IRENA: US$5.4 trillion of annual investment is needed to support the global shift to renewables

 

  • Investment barriers are becoming the biggest hurdle to meeting the world’s 1.5 C climate target.
  • To achieve this, global investments in the energy transition must quadruple to more than €5 trillion ($5.42 trillion).

This is one of IRENA‘s main conclusions in the World Energy Transition Outlook, which the agency presented at the Berlin Energy Transition Dialogue this week in Germany.

“Two years ago we said that the window of opportunity was closing,” said IRENA Director-General Francesco La Camera. “Last year we called for a dramatic change in the way we use energy and this year we see no reason for more optimism.”

In 2022, the share of renewable energy in the global electricity mix exceeded the 80% mark.

“But that’s the only positive graphic I show,” said La Camera during the opening press conference for the Berlin Energy Transition Dialogue, which is held every year at the German Federal Foreign Office in Berlin to bring together policymakers and renewable energy companies from all over the world.

IRENA said the current growth rate is not enough to achieve the goals of the Paris Agreement. By 2030, the share of fossil fuels must be reduced from 79% in 2020 to 60%. To do this, the annual increase in renewable energy would have to be tripled.

It is not just a matter of expanding generation capacity, as all countries must be involved. A major challenge is to address investment inequality. German Foreign Minister Annalena Baerbock also noted such inequalities and said that interest rates for investments in some countries are sometimes four times higher than in Germany.

“That’s unfair,” said Baerbock, adding that leading G-7 economies have initiated the establishment of a fund at the World Bank for climate investments.

However, investments in renewable energy need companies and electricity buyers, and not just capital.

“Development must therefore go hand in hand with investment in renewables,” said La Camera.

Kenyan President William Ruto echoed similar sentiments.

“Unlike in Europe, Africa must first increase demand,” Ruto said, noting that Africa has enormous potential with electricity generation from renewable energy and a young population, Europe, on the other hand, cannot cover its energy requirements alone.

Baerbock said the world should not repeat the mistakes of the past, when countries were treated as pure raw material suppliers. She noted the example of lithium mining in Chile. Currently, a large amount of global lithium supplies come from Chile. Baerbock noted that 78% of that output goes to China, which she argued is the opposite of supply chain diversification.

“The decisions we make now will affect hundreds of millions of people over the next 1,000 years,” said German State Secretary Jennifer Morgan.

Author: Michael Fuhs

This article was originally published in pv magazine and is republished with permission.

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