions.
From the perspective of a decade ago, the gains in clean energy and climate tech are miraculous. From the likely perspective of a decade hence, the transition is moving way too slowly. BloombergNEF finds that investment needs to triple to start aligning with its net zero scenario. Climate Policy Initiative, which has a tighter focus on greenhouse gas emissions reductions and includes adaptation finance, projects the need for a fivefold jump as soon as possible.
Temperatures are the ultimate transition scorecard. The 2023 global average temperature came in a hair above or below 1.5C hotter than the preindustrial average, depending on the dataset. The Paris Agreement’s 1.5C heating limit isn’t technically dead until the global average passes it as a 20-year average.
So: Expect to hear less about staying under 1.5C and more about reaching net zero. Not that that will be easy.
“We work really hard to try and make sure our net zero scenario is plausible,” Cheung said. “And each time we do it, we have to refine it and adjust it, too, and I’m not gonna lie, it gets harder and harder to bend that curve.”
5. Plenty of good work left to do
Despite that cloud above our heads, “good climate news” is less of an oxymoron all the time. To cite just one recent example, Cheung pointed to the refining of lithium, cobalt and nickel, metals that are crucial to making batteries.
It wasn’t obvious there’d be enough investment in it as recently as two years ago. Then commodity markets did their job. High commodity prices prompted needed funding, Cheung said: “We now are able to say that through our work there is sufficient investment, which is great, isn’t it?”
To contact the author of this story:
Eric Roston in New York at eroston@bloomberg.net
© 2024 Bloomberg L.P.
