【推荐】世界能源投资2023--IEAVIP专享VIP免费

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World Energy

Investment 2023

The IEA examines the full spectrum of energy

issues including oil, gas and coal supply and

demand, renewable energy technologies,

electricity markets, energy efficiency, access to

energy, demand side management and much

more. Through its work, the IEA advocates

policies that will enhance the reliability,

affordability and sustainability of energy in its 31

member countries, 11 association countries and

beyond.

This publication and any map included herein are

without prejudice to the status of or sovereignty

over any territory, to the delimitation of

international frontiers and boundaries and to the

name of any territory, city or area.

Source: IEA.

International Energy Agency

Website: www.iea.org

IEA member countries:

Australia

Austria

Belgium

Canada

Czech Republic

Denmark

Estonia

Finland

France

Germany

Greece

Hungary

Ireland

Italy

Japan

Korea

Lithuania

Luxembourg

Mexico

Netherlands

New Zealand

Norway

Poland

Portugal

Slovak Republic

INTERNATIONAL ENERGY AGENCY

Spain

Sweden

Switzerland

Republic of Türkiye

United Kingdom

United States

The European Commission

also participates in the work

of the IEA

IEA association countries:

Argentina

Brazil

China

Egypt

India

Indonesia

Morocco

Singapore

South Africa

Thailand

Ukraine

Revised version, May 2023

Information notice found:

www.iea.org/corrections

World Energy Investment 2023

PAGE | 3

Abstract

This year’s edition of the World Energy Investment provides a full

update on the investment picture in 2022 and an initial reading of the

emerging picture for 2023.

The report provides a global benchmark for tracking capital flows in

the energy sector and examines how investors are assessing risks

and opportunities across all areas of fuel and electricity supply,

critical minerals, efficiency, research and development and energy

finance.

It focuses on some important features of the new investment

landscape that are already visible, including the policies now in place

that reinforce incentives for clean energy spending, the energy

security lens through which many investments are now viewed,

widespread cost and inflationary pressures, the major boost in

revenues that high fuel prices are bringing to traditional suppliers,

and burgeoning expectations in many countries that investments will

be aligned with solutions to the climate crisis.

IEA. CC BY 4.0.

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WorldEnergyInvestment2023TheIEAexaminesthefullspectrumofenergyissuesincludingoil,gasandcoalsupplyanddemand,renewableenergytechnologies,electricitymarkets,energyefficiency,accesstoenergy,demandsidemanagementandmuchmore.Throughitswork,theIEAadvocatespoliciesthatwillenhancethereliability,affordabilityandsustainabilityofenergyinits31membercountries,11associationcountriesandbeyond.Thispublicationandanymapincludedhereinarewithoutprejudicetothestatusoforsovereigntyoveranyterritory,tothedelimitationofinternationalfrontiersandboundariesandtothenameofanyterritory,cityorarea.Source:IEA.InternationalEnergyAgencyWebsite:www.iea.orgIEAmembercountries:AustraliaAustriaBelgiumCanadaCzechRepublicDenmarkEstoniaFinlandFranceGermanyGreeceHungaryIrelandItalyJapanKoreaLithuaniaLuxembourgMexicoNetherlandsNewZealandNorwayPolandPortugalSlovakRepublicINTERNATIONALENERGYAGENCYSpainSwedenSwitzerlandRepublicofTürkiyeUnitedKingdomUnitedStatesTheEuropeanCommissionalsoparticipatesintheworkoftheIEAIEAassociationcountries:ArgentinaBrazilChinaEgyptIndiaIndonesiaMoroccoSingaporeSouthAfricaThailandUkraineRevisedversion,May2023Informationnoticefound:www.iea.org/correctionsWorldEnergyInvestment2023PAGE3AbstractAbstractThisyear’seditionoftheWorldEnergyInvestmentprovidesafullupdateontheinvestmentpicturein2022andaninitialreadingoftheemergingpicturefor2023.Thereportprovidesaglobalbenchmarkfortrackingcapitalflowsintheenergysectorandexamineshowinvestorsareassessingrisksandopportunitiesacrossallareasoffuelandelectricitysupply,criticalminerals,efficiency,researchanddevelopmentandenergyfinance.Itfocusesonsomeimportantfeaturesofthenewinvestmentlandscapethatarealreadyvisible,includingthepoliciesnowinplacethatreinforceincentivesforcleanenergyspending,theenergysecuritylensthroughwhichmanyinvestmentsarenowviewed,widespreadcostandinflationarypressures,themajorboostinrevenuesthathighfuelpricesarebringingtotraditionalsuppliers,andburgeoningexpectationsinmanycountriesthatinvestmentswillbealignedwithsolutionstotheclimatecrisis.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE4TableofcontentsTableofcontentsIntroduction......................................................................................................5Overviewandkeyfindings.............................................................................7Powersector..................................................................................................25Overviewofpowerinvestment.....................................................................26Generation...................................................................................................31Finalinvestmentdecisions(FIDs)................................................................41Electricitygridsandbatterystorage.............................................................48Implications..................................................................................................55Fuelsupply.....................................................................................................58Overview......................................................................................................59Upstreamoilandgas...................................................................................66Midstreamanddownstreamoilandgas......................................................73Oilandgasindustrytransitions....................................................................79Low-emissionfuels.......................................................................................84Coal..............................................................................................................97Criticalminerals..........................................................................................101Implications................................................................................................105Energyenduseandefficiency...................................................................108Buildings.....................................................................................................111Transport....................................................................................................117Industry......................................................................................................124Implications................................................................................................128R&Dandtechnologyinnovation................................................................131SpendingonenergyR&D..........................................................................133VCfundingofearly-stageenergytechnologycompanies.........................141Implications................................................................................................150Sustainablefinance.....................................................................................154Overview....................................................................................................155Sustainableinvesting.................................................................................159Sustainabledebtissuances.......................................................................166Annex............................................................................................................174IEA.CCBY4.0.WorldEnergyInvestment2023PAGE5IntroductionIntroductionIEA.CCBY4.0.WorldEnergyInvestment2023PAGE6IntroductionAturningpointforenergyinvestment?ThisnewWorldEnergyInvestment2023(WEI2023)reportistheeighthinourannualserieswhereweprovidetheglobalbenchmarkfortrackingcapitalflowsintheenergysector.Thelastfewyearshavebeenaperiodofextremedisruptionfortheenergysector.ThenewWEI2023offersanopportunitytotakestockofwhatthishasmeantforinvestment,andwhatthoseinvestmentsmightmeaninturnforthefuturesecurityandsustainabilityoftheenergysector.Theshocktothesystemfromtheglobalenergycrisishascomeatatimeofincreasinglyvisibleimpactsofachangingclimateandhastakenmanyforms.Pricespikescreatedstrongeconomicincentivestoincreasesupplyandtofindalternativeormoreefficientwaystomeetdemand.Energysecurityshockscreatedpowerfulincentivesforpolicymakerstoreducevulnerabilitiesanddependencies,whilealso–formanydevelopingeconomiesinparticular–drainingthefinancialresourcesavailabletoaddressthem.InthenewWEI2023weprovideafullupdateontheinvestmentpicturein2022andaninitialreadingoftheemergingpicturefor2023.Hugeuncertaintiesremainoverhoweventswillplayout.Butsomeimportantfeaturesofthenewinvestmentlandscapearealreadyvisible,includingthepoliciesnowinplacethatreinforceincentivesforcleanenergyspending,theenergysecuritylensthroughwhichmanyinvestmentsarenowviewed,widespreadcostandinflationarypressures,themajorboostinrevenuesthathighfuelpricesarebringingtotraditionalsuppliers,andburgeoningexpectationsinmanycountriesthatinvestmentswillbealignedwithsolutionstotheclimatecrisis.Thestructureofthisyear’sWEI2023isasfollows:InChapter1wepresenttheoverviewandkeyfindings.Chapter2coversthepowersector,whileChapter3reviewsthelatestdevelopmentsandtrendsinfuelsupplyinvestment.Chapter4dealswithinvestmentinenergyefficiencyandtheend-usesectors,andChapter5bringsinsightsonenergyresearchanddevelopmentandinnovation.TheconcludingChapter6considerstrendsinenergyfinance.WhilethefocusofWEI2023istotrackinvestmentandfinancingtrendsin2022andprovideanearlyindicationfor2023,thereportalsobenchmarkstoday’strendsagainstfuturescenariosfromtheIEAWorldEnergyOutlook.TheStatedPoliciesScenario(STEPS)isbasedontoday’spolicysettingsandconsidersaspirationaltargetsonlyinsofarastheyarebackedbydetailedpolicies.TheAnnouncedPledgesScenario(APS)assumesthatallclimatecommitmentsandnetzerotargetsmadebygovernmentsaroundtheworldwillbemetinfullandontime.TheNetZeroEmissionsby2050Scenario(NZEScenario)setsoutanarrowbutachievablepathwayfortheglobalenergysectortoachievenetzeroCO2emissionsby2050.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE7OverviewandkeyfindingsOverviewandkeyfindingsIEA.CCBY4.0.WorldEnergyInvestment2023PAGE8OverviewandkeyfindingsTherecoveryfromtheCovid-19pandemicandtheresponsetotheglobalenergycrisishaveprovidedamajorboosttoglobalcleanenergyinvestmentGlobalenergyinvestmentincleanenergyandinfossilfuels,2015-2023eIEA.CCBY4.0.Note:2023e=estimatedvaluesfor2023.400800120016002000201520162017201820192020202120222023eBillionUSD(2022)CleanenergyFossilfuelsIEA.CCBY4.0.WorldEnergyInvestment2023PAGE9OverviewandkeyfindingsIncreasesacrossalmostallcategoriespushanticipatedspendingin2023uptoarecordUSD2.8trillionEnergy-sectorinvestment,2019-2023eIEA.CCBY4.0.Notes:“Low-emissionfuels”includemodernliquidandgaseousbioenergy,low-emissionhydrogenandlow-emissionhydrogen-basedfuels;“Otherenduse”referstorenewablesforenduseandelectrificationinthebuildings,transportandindustrialsectors.Thetermsgridsandnetworksareusedinterchangeablyinthisreportanddonotdistinguishbetweentransmissionanddistribution;2023e=estimatedvaluesfor2023..10020030040050060070020192020202120222023e20192020202120222023e20192020202120222023e20192020202120222023e20192020202120222023e20192020202120222023e20192020202120222023e20192020202120222023e20192020202120222023e20192020202120222023eUpstreamoilandgasMidstreamoilandgasCoalLow-emissionfuelsRenewablesFossilGridsandstorageNuclearEfficiencyElectrificationandotherBillionUSD(2022)FuelsupplyinvestmentPowerinvestmentEnduseinvestmentIEA.CCBY4.0.WorldEnergyInvestment2023PAGE10OverviewandkeyfindingsRenewables,ledbysolar,andEVsareleadingtheexpectedincreaseincleanenergyinvestmentin2023Annualcleanenergyinvestment,2015-2023eIEA.CCBY4.0.Notes:“Low-emissionfuels”includemodernliquidandgaseousbioenergy,low-emissionhydrogenandhydrogen-basedfuelsthatdonotemitanyCO2fromfossilfuelsdirectlywhenusedandemitverylittlewhenbeingproduced;“Otherenduse”referstorenewablesforenduseandelectrificationinthebuildings,transportandindustrialsectors.2023e=estimatedvaluesfor2023;CCUS=carboncapture,utilisationandstorage;EV=electricvehicle.400800120016002000201520162017201820192020202120222023eBillionUSD(2022)Low-emissionfuelsandCCUSNuclearBatterystorageEVsGridsOtherenduseEnergyefficiencyRenewablepowerIEA.CCBY4.0.WorldEnergyInvestment2023PAGE11OverviewandkeyfindingsLessthanhalfoftheoilandgasindustry’sunprecedentedcashflowfromtheenergycrisisisgoingbackintotraditionalsupplyandonlyasmallfractiontocleantechnologiesDistributionofcashspendingbytheoilandgasindustry,2008-2022IEA.CCBY4.0.Source:IEAanalysisbasedondatafromS&PCapitalIQ.20%40%60%80%100%200820092010201120122013201420152016201720182019202020212022NetdebtrepaidDividendsplusbuybacksminusissuancesLow-carboncapitalexpenditureOilandgascapitalexpenditureIEA.CCBY4.0.WorldEnergyInvestment2023PAGE12OverviewandkeyfindingsThemomentumbehindcleanenergyinvestmentstemsfromapowerfulalignmentofcosts,climateandenergysecuritygoals,andindustrialstrategiesTherecoveryfromtheslumpcausedbytheCovid-19pandemicandtheresponsetotheglobalenergycrisishaveprovidedasignificantboosttocleanenergyinvestment.Comparingourestimatesfor2023withthedatafor2021,annualcleanenergyinvestmenthasrisenmuchfasterthaninvestmentinfossilfuelsoverthisperiod(24%vs15%).OurnewanalysishighlightshowtheperiodofintensevolatilityinfossilfuelmarketscausedbytheRussianFederation’s(hereafter“Russia”)invasionofUkrainehasacceleratedmomentumbehindthedeploymentofarangeofcleanenergytechnologies,evenasitalsopromptedashort-termscrambleforoilandgassupply.WeestimatethataroundUSD2.8trillionwillbeinvestedinenergyin2023.MorethanUSD1.7trillionisgoingtocleanenergy,includingrenewablepower,nuclear,grids,storage,low-emissionfuels,efficiencyimprovementsandend-userenewablesandelectrification.Theremainder,slightlyoverUSD1trillion,isgoingtounabatedfossilfuelsupplyandpower,ofwhicharound15%istocoalandtheresttooilandgas.ForeveryUSD1spentonfossilfuels,USD1.7isnowspentoncleanenergy.Fiveyearsagothisratiowas1:1.Cleanenergyinvestmentshavebeenboostedbyavarietyoffactors.Theseincludeimprovedeconomicsatatimeofhighandvolatilefossilfuelprices;enhancedpolicysupportthroughinstrumentsliketheUSInflationReductionActandnewinitiativesinEurope,Japan,thePeople’sRepublicofChina(hereafter“China”)andelsewhere;astrongalignmentofclimateandenergysecuritygoals,especiallyinimport-dependenteconomies;andafocusonindustrialstrategyascountriesseektostrengthentheirfootholdsintheemergingcleanenergyeconomy.ThismomentumhasbeenledbyrenewablepowerandEVs,withimportantcontributionsalsofromotherareassuchasbatteries,heatpumpsandnuclearpower.In2023low-emissionspowerisexpectedtoaccountforalmost90%oftotalinvestmentinelectricitygeneration.SolaristhestarperformerandmorethanUSD1billionperdayisexpectedtogointosolarinvestmentsin2023(USD380billionfortheyearasawhole),edgingthisspendingabovethatinupstreamoilforthefirsttime.Consumersareinvestinginmoreelectrifiedenduses.Demandforelectriccarsisbooming,withsalesexpectedtoleapbymorethanone-thirdthisyearafterarecord-breaking2022.Asaresult,investmentinEVs(definedastheincrementalspendingonEVsvstheaveragepriceofvehiclessoldinagivencountry)hasmorethandoubledsince2021,reachingUSD130billionin2023.Globalsalesofheatpumpshaveseendouble-digitgrowthsince2021.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE13OverviewandkeyfindingsTheincreaseinfossilfuelinvestmentexpectedin2023isunevenlyspreadaroundtheworld;lessthanhalfthecashflowavailabletotheoilandgasindustryisgoingbackintonewsupply2022wasanextraordinarilyprofitableyearformanyfossilfuelcompanies,astheysawrevenuessoaronhigherfuelprices.Netincomefromfossilfuelsalesmorethandoubledcomparedwiththeaverageinrecentyears,withglobaloilandgasproducersreceivingaroundUSD4trillion.Ouroverallexpectation,basedonanalysisoftheannouncedspendingplansofallthelargeandmedium-sizedoil,gasandcoalcompanies,isthatinvestmentinunabatedfossilfuelsupplyissettorisebymorethan6%in2023,reachingUSD950billion.Thelargestshareofthistotalisgoingtoupstreamoilandgas,whereinvestmentisexpectedtoriseby7%in2023tomorethanUSD500billion,bringingthisindicatorinaggregatebacktothelevelsof2019.Aroundhalfthisincreaseislikelytobeabsorbedbycostinflation.Manylargeoilandgascompanieshaveannouncedhigherspendingplansonthebackofrecordrevenues.Butuncertaintiesoverlonger-termdemand,worriesaboutcosts,andpressurefrommanyinvestorsandownerstofocusonreturnsratherthanproductiongrowthmeanonlylargeMiddleEasternnationaloilcompaniesarespendingmuchmorein2023thantheydidin2022,andtheyaretheonlysubsetoftheindustryspendingmorethanpre-pandemiclevels.Theheadlineriseinspendingonnewoilandgassupplyrepresentslessthanhalfofthecashflowthatwasavailabletotheoilandgasindustry.Between2010and2019,three-quartersofcashoutflowsweretypicallyinvestedintonewsupply.Thisisnowlessthanhalf,withthemajoritygoingtodividends,sharebuybacksanddebtrepayment.Investmentbytheoilandgasindustryinlow-emissionssourcesofenergyislessthan5%ofitsupstreaminvestment.Thisindicatordifferswidelybycompany,withdouble-digitsharescommonamongthelargeEuropeancompanies.Investmentbytheindustryincleanfuels,suchasbioenergy,hydrogenandCCUS,ispickingupinresponsetomoresupportivepoliciesbutremainswellshortofwhereitneedstobeinclimate-drivenscenarios.Investmentincoalsupplyisexpectedtoriseby10%in2023,andisalreadywellabovepre-pandemiclevels.Investmentinnewcoal-firedpowerplantsremainsonadecliningtrend,butawarningsigncamein2022with40GWofnewcoalplantsbeingapproved–thehighestfiguresince2016.AlmostallofthesewereinChina,reflectingthehighpoliticalpriorityattachedtoenergysecurityaftersevereelectricitymarketstrainsin2021and2022,evenasChinadeploysarangeoflow-emissiontechnologiesatscale.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE14OverviewandkeyfindingsTheincreaseincleanenergyspendinginrecentyearsisimpressivebutheavilyconcentratedinahandfulofcountriesIncreaseinannualcleanenergyinvestmentinselectedcountriesandregions,2019-2023eIEA.CCBY4.0Note:2023e=estimatedvaluesfor2023.-10205080110140170200RussiaIndonesiaMiddleEastBrazilAfricaIndiaJapanUnitedStatesEuropeanUnionChinaBillionUSD(2022)IEA.CCBY4.0.WorldEnergyInvestment2023PAGE15OverviewandkeyfindingsCleanenergycostsedgedhigherin2022,butpressuresareeasingin2023andmaturecleantechnologiesremainverycost-competitiveintoday’sfuel-priceenvironmentIEAcleanenergyequipmentpriceindexAveragepricesforselectedtechnologiesIEA.CCBY4.0.Notes:TheIEAcleanenergyequipmentpriceindextrackspricemovementsofafixedbasketofequipmentproductsthatarecentraltothecleanenergytransition,weightedaccordingtotheirshareofglobalaverageannualinvestmentin2020-2022:solarPVmodules(48%),windturbines(36%),EVbatteries(13%)andutility-scalebatteries(3%).PricesaretrackedonaquarterlybasiswithQ42019definedas100.1002003004005000.51.01.52.02.5201420152016201720182019202020212022USD/kWh(nominalprices)MillionUSD/MW(nominalprices)EVbatteries(RHaxis)StoragebatteriesWindturbinesSolarpanels50100150200250201420152016201720182019202020212022Index(2019Q4=100)IEA.CCBY4.0.WorldEnergyInvestment2023PAGE16OverviewandkeyfindingsNotesofcautionamidrisingmomentumbehindcleanenergytransitionsThepositivemomentumbehindcleanenergyinvestmentisnotdistributedevenlyacrosscountriesorsectors,highlightingissuesthatpolicymakerswillneedtoaddresstoensureabroad-basedandsecuretransition.Themacroeconomicenvironmentpresentsadditionalobstacles,withhighershort-termreturnsforfossilfuelassetsandrisingborrowingcostsanddebtburdens.Cleanenergyinvestmentsoftenrequirehighupfrontspending,makingthecostoffinancingacrucialvariableforinvestors,evenifthisisoffsetovertimebyloweroperatingcosts.Morethan90%oftheincreaseincleanenergyinvestmentsince2021hastakenplaceinadvancedeconomiesandChina.Therearebrightspotselsewhere:forexample,solarinvestmentremainsdynamicinIndia;deploymentinBrazilisonasteadyupwardcurve;andinvestoractivityispickingupinpartsoftheMiddleEast,notablyinSaudiArabia,theUnitedArabEmiratesandOman.However,higherinterestrates,unclearpolicyframeworksandmarketdesigns,financially-strainedutilitiesandahighcostofcapitalareholdingbackinvestmentinmanyothercountries.Remarkably,theincreasesincleanenergyinvestmentinadvancedeconomiesandChinasince2021exceedtotalcleanenergyinvestmentintherestoftheworld.Afteranunbrokenrunofcostdeclines,pricesforsomekeycleanenergytechnologiesrosein2021and2022thankslargelytohigherinputpricesforcriticalminerals,semiconductorsandbulkmaterialslikesteelandcement.SolarPVmoduleswerearound30%moreexpensiveinearly2022thanoneyearearlier,althoughthesepricepressureshaveeasedsince.Windturbinecosts,especiallyforEuropeanmanufacturers,remainedhighinearly2023,at30%abovethelowlevelsofearly2020.Permittinghasbeenakeyconcernforinvestorsandfinanciers,especiallyforwindandgridinfrastructure.Whilesolardeploymenthasbeenincreasingyear-on-year,theprojectpipelineforsomeothertechnologieshasbeenlessreliable.Investmentinwindpowerhasvariedyear-on-yearinkeymarketsinresponsetochangingpolicycircumstances.Nuclearinvestmentisrisingbuthydropower,akeylow-emissionsourceofpowermarketflexibility,hasbeenonadownwardtrend.Weakgridinfrastructureisalimitingfactorforrenewableinvestmentinmanydevelopingeconomies,andheretoocurrentinvestmentflowsarehighlyconcentrated.AdvancedeconomiesandChinaaccountfor80%ofglobalspendingandforalmostallofthegrowthinrecentyears.Ouranalysispresentsamixedpictureontheprospectsforenergyefficiencyandenduseinvestments.Theyrosein2022thankstothestimulusprovidedbynewpoliciesinEuropeandNorthAmerica,alongsideexceptionallyhighenergyprices.However,weexpectspendingtoflattenin2023amidaslowdowninconstructionactivity,higherborrowingcostsandstrainsonhouseholdbudgets.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE17OverviewandkeyfindingsCutsinRussiangasdeliveriestoEuropehavepromptedhigherinvestmentinalternativesourcesofsupplyandinLNGinfrastructureChangeinglobalinvestmentinnaturalgassupplyAnnualLNGimportandexportcapacityadditionsIEA.CCBY4.0.Notes:“Gassupplyinvestment”includesupstreamandtransport(LNGliquefaction,shippingandregasificationandpipelinetransmissionanddistribution).2023e=estimatedvaluesfor2023.2040608010012020192021202320252027BcmperyearImportExport-60-45-30-150153020192020202120222023eBillionUSD(2022)IEA.CCBY4.0.WorldEnergyInvestment2023PAGE18OverviewandkeyfindingsStrongpolicysignalsandnewsupportschemeshavetriggeredarapidexpansionintheprojectpipelinesforlow-emissionshydrogenandCCUSCapacityadditionsforhydrogenelectrolysisandCO2captureprojectsbyannouncedstartdate,2017-2026IEA.CCBY4.0.Notes:GW=GWofelectricityinput;foryearsbefore2023,actualstartdatesareshown;for2023onwards,scheduledstartdatesasannouncedbydevelopersareshown;CCUScoversallsourcesofCO2,includinglow-emissionhydrogenprojectsusingCCUS;dataincludeprojectsatthe“feasibility”stageandbeyond.Sources:IEAanalysisbasedonIEAhydrogenprojectdatabase,CCUSprojectsdatabaseandrecentannouncements.51015202530NorthAmericaEuropeLatinAmericaChinaAsiaPacificMiddleEastOtherHydrogenelectrolysisMW153045607590MtCO₂/yrCCUSIEA.CCBY4.0.WorldEnergyInvestment2023PAGE19OverviewandkeyfindingsGasinvestmentsarecaughtbetweenimmediateshortfallsandlonger-termuncertainty,althoughlow-emissionopportunitiesaregrowingRussiacutpipelinedeliveriesofnaturalgastotheEuropeanUnionbyaround80%in2022,seekingleveragebyexposingconsumerstohigherenergybillsandsupplyshortagesfollowingitsinvasionofUkraine.Thisledtostrongpriceandpolicyincentivesforinvestorstostepupnon-Russiangassupply,buildupalternativedeliveryinfrastructure,andscaleupalternativestonaturalgas.Alloftheseeffectsarevisibleinouranalysis.Theamountofnewoilandgasresourcesapprovedfordevelopmentin2022and2023hasbeenbelowtheaveragelevelseenoverthepastdecade.However,2023isseeinga25%increaseinnewapprovalsrelativeto2022andmostofthesearefornaturalgas,reflectingthepushtosubstitutefortheshortfallinRussiansupply.Awaveofnewregasificationcapacityisalsounderwayascountrieslooktosecureliquefiednaturalgas(LNG)imports.Europe’sannualregasificationcapacityissettoincreaseby50bcmfrom2022-2025,expandingthecontinent’soverallLNGimportcapacitybyone-fifth.ImportprojectsaregrowingevenmorequicklyinAsia,whichissettoaddover100bcmofLNGimportcapacityby2025(morethanhalfinChina).Thecrisishasalsopromptedadditionalinvestmentinliquefactioncapacity,themostexpensivepartofthegasvaluechain.Around60bcmofcapacityhasbeengiventhegreenlightsinceRussia’sinvasionofUkraine,nearlydoubletherateofnewapprovalscomparedwiththepastdecade.Alongwithprojectsalreadyunderconstruction,thisleadstoanunprecedented170bcmofexportcapacitythatcouldcomeintooperationbetween2025and2027.Akeydilemmaforinvestorsundertakinglarge,capital‐intensivegassupplyprojectsishowtoreconcilestrongnear‐termdemandgrowthwithuncertainandpossiblydeclininglonger-termdemand.ThisisaparticularissueforEurope,giventhecontinent’sstrongclimategoals.Manyimportershavebeenreluctanttocommittolong-termcontractsforgassupply.Apreferenceforfloatingregasificationterminalshasbeenawaytoavoidlockinginfutureemissions.Anotheravenueistoexpandinvestmentinlow-emissionfuelsandinCCUS.Newpoliciesareswellingtheprojectpipelineintheseareas,drivenbyenergysecurityandclimateimperatives.Europehasaburgeoningnumberofelectrolytichydrogenprojects,andreinforcedUSincentivesintheInflationReductionActhavepromptedawaveofinvestorinterestinhydrogenandCCUS.Afteranumberoffalsedawns,thenumberoflarge-scaleprojectsandwell-capitalisedsponsors,alongwithastringofacquisitionsbyoilandgasmajors(notablyintransportbiofuelsandbiogases),suggeststhatinvestmentinlow-emissionfuelscouldgrowstronglyinthecomingyears.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE20OverviewandkeyfindingsInvestmentisflowingtocleanenergymanufacturingandcriticalminerals,butensuringwell-sequencedgrowthofnewsupplychainswillbeamajortaskLithium-ionbatterymanufacturingcapacityCapitalexpenditurebymajorminingcompaniesinthenon-ferrousmetalsIEA.CCBY4.0.Notes:Cu=copper;Ni=nickel;Co=cobalt;theillustrativeexpansionofmanufacturingcapacityassumesthatallannouncedprojectsproceedasplanned.102030405020182019202020212022BillionUSD(2022)ChinaEuropeUnitedStatesRestofworldDiversifiedmajorCu,Ni,CospecialistLithiumspecialist2468202220252030TWhIEA.CCBY4.0.WorldEnergyInvestment2023PAGE21OverviewandkeyfindingsCompetitionforcleanenergymanufacturingandforsuppliesofcriticalmineralsandmetalsisamajorissuefortheresilienceoftransitionsAsecuretransitiontocleanenergyhingesonresilientanddiversifiedcleanenergytechnologysupplychains.AccordingtotheIEAEnergyTechnologyPerspectives,someUSD1.2trillionofcumulativeinvestmentto2030isneededincleanenergymanufacturingandincriticalmineralssupplytogetontrackfora1.5°Cscenario,inadditiontotheenergysectorinvestmentscoveredinthisreport.RecordsalesofEVs,stronginvestmentinbatterystorageforpower(whichareexpectedtoapproachUSD40billionin2023,almostdoublethe2022level)andapushfrompolicymakerstoscaleupdomesticsupplychainshavesparkedawaveofnewlithium-ionbatterymanufacturingprojectsaroundtheworld.Ifallcapacityannouncementsweretomaterialise,then5.2TWhofnewcapacitycouldbeavailableby2030.Forthemoment,Chinaisthemainplayerateverystageofglobalbatterymanufacturing,withtheexceptionoftheminingofcriticalminerals.Theannouncedmanufacturingplanswouldsomewhaterodethisposition.In2022,over75%ofexistingbatterymanufacturingcapacitywaslocatedinChina.However,despiteaccountingfortwo-thirdsofyearlyglobalcapacityadditionsto2030,China’sshareofglobalcapacitycouldfallbynearly10percentagepointsbytheendofthedecade.Akeyquestionforbatterymanufacturersiswhethersuppliesofcriticalmineralswillkeepupwithdemand.Thankstohighpricesandgrowingpolicysupport,investmentincriticalmineralminingroseby30%in2022.Explorationspendingalsogrew,notablyforlithium,copperandnickel,ledbyCanadaandAustraliaandwithactivitiesgrowinginBrazilandresource-richcountriesinAfrica.Butmovingfromexplorationtonewproductioncantakemorethan10years,andthereremainwidespreadconcernsthatcriticalmineralinvestmentwillbecomeaconstrainingfactorforcleantechnologymanufacturinganddeployment.Criticalmineralsandbatteriesareamongtheareaswherecleantechnologyinnovationremainsessential.Publicspendingonresearchanddevelopmenthasbeenonasteadyupwardtrend,ashascorporatespending.Butventurecapitalfundingforcleanenergy,afterreachingahighin2022,facesheadwindsinamoredifficultmacroeconomicenvironment.Foradecade,cheapcapitalhasloweredbarrierstoinvestmentinriskierbetsandtherebyconcealedpotentialweaknessesininnovationsystems.Withthecostofmoneysettorise,thehealthofthesesystemsandthelevelofpublicsupportwillbeacriticaldeterminantofhowquicklynewtechnologyideascontinuetoflow.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE22OverviewandkeyfindingsScalingupcleaninvestmentisthekeytaskforthesustainableandsecuretransformationoftheenergysectorHistoricalinvestmentinenergybenchmarkedagainstneedsinIEAscenariosin2030IEA.CCBY4.0.Notes:STEPS=StatedPoliciesScenario;APS=AnnouncedPledgesScenario;NZE=NetZeroEmissionsby2050Scenario.2023e=estimatedvaluesfor2023.1234520192020202120222023e2030STEPS2030APS2030NZE20192020202120222023e2030STEPS2030APS2030NZECleanenergyFossilfuelsCleanelectrificationLow-emissionfuelsEnergyefficiencyCoalOilNaturalgasTrillionUSD(2022)IEA.CCBY4.0.WorldEnergyInvestment2023PAGE23OverviewandkeyfindingsExpandingaccesstofinancewillbevital:sustainablefinancehasweatheredthestormoftheenergycrisis,butremainsheavilyconcentratedinadvancedeconomiesSustainabledebtissuancesbyissuertype,andregion,2016-2022IEA.CCBY4.0.Notes:SSA=sovereigns,supranationalsandagencies;thiscategoryalsoincludesmunicipals;Other=asset-basedsecuritiesandprojectbonds.Sources:Bloomberg;Refinitiv.3006009001200150018002016201720182019202020212022BillionUSD(2022)CorporatesFinancialsSSAOtherAdvancedeconomiesChinaOtherEMDEs52%32%16%78%12%10%USD1.5trillionUSD1.6trillionSustainabledebtissuances,2022Cleanenergyspending,2022IEA.CCBY4.0.WorldEnergyInvestment2023PAGE24OverviewandkeyfindingsCleanenergyinvestmentisstartingtoflow,butimbalancespointtocontinuedrisksaheadIntheIEAWorldEnergyOutlook2021,wewrotethat“theworldisnotinvestingenoughtomeetitsfutureenergyneeds…IEAanalysishasrepeatedlyhighlightedthatasurgeinspendingtoboostdeploymentofcleanenergytechnologiesandinfrastructureprovidesthewayoutofthisimpasse,butthisneedstohappenquicklyorglobalenergymarketswillfaceaturbulentandvolatileperiodahead”.Thispictureisstartingtochange:globalenergyinvestmentispickingup,andtheriseincleanenergyinvestmentsince2021isleadingtheway,outpacingtheincreaseinfossilfuelinvestmentbyalmostthree-to-one.Cleanelectrificationisleadingthecharge.Ifitcontinuestogrowattherateseensince2021,thenaggregatespendingin2030onlow-emissionpower,gridsandstorage,andend-useelectrificationwouldexceedthelevelsrequiredtomeettheworld’sannouncedclimatepledges(theAPS).Forsometechnologies,notablysolar,itwouldmatchtheinvestmentrequiredtogetontrackfora1.5°Cstabilisationinglobalaveragetemperatures(theNZEScenario).However,progresshasbeenuneven.Investmentinexpandingandmodernisinggridsislaggingbehindinmanycountries.Arisingshareofsolarandwindneedstobeaccompaniedbyspendingontechnologiesthatprovidegreaterflexibilitytopowersystems.Supplychainandskillsbottleneckscouldconstraingrowth.And,aboveall,thegeographicalimbalancesininvestmentneedaddressing,withcleanenergyinvestmentinmanyemerginganddevelopingeconomiesgrowingonlyslowlyandthenumberofpeoplewithoutaccesstomodernenergyservicesremainingstubbornlyhigh.Otherpillarsofcleanenergytransitionsdonotyetshowthesamepositivedynamicsascleanelectrification.Investmentinenergyefficiencyhasbeenincreasing,butiswellofftracktomeetmoreambitiousclimatescenarios.Investmentinlow-emissionfuelsisbeingspurredbynewpolicymeasures,butfromaverylowbase.Spendingonfossilfuelsismostcloselyalignedwiththe2030needsofascenarioreflectingtoday’spolicysettings(STEPS),butproducersneedtowatchcloselyhowcleanenergyspendingevolves,particularlythewaysinwhichcleanelectrificationaffectsdemandforfuelsinpowergeneration,andformobilityandheat.Therisksoflockinginfossilfueluseareclear:fossilfuelinvestmentin2023isnowmorethandoublethelevelsrequiredtomeetmuchlowerdemandintheNZEScenario.Thecrucialopenquestionishowquicklycleanenergyinvestmentscalesupinemerginganddevelopingeconomies,wheresupportivestrategiesandpolicieswillneedtobeaccompaniedbyimprovedaccesstofinance.Forthemoment,sustainablefinanceinstrumentsremainconcentratedinadvancedeconomies,accountingfornearly80%ofsustainabledebtissuancein2022.Issuanceselsewhere(outsideChina)aregrowingfromalowbase,withIndia’ssuccessfulfirstgreenbondalandmarkinthissector.Scalinguptheseinstrumentsandmobilisingmuchgreatersupportfromdevelopmentfinanceinstitutionswillbecriticaltothecontinuedbroadeningandaccelerationofcleanenergytransitions.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE25PowersectorPowersectorIEA.CCBY4.0.WorldEnergyInvestment2023PAGE26PowersectorOverviewofpowerinvestmentIEA.CCBY4.0.WorldEnergyInvestment2023PAGE27PowersectorPowersectorinvestmentincreasedbyaround12%in2022toUSD1.1trillionwith2023expectedtoseefurthergrowthtoalmostUSD1.2trillionGlobalaverageannualinvestmentinthepowersectorbycategory,2011-2023eIEA.CCBY4.0.Notes:Investmentismeasuredasongoingcapitalspendingonnewpowercapacity;allnumbersthroughoutarein2022USD;Fossilfuelpowerincludesunabatedandabatedpower;EMDEs=emergingmarketanddevelopingeconomies;2023e=estimatedvaluesfor2023.10%20%30%40%50%250500750100012502011-162017201820192020202120222023eBillionUSD(2022)BatterystorageElectricitygridsNuclearFossilfuelpowerRenewablepowerEMDEsexcl.China(share,rightaxis)IEA.CCBY4.0.WorldEnergyInvestment2023PAGE28PowersectorAdvancedeconomiesandChinaleadinvestmentinrenewablepowergenerationandgrids,whilemanyotherEMDEsstruggletomobilisesufficientcapitalforacleanandsecureenergytransitionAverageannualinvestmentinthepowersectorbygeographyandcategory,2011-2023eIEA.CCBY4.0.Notes:REP=renewablepower;FFP=fossilfuelpower;batteriesareexcludedhere;2023e=estimatedvaluesfor2023.50100150200250300REPGridsFFPNuclearREPGridsFFPNuclearREPGridsFFPNuclearAdvancedeconomiesChinaOtherEMDEsBillionUSD(2022)2011-162017-202021-23eIEA.CCBY4.0.WorldEnergyInvestment2023PAGE29PowersectorInvestmentinrenewables,gridsandbatterieshasacceleratedduringtheglobalenergycrisis,withcapitalspendingonunabatedfossilfuelpowergenerationedgingdownwardsPowersectorinvestmentgrewby12%in2022,toppingUSD1trillionforthefirsttime,with2023expectedtoseefurthergrowthtoalmostUSD1.2trillion.Ourtrackingofcapitalflowsandinvestmentssuggeststhatamajoreffectoftheglobalenergycrisishasbeentoacceleratethedeploymentofcleanenergytechnologies.ThestrongunderlyingeconomicsofrenewableshavebeenreinforcedbypolicypackagessuchastheUSInflationReductionAct,theEUREPowerEUplanandFit-for-55package,andIndia’srenewablestargets.RenewablesandgridsaretheleadingcomponentsofpowerinvestmentandareexpectedtoaccountformorethanUSD1trillionofinvestmentontheirownin2023.Globalspendingonrenewableshitanewrecordin2022atalmostUSD600billion,drivenbysolarPVandwind(especiallyinChina)despitecostandsupplychainpressures.Giventhereinforcedpushforrenewablesinarangeoflargemarkets(e.g.USA,China,Europe,India)andthegradualunwindingofsupplychainproblems,wearenowexpectinghighercapacityadditionsforwindandespeciallysolarPVthanlastyear,with2023expectedtoseeanother10%increaseinrenewablesinvestmenttomorethanUSD650billion.Capitalexpenditureonfossilfuelpowerincreasedmarginallyin2022toalmostUSD110billionbutthiswasstillsignificantlylowerthantheannualaverageofUSD135billionintheperiod2016-2021.Whilecoal-firedpowerinvestmentdecreased,investmentingas-firedpowerpickedup.SpendingonfossilfuelpowerwithCCUSrosebutremainsmarginalatUSD1billion.Spendingondispatchablecleangeneration,ontheotherhand,continuesitsdownwardinvestmenttrend,withincreasedspendingonnuclearnotabletocompensateforadropinhydropowerinvestment.Spendingonelectricitygridsbuiltonits2021reboundwithafurther8%increasein2022,butinitialsignssuggestaflatteninginspendingin2023.MostoftheinfrastructureinvestmentisinadvancedeconomiesandChina,underpinnedbytheneedtoenablegreaterelectrificationandmeetgridbalancingdemandsinpowersystemsthatareincreasinglyrenewablesrich.Spendingongridsinmostemergingmarketanddevelopingeconomies(EMDEs)isfallingbehind,aworryingsignalgiventheprospectofrapidincreasesinelectricitydemand.Batterystorageinvestmentin2022grewinlinewithourstrongexpectationsandissetforfurthergrowthin2023,encouragedbytheUSInflationReductionActandotherincentivesinEurope,Australia,China,JapanandKorea.Despiteupbeatexpectationsforcleanpower,finalinvestmentdecisions(FIDs)in2022hadamixedpicture.Solarprojectapprovalsremainstrong,whileoffshorewindlagsbehind.FIDsforcoal-andgas-firedplantsreachedtheirhighestlevelsince2016,drivenalmostentirelybyChina,reflectingsecurityofsupplyconcerns.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE30PowersectorOutsideChina,powersectorspendinginmanyEMDEsremainslow;itneedstopickupquicklytomeetaccess,securityandsustainabilitygoalsPowersectorinvestmentinEMDEsoutsideChinahasbeenaveragingaroundUSD230billionperyearinrecentyears,onlyaround20%oftheglobaltotal.Thisfigureincreasedby7%in2022,butinvestmentspendinginadvancedeconomiesandinChinarosemorerapidlyby14%,reachingmorethanUSD850billion.AnumberofEMDEsaresteppinguptheireffortstodeploycleanpower.Indiaremainsadynamicmarket,inparticularforsolarPV,withpolicymakersalsofocusedonbuildingoutthegrid,promotingnewsourcesofflexibilityinpowermarkets,andencouragingthedomesticsupplychain.India’sProduction-LinkedIncentive(PLI)schemeisprovidingincentivesfordomesticmanufacturingofhigh-efficiencysolarPVmodulesaswellasforbatteries.RenewablepowerinvestmentisalsostartingtopickupintheMiddleEast,notablyforsolarinSaudiArabia,theUnitedArabEmiratesandOman.DeploymentisonasteadyupwardcurveinBrazil.SouthAfricaconcludedthesixthroundofitsRenewableEnergyIndependentPowerProducerProcurementProgram.Newpowerprojectsareurgentlyneededtorelievechronicpowershortages:theSouthAfricanauthoritiesevendeclareda“stateofdisaster”intheenergysectorfromFebruary-April2023.InvestmentsinrenewablesshouldalsobenefitfromtheJustEnergyTransitionPartnerships(JETPs)thatSouthAfrica,IndonesiaandVietNamhavesignedwithinternationalpartnersandfinancialinstitutions.JETPsaimtoboostcleanpowerandreducerelianceoncoalassets,whileaddressingthesocialimplicationsofchange.Kenyaalsoliftedabanonnewpowerpurchaseagreements(mainlyaffectingrenewableprojects).However,thelandscapeforrenewablepowerinvestmentinmanyEMDEsremainsdifficult,andmuchmoreneedstobedonetoimproveperceivedandrealinvestmentrisksandtoreducecosts.GreaterinvestmentincleanpowerinEMDEsishinderedbyarangeofbarrierssuchashigherfinancingcosts,highdebtburdensofelectricutilitiesandtheabsenceofclearcleanenergystrategies,aswellaschallengesrelatedtolandacquisition,enablinginfrastructureandskilledlabour.Lowlevelsofspendingongrids(evencomparedwithpastspendingaveragesinEMDEs)exacerbatechallengeswithsecurityofsupplyandelectricityaccess,aswellasleavingEMDEsill-preparedforincreasedinvestmentinvariablerenewables.Astepupinconcessionalfundingandotherdedicatedmultilateralsupportiscriticallyimportanttoincreasecleanpowerinvestment.TheupcomingSummitforaNewGlobalFinancialPact,whichaimstodefineanewfinancialpactwithEMDEs,willbeanimportantsteppingstonetowardsrealisingthisgoal.AforthcomingjointIEA-IFCreportwillprovideanalysisandrecommendations.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE31PowersectorGenerationIEA.CCBY4.0.WorldEnergyInvestment2023PAGE32PowersectorVariablerenewablesarebyfarthemostdynamicsectorsforinvestmentinpowergeneration…Globalannualinvestmentinthepowergenerationbyselectedtechnology,2020-2023eIEA.CCBY4.0.Notes:Gas-firedgenerationinvestmentincludesbothlarge-scaleplantsandsmall-scalegeneratingsetsandengines;hydropowerincludespumped-hydrostorage;2023e=estimatedvaluesfor2023.Sources:IEAanalysisbasedoncalculationsfromIRENA(2023)andS&PGlobal(2023).50100150200250300350400SolarPVWindHydroNuclearCoalpowerGaspowerBillionUSD(2022)2020202120222023eIEA.CCBY4.0.WorldEnergyInvestment2023PAGE33Powersector…despitetightsupplychainsandhigherinputcostspushinguprenewableprojectcostsinmanymarketsIEAglobalwindturbineandsolarPVmoduleproducerpriceindexandaveragemanufacturingpricesamongkeyregionsIEA.CCBY4.0.Notes:Theindex,developedbytheIEA,trackspricemovementsofafixedbasketofsolarPVpanelsandwindturbinesagainstabaseperiod(Q42019);pricesareweightedaccordingtothesharesofglobalaverageannualinvestmentin2020-2022:solarmodules(58%)andwindturbines(42%);windturbinepricesreflectaweightedaverageofbothonshoreandoffshoreturbinemanufacturers’prices,notingthatthisismoresensitivetochangesinonshoreturbinepricesgiventhattheyaccountforalargershareofproduction;giventhatthesupplyofsolarPVmodulesishighlygeographicallyconcentrated(withthemajorityofproductionbasedinChina),anddataavailabilityconstraints,whereonlythepricetrendsofChinesemanufacturersareincluded.Sources:IEAcalculationsbasedoncompanies’financialreports,BloombergdataandBNEF.8095110125140155170201720182019202020212022Index(Q42019=100)GlobalindexEuropeanturbinemanufacturersChineseturbinemanufacturersChinesesolarpanelmanufacturersWindturbineandsolarmoduleproducerpriceindex0.20.40.60.81.01.2201720182019202020212022MillionUSD/MWManufacturers'averagesellingpriceIEA.CCBY4.0.WorldEnergyInvestment2023PAGE34PowersectorPowercompanyinvestmentplansremainrobust,evenaslevelisedcostsforrenewablesmovedhigherLCOEestimatesofutility-scalesolarPVandwind;andaverageannualshort-terminvestmentguidelinesofselectedpowercompaniesIEA.CCBY4.0.Notes:LCOEscalculationsassumeincreasesinthecostofcapitalinEurope,UnitedStatesandIndiabetweenQ12021andQ42022forbothsolarPVandwind,whileremainingconstantin2023e.CapitalcostsareassumedtoincreaseinQ42022acrossthefourregions(exceptwindinChina)andreduceorremainflatin2023,thoughnottotallycompensatingforthe2022increase.CapacityfactorsareconsistentwithWEO2022.IRAeffectsassumea26USD/MWhofproductiontaxcredit.Annualcompanyinvestmentreflectsnominalcapitalspendingguidelines(forallgroup-levelrelatedactivities)publishedinannualreportsorstrategicplans;forexample,ifacompanyannouncedaninvestmentofUSD15billionover2020-2023andUSD18billionover2023-2025(mostrecentannouncement)thisisreflectedasUSD5billion(previous)andUSD6billion(current);figuresforIndiancompanieswerenotincludedasdatawereunavailable;thedropinEnel’sfiguresisduetoEnelstreamliningitsbusiness(e.g.exitingArgentina,PeruandRomania),butitsinvestmentinothergeographiesremainsasplanned.2023e=estimatedvaluesfor2023;IRA=USInflationReductionAct;LCOE=levelisedcostofelectricitySources:Companies’annualreports.10203040506070802022USD/MWhQ12021Q42022UnitedStatesChinaIndia2023eEuropeIRAeffectsinPPApricesSolarPVOnshorewind10203040506070809024681012141618USDbillionPreviousCurrentguidelineEuropeancompaniesAmericanChineseIEA.CCBY4.0.WorldEnergyInvestment2023PAGE35PowersectorSomekeypartsofthepowerinvestmentchainareshowinggreatersignsofstressProfitabilityofmajorwindturbinemanufacturersandassetowners;andchangeinbondratingofSOEsinselectedEMDEsIEA.CCBY4.0.Notes:EBIT=earningsbeforeinterestandtaxes,annualbasis;EuropeanandUSmanufacturersrepresentaweightedaverage(bymarketshare)ofVestas,SiemensGamesa,NordexandGE;Chinesemanufacturersrepresentaweightedaverage(bymarketshare)ofGoldwind,WindeyandMingyang;EuropeanandUSassetmanagersrepresentasimpleaverageofNextera,Ørsted,Iberdrola,RWEandEnel;SOE=state-ownedenterprise;“Worse”meansthatthebond’sratinghasbeendowngraded;“Better”meansthatthebond’sratinghasbeenupgraded;“Nodata”meansnodataonratingavailable;“Foreign”referstobondsissuedinUSDorEUR.Sources:Companies’annualreports,WoodMacKenzieandBloomberg.-5%0%5%10%15%20%202020212022EuropeanandUSturbinemanufacturersChineseturbinemanufacturersEuropeanandUSrenewableassetownersEBITmargin-windindustrysegments510152025LocalForeignLocalForeignLocalForeignCPE(Mexico)ESKOM(SA)PLN(Indonesia)Amountissued(billions)EqualWorseBetterNodataChangeinbondrating-currentvsinitialratingIEA.CCBY4.0.WorldEnergyInvestment2023PAGE36PowersectorNewpoliciesareprovidinganimportantboosttotheprospectsforlow-emissionpowerKeylow-emissionpowerpoliciesintroducedandproposalsannouncedin2022-2023inselectedcountriesandregionsRegionPoliciesUnitedStates•ApprovaloftheInflationReductionActoTaxcreditextensionsforsolarPVandwind:productioncredit(perunitofenergy)andinvestmentcredit(capitalcosts)oInvestmenttaxcreditalsoavailableforbatterystorageandzero-emissionnuclearoFinancialsupportforgridsandmanufacturingcleanpowerequipmentChina•14thFive-YearPlanraisesrenewabletargetto33%ofpowerconsumptionby2025(and18%fornon-hydrorenewables)Europe•AnnouncementsbytheEuropeanCommission:REPowerEUPlan,Net-ZeroIndustryActproposalandotherpotentialreformsoIncreaseEU2030renewablestargetto45%by2030(wholeenergymatrixnotjustpower)oFast-trackingpermittingprocessplus~EUR225billioninloansforgridsoProposedreformofmarketdesignandtechnology-specifictargetsforEUmanufacturingcapacity•NineEuropeancountriescommittedtoboostoffshorewindcapacitytoover120GWby2030andover300GWby2050IndonesiaandSoutheastAsia•IndonesiaintroduceditsJETPoRenewableenergytargetuptoatleast34%ofpowergenerationby2030,acceleratecoalpowerplantretirementandachievenetzeroemissionsinthepowersectorby2050oUSD20billionofinitialfunding•Thailandintroducednewregulationforrenewablepowerprocurement,establishingthefeed-intariffspayablebydistributioncompaniesandcapacitytargets(additional5GWofbiogas,solar,solarwithstorage,andwind)•Philippinessetouta35%renewableelectricitygenerationtargetby2030(fromabout20%in2021)and50%by2040India•ContinuestoexpandtheProduction-LinkedIncentive(PLI)schemeo50GWhofbatterymanufacturingcapacityo40GWofsolarPVmanufacturingcapacitytobeaddedinnextthreeyearsJapan•Governmentisstudyingextensiontolifetimeofnuclearpowerplants(beyond60years)Korea•Plantoincreasenuclearpowerto35%oftotalgenerationandrenewablesto31%from10%in2021by2036•Coal-firedpowertoreduceto15%SouthAfrica•GovernmentconcludedsixthrenewableauctionBrazil•Planningtwomajortransmissionauctionsin2023,includingthelargesteverheldinBrazil(ininvestmentterms)IEA.CCBY4.0.WorldEnergyInvestment2023PAGE37PowersectorButgettingprojectsupandrunninghasoftenbeenslow,puttingthefocusonpermittingandotherpracticalobstaclesfacinginvestorsCapacityawaitingpermitsandunderconstructionandaveragepermittingtimesintheUnitedStatesandmajorEuropeanrenewablemarketsIEA.CCBY4.0.Notes:UnitedStates,UnitedKingdomandFranceshowcapacityinDecember2023;ItalyshowscapacityinJanuary2023andSpaininMarch2023;windincludesonshoreandoffshore.Sources:RedEléctrica,Terna,MinistèredelaTransitionEnergétique,NationalGridandLawrenceBerkeleyNationalLaboratory;BNEF(averagewaitingtimes).100200300FranceSpainUnitedKingdomItalyGWSolar(inoperation)Wind(inoperation)Solar(awaitingpermit)Wind(awaitingpermit)Capacityinoperationandawaitingapermit2468YearsAveragepermittingtimeEUregulatorylimit2030solarPV&windtarget50010001500USUnitedStatesIEA.CCBY4.0.WorldEnergyInvestment2023PAGE38PowersectorSolarPVmademostoftheheadlinesforpowergenerationinvestmentin2022,althoughincreasedfinancingandcapitalcostswerealsopartofthestoryCapitalspendingonnewgenerationhasbeensettingnewrecordseachyear,drivenbystrongperformancesfromsolar,andweexpectthesametobetruein2023.Chinaaloneaddedover100GWofsolarPVcapacityin2022,almost70%higherthanin2021,andannualinstallationsincreasedby40%ormoreinEurope,IndiaandBrazil,despiteinflationandsupplychainissues.Investmentinwindpowerincreased,albeitlessthansolar(asmainlylargeprojectscontinuetofacedelays)whilespendingonhydropowercontinuedtofall.Nuclearpowerinvestmentalsorose,mainlyinadvancedeconomiesandChina.MorethanadecadeaftertheaccidentatFukushimaDaiichi,anincreasingnumberofcountriesaretakingafreshlookathownucleartechnologiesmightprovidelow-emissionsanddispatchablepower.Investmentinfossil-fuelbasedelectricitywasflat,reflectinglowerspendingonunabatedcoalpoweralongsidehigherinvestmentingas-firedplants.Despitethegrowthinmanysectors,powergenerationinvestmentin2022facedsomeheadwinds.Onthefinancingside,thecostofborrowingincreasedasbaseratesrosetofightinflation.Equityriskpremiums–thepremiumaboverisk-freeratesthatequityinvestorsexpectforanaverageunit–havegoneupacrosstheworld.Thisisproblematicashighlyleveragedcompanies,likemanypowerutilities,mayhavetotapintotheequitymarketforfinancingashigherleverage(moredebt)couldaffecttheircreditratings.AglobalproducerpriceindexofsolarPVmodulesandwindturbinesdevelopedbytheIEAshowsthatpricesfelltoalowpointinQ32020butthenwerepushedupbytightmarketsformaterialsandlabour,ending20%higherinQ42022.Modulepriceswerearound20%higherinearly2022y-o-y,butstartedtocomedowninearly2023asinputcostsdeclined(solargradesiliconandwafers)andmanufacturingcapacityexpanded(largelyinAsia).Windturbinecosts,especiallyfromEuropeanmanufacturers,remainedhighinearly2023,at35%abovethelowlevelsofearly2020.Chinahasfollowedadifferentpath.DebtfinancingremainedfavourableasthePeople’sBankofChinahaskeptreferencelendingrateslowtoboosttheeconomyandrenewableprojectscanaccesspreferentialrates.CapitalcostsforsolarPVincreasedslightlyin2022beforefallingback,whilewindcapitalcostswerelessaffectedthanelsewhere.ThepriceoflocalwindturbinescontinuedtodecreasegivenChinesemanufacturers’abilitytomanagesupplychainpressuresandagrowingnumberoforders.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE39PowersectorSolarandwindretainastrongcompetitiveadvantage,althoughpressuresarehigherinthewindsectorandtheconditionsformobilisingcapitalinEMDEsremainchallengingTheriseinprojectcostshastranslatedintoahigherlevelisedcostofelectricity(LCOE)acrosstechnologies.LCOEsforsolarPVandwind,havingfallenforyears,increasedin2022,butremainedamoreattractivepropositionthanfossilfuelpowerfornewgenerationinmostmarketsaroundtheworld.InEuropetheaverageLCOEforsolarPVincreasedby30%andby15%foronshorewindbetweenearly2021andlate2022,despitecontinuedgainsfromtechnologylearning.However,absolutevaluesremainlowandcapitalcostpressuresareexpectedtoeasein2023.InvestmentplansbymajorEuropeanutilitiesalsoremainstrong.Wholesalepowerpriceshavefallencomparedtoayearago,butarestillhighinhistoricalterms,anadditionalsignalforinvestors,althoughitremainstobeseenhowtheproposedchangestotheEUpowermarketdesignmayaffectinvestors’views.RecentyearshavebeenchallengingforthewindequipmentmanufacturingindustryoutsideChina.Theaverageratioofearningsbeforeinterestandtaxes(EBIT)torevenuesamongthelargestEuropeanandUSturbineproducershasbeenmeagreifnotnegative.Thismeasureofacompany’sprofitabilitysawabigdropin2022asrevenueswerehithardbysupplychaindelays,inflationarypressuresandinsomecasesimpairmentsduetoRussia’sinvasionofUkraine.Higherpricesarealsocontributingtolowerorderintakes,evenasthehelpnear-termresults,whicharealsobeingassistedbyimprovementsintheservicebusiness.MostEMDEsoutsideChinaareexperiencinghighercosts,especiallywhereinvestmentsaredenominatedinUSdollars.State-ownedutilities–oftenthemaininvestorandcounterpartywiththeprivatesectorinEMDEs–remainfinanciallyfragile,andrisinginterestratesandfallingdomesticcurrenciesmakeithardertopaytheirexistingdebt,letaloneinvest.Moreattractiveconditionsforrenewablesinvestmentsinadvancedeconomiesmayalsodiscouragecapitalfromflowingintocountrieswithhigherrealorperceivedrisks.India’ssizeandwell-developedpolicyframeworks,especiallyforsolar,underpincontinuedstronginterestfrominvestorsandprojectdevelopers,althoughofftakerandtransmissionrisksremain.LCOEsforsolarPVandonshorewindroseintheUnitedStatesin2022,butPPAsaresetforimportantreductionsgiventhetaxextensionsintheInflationReductionAct.InChinaLCOEsforsolarPVwerealsoupin2022,whilewindLCOEsfell.Aftersubsidiesforonshorewindwereremovedin2020,investmentappetitereduced,forcingdomesticturbinemakerstoslashprices.Increasedordershelpedoffsetlowerpricesformanufacturers,butcompetitionremainsstrong.Manufacturershavealsofocusedonbuildingbiggerturbines,andoninnovationandcostcontrol.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE40PowersectorAmbitiousnewpoliciestoacceleratecleanpowerinvestmentsareinplace,butthereareuncertaintiesoverhowquicklythesewilltranslateintoflowsofnewprojectsThepassageoftheInflationReductionActintheUnitedStateswasamajorlegislativemilestonethatincludedsignificantfinancialsupportforlow-emissiontechnologies.Itincludesneworextensionstotaxcreditsforwind,solarPVandstoragebasedonprojectinvestmentcosts(USD)andgeneration(USD/MWh),taxcreditsforlocalmanufacturingandgridupgrades,andvariousotherformsofassistance.TheEuropeanUnionislookingtoincreasedeploymentofrenewablesacrosspowergenerationandtheend-usesectorsaspartofitsgoaltoreducegreenhousegasemissionsbyatleast55%by2030andtoaddresstheenergymarketdisruptioncausedbyRussia’sinvasionofUkraine.AprovisionalagreementwasreachedinMarch2023toraisetheEU'srenewabletargetfor2030toaminimumof42.5%offinalenergyconsumption,upfromthecurrent32%target.TheEuropeanCommissionalsoproposedaNetZeroIndustryAct,whichtargetsdomesticmanufactureofupto40%ofEurope’scleanenergytechnologydeploymentneedsby2030.Theactwouldcovereighttechnologiesandsimplifyregulation,supportedbyexistingfundingchannels(e.g.InvestEU;theRecoveryandResilienceFacility).InmanypartsofAsia,policiessupportingbothrenewablesandnuclearpowerareontherise.Japanisdiscussinglegislationtoextendnuclearpowerplantlifetimesbeyond60yearsandSouthKorea’s10thElectricityPlanincorporatesaslightlyhighershareofnuclearpowerinthegenerationmix(35%by2036)aswellasasharpincreaseintheshareofrenewablesto31%by2036(upfrom7.5%in2021)AmongEMDEs,IndonesiaandVietNamconcludedJETPstoacceleratetheenergytransitionawayfromfossilfuelsandtowardsrenewables.Indonesia’sJETP,forinstance,expectstoreceiveUSD20billionofinitialfundingoverthenextthreetofiveyears,withcapitalcomingfrombothcommercialandconcessionalsources,andprivateaswellaspublicmoney.Gettingprojectsupandrunningatthescaleandspeedneededtoreachtargetsisprovinghard,withchallengesbeyondprices.Permittinghasbeenakeyconcernforinvestorsandfinanciersrecently,especiallyforwindandgridinfrastructure.Europehasbeenatthecentreofthisdebate,withsubstantialrenewablecapacityinthepipelinewaitingforpermits,andqueueswellbeyondsetlimits.Governmentsarenowenactingpoliciestoaddressthisissue.Otherrisksincludetransmissionbottlenecks(eithermissingorpoor-qualitygridinfrastructuretoconnectnewrenewableprojects)andshortagesofskilledlabour.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE41PowersectorFinalinvestmentdecisions(FIDs)IEA.CCBY4.0.WorldEnergyInvestment2023PAGE42PowersectorMorethan40GWofcoal-firedplantswereapprovedin2022;almostallofthiswasinChina,reflectingastrongelectricitysecuritypriorityevenaslow-emissionspowerscalesupfastCoal-firedpowergenerationcapacitysubjecttoaFIDbygeography(left)andsegment(right),2016-2022IEA.CCBY4.0.Notes:FID=finalinvestmentdecision;FIDsareanindicationofthescaleoffuturecapacitytocomeonlineinthecomingfewyears;theIEAtracksprojectsthatreachfinancialcloseorbeginconstructiontoprovideaforward-lookingindicatoroffuturecapacityadditionsandspendingactivity.Source:IEAcalculationsbasedonMcCoyPowerReports(2023).2040602016201720182019202020212022GWChinaIndiaSoutheastAsiaRestofworld2040602016201720182019202020212022HighefficiencySubcriticalIEA.CCBY4.0.WorldEnergyInvestment2023PAGE43PowersectorDespitehighnaturalgasprices,FIDsforunabatedgas-firedpowergenerationrosein2022Gas-firedpowergenerationcapacitysubjecttoaFIDbygeography(left)andsegment(right),2016-2022IEA.CCBY4.0.Notes:MENA=MiddleEastandNorthAfrica;CCGT=combined-cyclegasturbine;OCGT=open-cyclegasturbine;FIDsareanindicationofthescaleoffuturecapacitytocomeonlineinthecomingyears;theIEAtracksprojectsthatreachfinancialcloseorbeginconstructiontoprovideaforward-lookingindicatoroffuturecapacityadditionsandspendingactivity.Source:IEAcalculationsbasedonMcCoyPowerReports(2023).204060802016201720182019202020212022GWChinaUnitedStatesMENAOtherAsiaSoutheastAsiaEuropeRestofworld20%40%60%80%204060802016201720182019202020212022CCGTOCGTNetimportersofnaturalgas(share,rightaxis)IEA.CCBY4.0.WorldEnergyInvestment2023PAGE44PowersectorIn2022FIDsforunabatedfossilfuelgenerationreachedlevelslastseenin2016onthebackofsecurityofsupplyconcernsanddiversificationGlobally,FIDsforunabatedfossilfuelpowergenerationincreasedby40%year-on-yeartomorethan100GWin2022,thehighestlevelsince2016,drivenbynewlyapprovedcoalandnaturalgascapacity.ChinaaccountsforthevastmajorityoftheseFIDs(95%incoal-firedpower)andifChinaisexcludedtheglobalgrowthratefallstojust3%.Asevereelectricitysupplycrisisinlate2021andcontinuedmarketstrainsamidaheatwavein2022providethebackdroptoChina’sproposedexpansionincapacity.Thestrainswerecausedbydroughtconditionsthatloweredhydropoweroutput,inflexibleinterprovincialelectricityexportcontracts,andacombinationofrisingcoalpricesandlowwholesaletariffsthatledsomegeneratorstostopoperations.Thistriggeredvariousregulatorychanges,aswellascentralgovernmentsupportformorecoal-andgas-firedpowerinvestment.Theinvestmentcaseforthisnewcapacityishardlyclear-cutgiventherapidpaceofrenewabledeployment.Forthemoment,itremainsunclearwhetherthisnewcapacity–ifandwhenitcomesonlineinafewyears–willbeusedprimarilyforflexibilitypurposesorforbaseloadgeneration;theimplicationsforemissionswilldependontheanswertothisquestion.InIndonesia,incontrastto2021,therewerenonewcoalFIDs,anencouragingsignalgiventhecountry’snetzeropledgeandJETP.InotherSoutheastAsiancountriesandtherestoftheworld(e.g.LaoPDRandRussia),onlyaverylimitednumberofnewcoal-firedplantswereapprovedfordevelopment,reflectingpledgesfromarangeofcountriesandfinancialinstitutionstostopbackingtheirconstruction(notablytheChinesecommitmenttostopbuildingorfinancingcoalplantsabroad).Thoseapprovedcontinuetobeofrelativelyhighefficiency,withsubcriticalfacilitiesdroppingtobelow5%ofnewFIDs.Similartocoal,FIDsforgas-firedpowergenerationamountedto65GWin2022–ajumpofalmost40%despiteveryhighpricesfornaturalgasinthewakeofRussia’sinvasionofUkraine.SomeofthesenewFIDswerefromgas-importingcountriesthatwereexposedtopricepressuresfromnaturalgasmarkets.Chinaisanotableexample,approvingalmosttwiceasmuchgas-firedcapacityasin2021.Thiswaslargelyintheheavilypopulatedsoutheasterncoastalregions,withinreachofLNGimportfacilities;worriesabouthydroavailabilityalsosupporteddecisionstogoaheadwithgas.OtherregionsseeingnewgasFIDswerelargelythosewithlargeresources,suchastheUnitedStatesandtheMENAregion.WhileFIDsinSoutheastAsia(especiallyinThailandandVietNam)roseyear-on-year,decisionstogoaheadwithgas-firedpowerinotherpartsofAsia,outsideChina,fellbymorethan60%.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE45PowersectorIrrespectiveoftherecentincreaseinnewcoalFIDs,thepipelineofnewcoal,hydropowerandnuclearprojectsisslowing,whilegas-firedprojectsareacceleratingAnnualaveragecapacityadditionsandFIDsbycapacity,2019-2022IEA.CCBY4.0.Notes:AnnualaverageFIDsareanindicationofthescaleoffuturecapacitytocomeonlineinthenextfewyears;thetimeittakesforanewplanttogoonlinecandiffer;forexample,anewnaturalgasplantcantakethreeyears,whileanewnuclearplantcantakesevenyears.Sources:IEAcalculationsbasedonMcCoyPowerReports(2023),S&PGlobal(2023)andIAEA(2023).20406080NaturalgasCoalHydroNuclearGWAnnualaveragecapacityadditionsAnnualaverageFIDsIEA.CCBY4.0.WorldEnergyInvestment2023PAGE46PowersectorFIDsforutility-scalerenewablesremainedaround2021levelsin2022,withhighersolarbutadeclineinapprovalsforwindFIDsforutility-scalerenewableplants,2016-2022IEA.CCBY4.0.Notes:Excludeslargehydropower;Otherincludesbiomass,waste-to-energy,geothermal,smallhydroandmarine.Source:IEAcalculationsbasedonCleanEnergyPipeline(2023).501001502002503003504002016201720182019202020212022BillionUSD(2022)OtherWindSolarIEA.CCBY4.0.WorldEnergyInvestment2023PAGE47PowersectorBuoyantFIDsforsolarkeptutility-scalerenewablesaroundrecordlevelsin2022FIDsforutility-scalerenewableplantsremainedhighin2022,followingarecordyearin2021.FIDsforsolarprojectsincreasedsignificantly,reachingmorethanUSD180billion–20%morethanin2021–whilewindpowerexperiencedadrop,inparticularforoffshorewindprojects,whichfellmorethan50%.Thetotalnumberofutility-scaleFIDsincreased,withdealsaboveUSD1billionplayingalargerrole.Inmonetaryterms,utility-scalerenewableapprovalsinChinadecreasedbyaround5%overall,thoughincreasingbythelastquarterof2022(48%higherthaninthethirdquarter).InIndia,bycontrast,decisionsforrenewablesprojectstripled,pushedbyits2022targetfor100GWofinstalledsolarcapacityandthecontinuingpushforinnovative“round-the-clocktenders”(combiningrenewableswithstorage).AsimilarjumpwasobservedinSouthAfrica,asthecountryaimstotackleasevereelectricitycrisisanddiversifyitselectricitymix,supportedbytheinvestmentplanofitsownJETPandagroupofleadingcountries.FIDsintheEuropeanUnionremainedflat,whileintheUnitedStatestheyincreasedbyaround5%,withUSapprovalsinparticularacceleratinginthesecondhalfof2022afterthepassageofitsInflationReductionAct.FIDsforlargehydropowerandnuclearpowerplantsdecreasedsignificantlyto14GWand4GWrespectively(from20GWand6GWin2021,respectively).In2022Chinawastheonlyregiontostarttheconstructionofanewnuclearpowerplant,whileinvestmentinlargehydropowerwasdominatedbyChinaandIndia.Pumpedhydro,whichcanserveasanenergystoragefacility,constituted90%ofthehydropowerFIDs.Afteranuptickin2021,thedecliningpipelinefortheseprojectsisareasonforconcerngiventheirpotentialtosupportpowersectordecarbonisationandsupplysecurity.However,additionalcapitalisbeingspentonmodernisingandextendingthelifetimesofexistingplants,whichisnotcapturedbyFIDs;andpolicyisbecomingmoresupportivetonewprojectapprovalsinfuture.Renewableprojectshaveshownunevengrowth,withsolargainingrelevanceinthemixandwindfacingmajorchallengesparticularlyforoffshorewindenergy,whichhasexperiencedsetbacksduetoconstructiondelaysandsupplychainconstraints.Furthermore,fossilfuelpowerFIDshaverisenasmanycountrieshaveprioritisedenergysecurityprojects.However,asCovid-19regulationsarenowlargelylifted,supplychainpressureseasingandpricesforkeycomponentssuchascriticalmineralsaremoderating,thereisgrowingsupportforrenewableenergyaidedbysupportivepoliciesinkeyregions.RecentexamplesaretheUSInflationReductionActandGermany’sUSD31billionpushtoexpandwindandsolar.ThisisexpectedtoleadtoanincreaseinFIDsforutility-scalerenewablesin2023.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE48PowersectorElectricitygridsandbatterystorageIEA.CCBY4.0.WorldEnergyInvestment2023PAGE49PowersectorInvestmentinpowergridscontinuestoriseinadvancedeconomiesandChina,witharisingshareofspendingondigitalisation…Investmentinpowergridinfrastructurebygeography(left)andsegment(right),2016-2023eIEA.CCBY4.0.Notes:Automationandcommunicationincludebothdistributionandtransmission;2023e=estimatedvaluesfor2023.Sources:IEAanalysisbasedontransmissionanddistributioncompanies’financialstatements,andGuidehouse(2022).10%20%30%40%10020030040020162017201820192020202120222023eTransmission(leftaxis)Distribution(leftaxis)Smartmetersshare10020030040020162017201820192020202120222023eUnitedStatesChinaEuropeOECDPacificOtherIEA.CCBY4.0.WorldEnergyInvestment2023PAGE50Powersector…butmanyEMDEsoutsideChinastillfacechallengesinmobilisingcapitalforinfrastructuredevelopmentAdvancedeconomiesandChinacontinuetoleadinvestmentingrids,togetheraccountingfor80%oftheglobalspending.Investmentinelectricitygridsisgrowingatastablepaceinadvancedeconomies,withcapitalexpenditurerising6%in2022,andChinaseeingasteeper16%rateofgrowthininvestment,despiteinvestmentin2021-2023overallbeinglowerthaninthepreviousthree-yearperiod.UScapitalspendingongridsremainslargelyconcentratedonenhancingreliabilityandupgradingoutdatedinfrastructure.Theamountinvestedinthisareain2022wasalmostUSD90billion,around7%morethanin2021.Europe’sspendingroseatasimilarrate,reachingUSD65billion.China’sinvestmentcontinuestogrow,especiallyinultra-highvoltagetransmissionprojects,withoverUSD22billionworthofprojectsinthesecondhalfof2022andthestartof2023.Overall,gridinvestmentinEMDEs(excludingChina)hasbeenlowinrecentyears,with2019-2022averageannualspendingaroundathirdlowerthaninthe2015-2018period.TheCovid-19pandemic,afocusonaffordabilityforconsumersandconstrainedbalancesheetshaveleftgridinvestmentfeeble.Privatelyfinancedtransmissionanddistributioninvestmentisalsolow,outsidespecificregionssuchasLatinAmerica,whereprivatefinanceisgainingmorerelevance.Insomeregionsitisnotevenallowed.Africastillshowslowlevelsofinvestmentinabsoluteterms,despiteitsenormousaccessneeds.In2022,however,investmentingridsincreasedsignificantlyacrossthecontinent.InSouthAfrica,investmentrosebyathirdtoUSD290million,albeitstillshortoftheinvestmentrequiredbyits2023-2027JETP.Thedomesticregulatorrecentlyapprovedan18%tariffincreasethatshouldstrengthenEskom’sbalancesheetandprovidefinancialrelieftothepowersystem.India’sinvestmentpickedupin2022,focusedonbothexpandingitsnetworkaswellasimprovingefficiencyandbettersupportingtheintegrationofrenewablesintothegrid.TheGreenEnergyCorridorPhaseIIwasapprovedin2022,whichentailsabudgetofoverUSD1.4billionbeingspentoverthenextfouryearsoncapacityadditions(linesandsubstations),interregionaltransmissionandneighbouringlinksfortrade.India’s2022spendingstillremainsaboutathirdbelowits2015-2018annualinvestmentaverage.Digitalspendingplaysacriticalroleinenhancingthereliability,flexibilityandefficiencyofpowergrids.Thereisanincreasingfocusonthedistributionsegment,whichnowrepresentsover75%ofthetotaldigitalspend.Moreover,therehasbeenasubstantialupswingininvestmentinEVcharginginfrastructure,whichhasdoubledin2022comparedtothepreviousyear.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE51PowersectorIfpolicymakersandregulatorsdonotprovidethenecessaryincentivesforinvestmentingridspending,itcouldposeasignificantobstacletothecleanenergytransitionsGridinvestmentlevelwithcurrentgrowthtrendandgaptoreachNZEScenariotrajectoryIEA.CCBY4.0.Notes:IEAestimationapplyingthecompoundannualgrowthrate(CAGR)of2019to2023etogridinvestmentbetween2024and2030;NZE=IEANetZeroEmissionsby2050Scenario;2023e=estimatedvaluesfor2023.1002003004005006007008002023e2024202520262027202820292030NZE2030BillionUSD(2022)Investmentlevelwith2019-2023eCAGRGapIEA.CCBY4.0.WorldEnergyInvestment2023PAGE52PowersectorInvestmentinbatterystorageissetforcontinuedrapidgrowthin2023,notablyinutility-scalebatterysystemsBatterystorageinvestmentbygeography(left)andsegment(right),2016-2023eIEA.CCBY4.0.Note:2023e=estimatedvaluesfor2023.Sources:IEAcalculationsbasedonCleanHorizon(2023),BNEF(2023),ChinaEnergyStorageAlliance(2023).1020304020162017201820192020202120222023eBillionUSD(2022)UnitedStatesChinaEuropeOECDPacificOtherUtility-scaleBehind-the-meter20162017201820192020202120222023eIEA.CCBY4.0.WorldEnergyInvestment2023PAGE53PowersectorInvestmentinbatterystoragemorethandoubledin2022,drivenbyinstitutionalinvestmentandsolardevelopersTheenergysystemisundergoingamajortransformationtowardsamoreflexiblegridthatcanrespondtodemandandpricevolatility.In2022expenditureonbatterystorageexceededUSD20billion,withtheUnitedStates,China,andEuropeaccountingfor90%ofspending.Thisconcentrationcanbeattributedtothetechnologicalcomplexitiesofthevaluechainandtheneedforsupportivepoliciesandmarketdesigns.Chinahasdemonstrateditscommitmenttobatterystoragethroughsignificantinvestments,suchastheconstructionoftheworld'slargestbatterystoragepeak-shavingpowerstation.Chinahasalsorecentlyestablisheditsfirstpeak-shavingcapacitymarket,whichregulatespricinglimitsfortransactionsandcompensationfordemandresponse.Intotal,spendingonbatterystorageinChinatripledin2022toalmostUSD8billion.2023isexpectedtoseethisincreasetoUSD14billiononthebackoffavourableeconomicsforutility-scalebatterystorageandstrongpolicysupport.InEurope,althoughhydrostorageremainspredominant,investmentinbatteryprojectsisrapidlygainingground,reachingUSD5billionin2022.AjointventurepartnershipbetweenNextEnergy(70%)andEelpower(30%),forexample,couldcreateuptoUSD370millionininvestmentopportunities.SpendingintheUnitedStatestotalledUSD6billionin2022,50%morethanthepreviousyear.TheexpectationofincreasedbenefitsundertheInflationReductionAct(seenextpage)mayaffectthetimingofcertainprojects,buttheenvironmentisincreasinglysupportive.Consequently,weexpectbatterystorageinvestmentstomorethandoubleintheUStoUSD13billionin2023.AsiaPacific(excludingChina)invested27%morethanlastyear,reachingmorethanUSD1billionin2022,with2023investmentsexpectedtotriple.India’sgovernment,forexample,hasambitioustargetsforbatterystorage.ThegovernmentisalsosupportingthecreationofadomesticvaluechainforthebatteryindustrywithfinancialallocationsofoverUSD2billionundertheNationalProgrammeonAdvancedChemistryCell(ACC)BatteryStorage.Otherdevelopingcountrieshavealsoshowngrowth,althoughtheabsolutelevelofinvestmentremainsrelativelylow.Capitalcostsforbatteriesincreasedin2022forthefirsttimeinadecadeduetovariousfactorsincludingtightsupplychainsforbatterymetalsandasharpincreaseindemand.Despitetheincreaseinbatterycapitalcosts,aclearregionaldifferentiationstillexists:Chinacontinuestoseethelowestcostsforutility-scalebatteries,followedbyEuropeandtheUnitedStates.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE54PowersectorImpactoftheUSInflationReductionActonbatterystorageCollectively,theInflationReductionActandtheBipartisanInfrastructureLawofferanestimatedUSD24billioninfederalinvestmentinEVs,batteriesandinfrastructure,ontopoftaxcredits.Thelong-termregulatorycertaintyalsoprovidescriticalstabilityforprivateinvestorsinthesector.Weestimatethatthenewfederalsupportcouldreducecapitalcostsforbatterystoragebyalmost15%,providingasignificantboosttoUSbatterystorageinvestment,whichisnowexpectedtodoublein2023.Theactalsoincludesprovisionsthatcouldcomplicatethetimingofinvestment,suchasdomesticsourcingrequirementsforcriticalmaterialslikelithiumthatcouldpreventsomebatteryprojectsfrombenefiting.SeveralChinesecompaniesarerespondingtothissituation:CATL,forexample,recentlyannouncedapartnershipwithFordtoestablishaUSD3.5billionplantinMichigan.InEuropetheactsparkedfearsthatitslocalcontentrequirementswouldleadtoprivateinvestmentshiftingawayfromthecontinent.MajorEuropeanplayerssuchasVolkswagen,BMWandbatterymakerNorthvoltannouncednewbatterymanufacturinginvestmentsaftertheUSactwasadopted.However,mostoftheseannouncementsconcerninvestmentplanspredatingtheact,whichhavenowbeenaccelerated,ratherthandisplacingnewEuropeanprojects.Moreover,theEuropeanUnionisnowaimingtoexpandavailablefundingfornetzeroindustriesviaitsGreenDealIndustrialPlan.TheUnitedStatesandEuropeanUnionarealsoplanningtodeepentheireconomicrelationshipwhileaddressingsharedeconomicandnationalsecuritychallengesinthecleanenergytransition.EstimatedimpactoftheUSInflationReductionActonaverageUScapitalcostsforbatterystorage(in2022costs)IEA.BYCC4.0.Sources:IEAcalculationsbasedonBNEF(2023),WoodMackenzie(2023)andLazard(2023).200400600800100012001400UtilityscaleBehindthemeterUSD/kWEstimatedcostreductionIEA.CCBY4.0.WorldEnergyInvestment2023PAGE55PowersectorImplicationsIEA.CCBY4.0.WorldEnergyInvestment2023PAGE56PowersectorGlobalpowersectorinvestmentisgrowingquicklybutunevenly;secureandsustainabledevelopmentofthepowersectorwillrequiremuchhigherinvestmentinEMDEsoutsideChinaInvestmentinthepowersectorin2021-2023ecomparedwithinvestmentforIEAscenariosin2030IEA.CCBY4.0.Notes:STEPS=IEAStatedPoliciesScenario;APS=IEAAnnouncedPledgesScenario;NZE=IEANetZeroEmissionsby2050Scenario;CCUS=carboncaptureandstorage;2023e=estimatedvaluesfor2023.50010001500200025003000202120222023e2030STEPS2030APS2030NZEBillionUSD(2022)20040060080010001200202120222023e2030STEPS2030APS2030NZEWorldEMDEsexcl.ChinaIEA.CCBY4.0.WorldEnergyInvestment2023PAGE57PowersectorDespitepositivesigns,there’smuchmoretobedonetogetthepowersectorontrackfora1.5-degreescenarioRecentyearshaveseenconsiderablegrowthincleanpowerinvestment,andoverallspendingingeneration,gridsandstoragewouldneedtorisebyanother30%by2030tobeconsistentwithannouncedclimatepledges(IEAAnnouncedPledgesScenario[APS]).Aggregateinvestmenttrendsofferreasonsforoptimism.Therateofgrowthseeninpowersectorcapitalexpenditureoverthelastfiveyears,ifmaintained,wouldbeenoughtosurpassthe2030figurefortheAPS.However,theaggregatenumbersmaskimbalancesacrosstechnologiesandregionsthatwouldneedtobeaddressedtoensuresecureandsustainabledevelopmentofthepowersector.Andtoday’sglobalinvestmentwouldneedtomorethandoubleby2030togetontrackfora1.5-degreestabilisationinglobalaveragetemperatures,asintheNZEScenario.Inparticular,despitesomebrightspotssuchasrenewablesinIndia,powersectorinvestmenttrendsinmostEMDEs(excludingChina)arewellofftrackforscenariosthatmeetnationalorglobalsustainabledevelopmentgoals.OurnewanalysissuggeststhatpowersectorinvestmentinEMDEsoutsideChinacouldriseby4%in2023.Itwouldneedtoincreasebyaround20%eachyeartoreachthelevelprojectedintheNZEScenarioin2030,withcapitalspendingonrenewablesgrowingatanexceptionallysteeprateof30%everyyear(comparedto10%inadvancedeconomies).ThedeficitinspendingongridsinmanyEMDEsisalsostriking,anddifficulttoresolvegiventhefinancialconditionofmanyutilities.Elsewhere,thegrowthtrendsforpowersectorinvestmentaremoreencouraging.IfChinaweretomaintainitsoverallgrowthtrendsince2019,thiswouldbeconsistentwiththeinvestmentlevelrequiredin2030fortheNZEScenario,withadvancedeconomiescomingclose.TotalpowersectorinvestmentinChinaandadvancedeconomieswouldneedtogrowby5%and10%everyyearbetween2024and2030,respectively.Maintainingsuchhighgrowthratesthroughoutthedecadecannotofcoursebetakenforgranted,notleastbecausesupplychainsneedtobeexpanded,permitssecured,flexibilityrequirementsneedtobemanagedandfinancingneedstobemobilised.Amongthedifferenttechnologies,thegrowthinglobalcapitalexpenditureinthelastfiveyears,ifmaintained,isontrackforanNZEScenarioonlyforahandfuloftechnologies,ledbysolarPVandbatterystorage.Investmentgrowthinwindandhydropowerwouldneedtoincreaseconsiderably,andsimilarlyinelectricitygrids(especiallygiventheirenablingroleforrenewablespenetration).IEA.CCBY4.0.WorldEnergyInvestment2023PAGE58FuelsupplyFuelsupplyIEA.CCBY4.0.WorldEnergyInvestment2023PAGE59FuelsupplyOverviewIEA.CCBY4.0.WorldEnergyInvestment2023PAGE60FuelsupplyGlobalinvestmentinfuelsrosein2022andisexpectedtoreturntopre-pandemiclevelsin2023Globalinvestmentinfuelsupply,2010-2023eIEA.CCBY4.0.Notes:Oil,naturalgasandcoalincludeupstreamandmidstreaminvestments.Low-emissionfuels=modernbioenergy,low-emissionhydrogenandhydrogen-basedfuels.2023e=estimatedvaluesfor2023.20040060080010001200140020102011201220132014201520162017201820192020202120222023eLow-emissionfuelsCoalNaturalgasOilBillionUSD(2022)IEA.CCBY4.0.WorldEnergyInvestment2023PAGE61FuelsupplyNetincomeoftheglobaloilandgasindustryreachedarecordhighofUSD4trillionin2022Netincomeoftheoilandgasindustry,2008-2022IEA.CCBY4.0.Notes:Netincomeiscalculatedfromoilandgasproductionatprevailingoilandgasprices(includingsubsidies)afteroperatingcostsbutbeforetaxes;“privatecompanies”hereincludeslistedandnon-listedcompanies.5001000150020002500300035004000200820092010201120122013201420152016201720182019202020212022NationaloilcompaniesPrivatecompaniesBillionUSD(2022)IEA.CCBY4.0.WorldEnergyInvestment2023PAGE62FuelsupplyRecordincomeintheoilandgassectorwasusedtoincreaseshareholderreturnsandpaydowndebt,withonlyafractionoffreecashflowdirectedtowardscleanenergyinvestmentsDistributionofcashspendingbytheoilandgasindustry,2008-2022IEA.CCBY4.0.Source:IEAanalysisbasedonS&PCapitalIQ.20%40%60%80%100%200820092010201120122013201420152016201720182019202020212022NetdebtrepaidDividendsplusbuybacksminusissuancesCleanenergycapitalexpenditureOilandgascapitalexpenditureIEA.CCBY4.0.WorldEnergyInvestment2023PAGE63FuelsupplyAmplerevenuesandhighpricesarepushingfossilfuelinvestmenthigher,butspendingisconstrainedbyworriesaboutcostsandlong-termdemandTheyear2022wasanextraordinaryyearforfuelsuppliersandtraders.Russia’sinvasionofUkrainedrovenaturalgaspricestorecordlevelsinmanypartsoftheworldandoilpricesbackuptolevelsnotseensincethemid-2010s.Netincomefromfossilfuelsalesalsorosetolevelsneverseenbefore,withtheglobaloilandgasindustryearningaroundUSD4trillion.Highpriceshavespurredanincreaseinfossilfuelinvestment:ourexpectation,basedonanalysisoftheannouncedspendingplansofallthelargeandmedium-sizedoil,gasandcoalcompanies,isthatinvestmentinnewfossilfuelsupplywillriseby6%in2023toUSD950billion.Someofthewindfallgainsin2022aregoingbackintotraditionalareasofsupply,withcompaniesseekingout“advantaged”resourcesthatcanbebroughttomarketrelativelyquickly,atlowcostandwithlowemissionintensities.Butmanyupstreamprojectsarealsofacingcostpressures,astightmarketsforservicesandlabourandincreasedrawmaterialcostserodetheimpactofincreasesininvestmentonrealactivity.Aroundhalfoftheincreaseinupstreamoilandgasinvestmentin2023islikelytobeaconsequenceofcostinflation.Therearesignificantvariationsbyregionandtypeofcompany.OnlyMiddleEasternnationaloilcompanies(NOCs)aresettospendmeaningfullymorein2023thantheydidin2022,andtheyaretheonlysubsetoftheindustryspendingmorethanpre-pandemiclevels.RealspendingonoilandgassupplybymostEuropeanandNorthAmericancompaniesremainsbelowwhereitwasin2019.Theheadlineincreaseinoilandgasspendingrepresentslessthanhalfofthecashflowthatwasavailabletotheoilandgasindustry.Between2010and2019,three-quartersofcashoutflows(accountforcapex,dividendandbuybacksaswellasnetdebtrepaid)wereinvestedintosupply.In2022,thisdroppedtolessthanhalf,withtheotherhalfusedprimarilyfordividends,sharebuybacksanddebtrepayment.Hesitationabouttraditionaloilandgassupplyinvestmentscomesfromavarietyoffactors,includingworriesaboutcosts,uncertaintiesoverlonger-termdemand,callsfortheindustrytostepupitsroleintacklingclimatechange,andpressuresfrommanyinvestorsandownerstofocusonreturnsratherthanproductiongrowth.Thelatterconsiderationisparticularlyvisiblefortightoilandshalegasoperators.AfteradecadeinwhichtheshaleindustryfailedtoIEA.CCBY4.0.WorldEnergyInvestment2023PAGE64Fuelsupplygenerateanypositivefreecashflows,companiesarenowbeingrewardedforincreasingvalueratherthanvolumes.Conventionaloilandgasresourcesapprovedfordevelopmentin2023arelikelytobearound25%morethanin2022butstillwellbelowtheaveragelevelseenoverthepastdecade.Theincreasein2023comesmainlyfromnaturalgas,reflectingmarketpressuresaswellasthepushtosubstitutetheshortfallinRussiandeliveries.Inthemidstreamsector,Russia’scutsinpipelinegasdeliveriestoEuropehavepromptedhigherspendingonLNGinfrastructure.Newregasificationcapacityiscomingintooperationinthenearterm,butnewexportfacilitiestakelongertodevelop.Exportprojectsalreadyunderdevelopmenthavebeensupplementedbyasteadystreamofnewapprovalsduringtheenergycrisis,promisingamajor170bcmwaveofnewLNGliquefactioncapacityin2025-2027.Akeydilemmaforinvestorsinlarge,capital‐intensivegassupplyprojectsishowtoreconcilestrongnear‐termdemandgrowthwithuncertainbutpossiblydeclininglonger-termdemand.Robustcoaldemandandhighpricesduringtheglobalenergycrisisarealsofeedingthroughintohigherglobalinvestment.CoalinvestmentincreasedtoUSD135billiongloballyin2022andisexpectedtorisetonearlyUSD150billionin2023.Nearly90%ofthisinvestmenttakesplaceintheAsiaPacificregion,notablyinChinaandIndiawherebothcountrieshavelookedtoexpandproductionanddevelopnewcoalmines.Elsewhere,nearlyallcoalinvestmentisfocusedonmaintainingorboostingproductionfromexistingminesasconcernsoverclimatechange,increasedemphasisonenvironmental,socialandcorporategovernance,slowpermittingandpublicoppositionlimittheavailabilityoffinancefornewcoalminedevelopment.Inaggregate,fossilfuelinvestmentsarenowbroadlyalignedwiththeStatedPoliciesScenario(STEPS)in2030,ascenariobasedontoday’spolicysettings.However,ifthecurrentmomentumbehindcleanenergyinvestmentismaintainedandcleanenergydeploymentscalesupquickly,demandforoil,naturalgasandcoalwouldcomeundermuchgreaterpressure.Benchmarkingtoday’sinvestmentlevelsagainstscenariosthathitglobalclimategoalsillustratesalargepotentialmismatch.Today’sfossilfuelinvestmentspendingisnowmorethandoublethelevelsneededintheNetZeroEmissionsby2050Scenario(NZEScenario).Themisalignmentforcoalisparticularlystriking:today’sinvestmentsarenearlysixtimesthe2030requirementsoftheNZEScenario.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE65FuelsupplyThesurgeinrevenuein2022offersamajoropportunitytoscaleupinvestmentinlow-emissionfuels;momentumisincreasing,butremainswellshortofwhereitneedstobeThesurgeinoilandgascompanyrevenuein2022opensupthepossibilityforacceleratedspendingbyfuelsuppliersonenergytransitions.Thisrelatesnotonlytoincreasinginvestmentinlow-emissionfuelsandtechnologiesbutalsoacceleratinginvestmentthatreducestheemissionsintensityofexistingfuelproduction.Oilandgasindustryspendingintheseareasisrising,andsignificantnewcommitmentsarebeingmadeacrossthewholespectrumofcleanfuels.OilandgascompaniesboostedtheirspendingonbioenergytoarecordUSD11billionin2022withaseriesoflargeacquisitionsoftransportbiofuelandbiogasproducers.Thesector’scommitmentstocarboncapture,utilisationandstorage(CCUS)andhydrogenarealsogrowing;manyofthelargestprojectsannouncedin2022wereunderpinnedbytheparticipationofoilandgasmajorsandNOCs,severalofwhichhaveambitiouscapacitytargetsfor2030.Todate,onlyahandfuloftheseprojectshavebeensubjecttoaFID,meaningthatannualisedspendingonhydrogenandCCUSprojectswasaroundUSD1billionin2022.SomeNOCshaveannouncedcommitmentstoreducesupplychainemissions,suchasSonatrach’seffortstobringdownflaringatHassiMessaoudandatitsLNGexportinfrastructure.Policiesareincreasinglysupportiveofthesekindsofinvestment,notablyviatheInflationReductionActintheUnitedStates,andthenumberofannouncedprojectsisrising,especiallyforcleanhydrogenandCCUS.Butastotalinvestmentinlow-emissionsourcesofenergy(includingcleanelectricity,cleanfuelsandCCUS)waslessthan5%ofupstreaminvestmentbytheoilandgasindustryin2022,muchlargershiftsincapitalallocationareneededtocleanupexistingproductionandtopositiontheoilandgasindustryaspartofthesolutiontoclimatechange.Forexample,tomaintainits30%shareoftotalcapitalspendingonCCUSasseenin2022,theoilandgasindustryundertheNZEScenariowouldhavetospendaroundUSD25billionannuallyby2030.Similarly,itsspendinglevelsonhydrogensupplywouldneedtoreachUSD19billionby2030,basedonthecurrent12%shareofinvestmentinelectrolyserprojects.ThisisacrucialtopicforCOP28inDubai.COPPresidentSultanAl-Jaberhascalledontheoilandgasindustryto“upitsgame,domoreanddoitfaster”.Withthisinmind,theIEAwillbeproducingnewanalysisontheroleoftheoilandgasindustryinnetzerotransitionsinadvanceofCOP28.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE66FuelsupplyUpstreamoilandgasIEA.CCBY4.0.WorldEnergyInvestment2023PAGE67FuelsupplyUpstreamoilandgasinvestmentroseby11%in2022andisexpectedtoriseby7%toUSD500billionin2023,buthalfoftheseincreasesareabsorbedbyrisingcostsTotalupstreamoilandgasinvestmentAnnualchangeinupstreamoilandgasinvestmentIEA.CCBY4.0.Notes:“Capitalexpenditureadjustedforcostinflationsince2019”adjustscapitalexpenditureforchangesinfindinganddevelopmentcostsusingtheIEA’supstreaminvestmentcostindexthatreflectsthepriceofabasketofgoodsandservicesrequiredtodevelopoilandgasfields.2023e=estimatedvaluesfor2023.Sources:financialreportdisclosureofasampleof90companies;costindexbasedondatafromBloomberg,FREDandIMFdata.20040060020192020202120222023eCapitalexpenditureCapitalexpenditureadjustedforcostinflationsince2019BillionUSD(2022)-30%-15%0%15%2019-202020-212021-222022-23eIEA.CCBY4.0.WorldEnergyInvestment2023PAGE68FuelsupplyMiddleEasternNOCsaretheonlysegmentoftheindustryspendingmorethanbeforeCovid-19Changeinupstreamoilandgascapitalinvestmentrelativeto2019bycompanytype,2020-2023eIEA.CCBY4.0.Note:2023e=estimatedvaluesfor2023.Sources:IEAanalysisfromannualreportsandRystadbasedonasampleofcompaniesaccountingformorethan70%ofglobalproduction.-40-30-20-10010203040MiddleEasternNOCsIndependentsRussianNOCsLatinAmericanNOCsAsianNOCsUSmajorsOtherNOCsEuropeanmajorsBillionUSD(2022)2020202120222023eIEA.CCBY4.0.WorldEnergyInvestment2023PAGE69FuelsupplyTheshalesectorrepresentsaroundaquarteroftotalupstreamoilandgasinvestmentevenasoperatorsprioritisereturnsoverproductiongrowthShareofoilandgasinvestmentbyassettype,2000-2023eIEA.CCBY4.0.Note:“Other”includescoalbedmethane,tightgas,coal-to-gas,extra-heavyoilandbitumen,gas-to-liquids,coal-to-liquidsandkerogenoil.2023valuesareestimates.Sources:IEAanalysisfromannualreportsandRystad.20%40%60%80%100%200020022004200620082010201220142016201820202022OnshoreconventionalOtherOffshoreconventionalTightoilandshalegasIEA.CCBY4.0.WorldEnergyInvestment2023PAGE70FuelsupplyUpstreamcompaniesaresearchingfor“advantagedresources”amidrisingpressuresoncostsandrenewedenergysecurityconsiderationsUpstreamoilandgascapitalexpenditureroseby11%in2022andourinitialestimateisfora7%increaseinupstreamspendingin2023,toreachjustoverUSD500billion.Companiesarefilteringinvestmentopportunitiesthroughanincreasinglydemandingsetofcriteria.Advantagedinvestmentsneedtobecompetitiveoncost,butalsohavelowemissionintensities.DeepwaterprojectstendtoscorehighlyonthesemetricsandareaslikeGuyana,theUSGulfCoast,BrazilandemergingproducerslikeNamibia(whichhasseenmajordiscoveriesinrecentyears)areattractingalotofinvestorinterest.Anotherpriorityisshortdevelopmentcycles.IttakesaroundthreetofiveyearsonaveragegloballyfromwhenaconventionalprojectreceivesitsFIDtoproductionstarting.Theuseofstandardiseddesignsandexistinginfrastructurecouldshortenthistimeaswellasreducedevelopmentcosts,butdespiteincreasingeffortsbytheindustrytodoso,thereislittleevidencetodateofastructuralreductioninthesedevelopmenttimelines.Anotherincreasinglyimportantconsideration,inthelightoftheenergycrisis,isgeopoliticalrisk.Amongothercharacteristics,companiesandpotentialimportersarealsolookingfor“trustworthybarrels”,especiallywheretheycanbedeliveredrelativelyquickly.Evencountriesthatareactivelypursuingrapidenergytransitionshaveprovedreadytoviewsomeupstreaminvestmentsthroughthisenergysecuritylens.Partoftherecentincreaseinspendingreflectshigherupstreamcosts:adjustingforrisingcosts,theincreaseinactivityisonlyaroundhalftheheadlineincreaseinupstreaminvestment.Thisincreaseinupstreamcostsin2022isduetoservicecompanies’highermargins,thehighercostofdrillpipes,casings,tubingandproppants,and,toalesserextent,higherlabour,cementandelectricitycosts.TheUSshaleindustryisexperiencingapersistentlabourshortageinthePermianBasin,themainproducingarea,whereitishasbeenchallengingtofillmechanicalandelectricalpositionswithlocalresidents.Tightorunderdevelopedmarketsforservicesandequipmentcandetercompaniesfromreinvestingtheirwindfallrevenuesbackintotheupstream.Thisisalsoafeatureofdeepwaterdevelopmentswherethereareconstraintsonavailablerigs.CompaniessuchasPetrobrasthathaveactivelytenderedinrecentyearsfordeepwaterdrillingequipmentandrigshavebeeninapositiontomoveaheadwiththeirupstreamambitions–inPetrobras’caseitslargeoffshorepre-saltfields.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE71FuelsupplyWindfallgainsin2022haveledtoincreasedinvestment,buttrendsdiffermarkedlybetweenregionsMostlargeoilandgascompanieshaveannouncedhigherplannedspendingonupstreamprojectsin2023fromthelevelsseenin2022,butonlyahandfulareinvestingmoreinthisareatodaythantheydidpriortotheCovid-19pandemic.Therearemajordifferencesbetweenregions.TheincreaseinspendingisconcentratedmainlyamonglargeMiddleEasternNOCs.Notably,SaudiAramcoandADNOC,investedconsiderablymorein2022thanin2019(priortotheCovid-19pandemic)andplantoboostinvestmentfurtherin2023.Bothcompaniesarespendingtomeetannouncedcapacityexpansiontargetsfor2027–SaudiAramcotoreach13millionbarrelsperday(mb/d)andADNOC5mb/d–andarealsolookingtoboostlocalsupplychainsandmanufacturingcapacity.Since2015SaudiAramcohasbeenlookingtosourceanincreasingshareofitsprocurementdomesticallyaspartoftheIn-KingdomTotalValueAddprogramme.Asof2022,63%ofSaudiAramco’sspendingwasdirectedtodomesticsuppliers,upfrom35%in2015(thetargetistoreach75%by2025).SaudiAramcohasannounceda30-60%increaseincapitalexpenditurefor2023,toreachatotalofUSD45-55billion.AnumberofNOCsinAsiaannouncedincreasesinspendingfor2023onthebackofrobustrevenuesin2022.InSoutheastAsia,Malaysia’sPetronasnowplanstospendaboutUSD14billioneachyearduring2023-2027,ariseofmorethan40%comparedwiththeaverageforthelastfiveyears.Indonesia’sPertaminaandThailand’sPTTEPhavealsoincreasedtheirplannedexpenditureforthecomingyears.Naturalgasistheprimetargetfortheregion’sNOCsgiventhesqueezeonsupplyandhighpricesduringtheenergycrisisin2022,withMalaysia’sfloatingZLNGprojectandIndonesia’sTangguhUCCprojectamongthoselikelytomoveforward.UpstreaminvestmentbyChineseNOCsisexpectedtobebroadlysimilartolevelsseenin2022ataroundUSD60billionperyear.China’sleadingoilandgascompaniesareexpandingtheirtransitioninvestmentsbuttheircoremandateremainstoensureoilandgassecurityontheirhomemarket.HigherrevenuesmayallowChina’sNOCstotargethigher-costdomesticresourcessuchasshaleorcoalbedmethane.ThereisalsoapushbysomeLatinAmericancompaniestoincreaseupstreamoilandgasspendingin2023.Thesecouldcomeunderpressureassomeofthelargestproducers–includingPetrobrasandEcopetrol–couldbetaskedbynewgovernmentadministrationstobalanceupstreaminvestmentwithanincreaseinrenewablesanddownstreaminvestment.Currently,explorationandproductionaccountforthreequarterofPetrobras’totalcapitalinvestment.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE72FuelsupplyUSandEuropeanmajorsannouncedrecordprofitsin2022,buthavenotsubstantiallymodifiedtheinvestmentplanstheymadepriortotheenergycrisis.OnenotableexceptionisBP,whichrecalibrateditsplanstocutupstreamproductionby40%andwillnowtargeta25%reductioninoutputby2030.ByandlargetheEuropeanmajorshavebeentradingalowermultipleofsharepricetoearningscomparedwiththeirUScounterparts,withEuropeancompaniesnotgettingmuchcreditthusfarfrominvestorsfortheirhighertransition-relatedcommitments.ForUStightoilandshalegas,thenumberofrigsinoperationrosesteadilythroughoutthefirsthalfof2022,buthassinceremainedaroundthislevel.Companiescontinuetoemphasisecapitaldisciplineandtheimportanceofreturningrevenuetoshareholders.Costinflationhasalsodampenedtheappetitetoincreaseinvestment.Investmentintheshalesectorin2023isexpectedtobesimilarto2019levels,althoughthenumberofwellsdrilledandcompletedislikelytobesubstantiallylower.TheoilandgasinvestmentpictureinRussiaissubjecttoahighdegreeofuncertainty,andaswithmanyaspectsofRussia’senergysector,hasbeennoticeablylesstransparentoverthelastyear,ascompaniesstoppedprovidingmuchdetailontheirfinancialperformanceorplans.Theinformationthatisavailablehighlightssomeofthestrains,includingregularcomplaintsfromcompaniesabouthighertaxes.InvestmentsinRussia’supstreamsectorreboundedfromCovid-19-inducedlowsin2020butasRussiabecomesincreasinglyshutofffromtheglobalenergymarket,investmentshavesunkwellbelowlevelsseeninthepandemic-affectedyearsof2020and2021.Rosneftmanagedtokeepspendingaround2021levels,butthecompanyhasnotprovidedanyinformationonits2023investments.OnnoticeableexceptionisGazpromwhichannounceda16%increaseininvestmentin2023from2022levels,focusingmainlyonthedevelopmentofnewproductionandgasprocessingcentresaswellasthePowerofSiberiapipeline.OtherlargeRussiancompanies,includingLukoil,Gazpromneft,TatneftandSibur,announcedatdifferentpointsthattheirinvestmentprogrammesareunderreview,buthavenotdisclosedanyfurtherinformation.Inthemeantime,manyoftheupstreaminvestmentsbywesterncompaniesinRussiaareinlegallimbo,withtheinvestorshavingannouncedtheirexitsandwrittendownthevalueoftheseinvestments.TheyarealsofacingofficialrestrictionsontheirabilitytodivestfromRussianassets.Forthemoment,therearefewsignsofothernon-westernplayerssteppingintotaketheirplaces.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE73FuelsupplyMidstreamanddownstreamoilandgasIEA.CCBY4.0.WorldEnergyInvestment2023PAGE74FuelsupplyInvestmentinnewLNGprojectsispickingup,withalonglineofprojectslookingtomoveahead,butspendingremainswellbelowthelevelsseeninthe2010sSanctionedLNGexportcapacityAnnualinvestmentspendingonsanctionedprojectsIEA.CCBY4.0.Note:Investmentspendingisprofiledassumingathree-to-six-yearconstructionperiod.2023e=estimatedvaluesfor2023.2004006008001000102030405020102011201220132014201520162017201820192020202120222023202420252026bcmperyearBillionUSD(2022)MiddleEastRussiaAfricaNorthAmericaAustraliaOthersCumulativecapacity(rightaxis)2040608010020102011201220132014201520162017201820192020202120222023ebcmperyearIEA.CCBY4.0.WorldEnergyInvestment2023PAGE75FuelsupplyInterestincontractingfornewLNGsupplyhasrisenfollowingRussia’sinvasionofUkraine,butEuropeanbuyersarewaryoflong-termcommitmentsDespitekeygaspricebenchmarksreachingrecordhighs,2022wasfarfromabumperyearforinvestmentinLNG.FIDsweremadefortwoprojectsintheUnitedStates(PlaqueminesandCorpusChristiStage3)andasmallfloatingLNGprojectinMalaysia(ZLNGSabah).ThetotalcommittedcapitalinvestmentwasUSD24billion,similartolevelsin2021.Investmentinregasificationfacilities,however,sawalargeuptickin2022asEU-basedcompaniesannounced,revivedoracceleratedplansforaround130bcmofnewLNGimportcapacity,includingmorethan20projectsbasedonfloatingstorageregasificationunits(FSRUs).Around45bcmofnewregasificationcapacityisexpectedtocomeonlinebytheendof2023,withGermanythefocalpoint.Thelong-livednatureofgasinfrastructure,alongsideEurope’s2050climatetarget,haspromptedadebateabouttheriskoflock-inorstrandedassetsfornewLNGimportinfrastructure.RegasificationterminalstypicallycostaroundUSD250/tonneofcapacity,aroundafifthofthecostofliquefactionterminals.Long-termcapacityrightsareusuallyheldbyprivatecompanies,whotakethemarketingriskandcanseeutilisationratesvarysubstantiallyoverthelongterm.TherecentflurryofinvestmentinLNGimportcapacityinEuropehasnotbeenmatchedbyaparallelwaveoflong-termsupplycontracting.Ofthe100bcmofnewLNGtermcontractssignedin2022,almosthalfwerebyportfolioplayers,whilebuyersinAsiapickedupathird,leavingaround20%earmarkedforEurope.Thisshareiswellabovehistoricallevels,buttotalfirmcontractedvolumes(around70bcm)remainwellbelowannualrequirements:buyersinEuropehavemainlybeenrelyingonspotandflexibleLNGtocovertheshortfallleftbyreducedRussiangasdeliveries.TwoLNGexportprojectshavesofarseenaFIDin2023,bothintheUnitedStates:theUSD8billionexpansionofPlaqueminesLNG(contractedmainlytoUSportfolioplayersandindependents),andtheUSD13billionPortArthurterminal(alargeproportionofwhichiscontractedtoEurope-focusedplayers).ThereareadditionalprojectsinNorthAmerica–aswellasQatar’sNorthFieldSouthexpansion–thathavemadeprogresstowardsaneventualFID;intheUSalonemorethan20pre-FIDsaleandpurchaseagreements(totallingaround40bcm)havebeensignedsinceRussia’sinvasionofUkraine.Portfolioplayershavecontractedaround40%ofthistotal,withChineseandEuropeanbuyerseachsigningupforaround20%.TheproliferationofLNGprojectsduetocomeonlineinthe2025-2027periodraisesthepossibilityofcostinflation,asmultipleprojectscompeteforalimitedpoolofspecialisedcontractors.TherewillbeIEA.CCBY4.0.WorldEnergyInvestment2023PAGE76Fuelsupplytrade-offsbetweenvalueandspeed,andthedeadlinesforsomeoftheapprovedprojectsmaywellslipfurtherintothelatterpartofthe2020s.InvestinginLNGremainsacomplexvalueproposition,asthereisanear-termneedforadditionalcapacitybutfarlesscertaintyaboutfuturerequirements,especiallyasanunprecedentedwaveofaround170bcmofnewcapacityisdueonlinebetween2025and2027(eventhoughsomelargeprojectssuchasMozambiqueLNGandArcticLNGmaybeatriskofdelay).Acceleratedclimateambitionsandsensitivitytohighgaspricesalsoloomlargeinthebackdrop:weassessthenetpresentvalue(NPV)ofLNGplantscurrentlyunderconstructionatoverUSD300billion,assumingpricesremainintherangeofaroundUSD9-11/MBtuovera30-yeareconomiclifetime(consistentwithSTEPSprices).However,loweringtheassumedgaspriceby20%wouldbringtheNPVdowntozero.Investmentinlong-distancegaspipelinesremainedmutedin2022.Russianstate-controlledtransportcompaniessuchasGazpromandTransnefthaveannouncedplansfordouble-digitgrowthininvestmentfor2023;thisreflectsasenseofurgencytoredirectexportflowsfromEuropetoAsia,ratherthantobringonlinenewupstreamdevelopments.However,therewasnofirmannouncementfromRussiaandChinaaboutnewgaspipelineinfrastructure,notablythePowerofSiberia2project,whichwouldconnectRussia’smajorexistingfieldsinWesternSiberiaandtheYamalpeninsulawithChina.Indiaremainsthekeymarketfornewgasdistributionnetworkinvestment,buthighimportpricesandgrowingdomesticcompetitionfromelectricityinthetransportandindustrialsectorshavedampenedannualinvestmentlevelsinthesector.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE77FuelsupplyInvestmentinoilrefiningcontinuedtorisein2022,butisexpectedtoslowfrom2023onwardsInvestmentinoilrefineries(greenfieldandupgrades)byregionandnetrefiningcapacityadditions,2015-2023eIEA.CCBY4.0.Notes:Investmentfiguresdonotincludemaintenancecapitalexpenditure.2023e=estimatedvaluesfor2023.-1.0-0.500.51.01.52.02.53.0-20-100102030405060201520162017201820192020202120222023eNorthAmericaCentralandSouthAmericaAfricaEurope/EurasiaOtherAsiaPacificSoutheastAsiaChinaandIndiaMiddleEastNetcapacityaddition(rightaxis)BillionUSD(2022)mb/dIEA.CCBY4.0.WorldEnergyInvestment2023PAGE78FuelsupplyThecurrenthealthymarginsmaynotnecessarilytranslateintohigherinvestmentlevelsinthecomingyears,highlightingtheimportanceofdemand-sidemeasurestocurbdemandgrowthTheverytightoilproductmarketin2022stemmedfromastrongreboundinoilproductdemand,anetreductioninrefiningcapacity,highnaturalgaspricesandlowerinventorylevels.Thesefactorscombinedtopushrefiningmarginstorecordhighs,especiallyformiddledistillatessuchasdieselandkerosene.Marginshavemoderatedsincelate2022duetoweakeneddemand.Middledistillatecracksinparticularhaveeasedfurtherinearly2023duetothelimitedcutsinRussiandieselexports,andhavebeenovertakenbygasolinecracksintheAtlanticBasin.However,despitetherecentfall,refiningmarginsremainhealthycomparedwithpastaverages.TheeffectsofsanctionsandembargoesonRussianoiltradeflowswereakeyvariableinglobaloilmarkets.ShipmentsofRussiancrudeoiltoEuropedeclinedvisiblyfollowingtheimportbaninDecember2022,butthesewereoffsetbythesurgeinimportsintoIndiaandChina,keepingoverallRussianexportvolumesstable.AsimilarpatternisbeingobservedinproducttradeflowsfollowingtheenforcementoftheEuropeanproductsembargoinFebruary2023.WhileRussianproductexportstoEuropearefalling,someofthevolumesarebeingreroutedtoAsia,AfricaandtheRepublicofTürkiye.Despitesustainedvolumes,Russia’sexportrevenuesarenonethelessdwindling.ExportrevenueinApril2023isestimatedatUSD15billioncomparedwithnearlyUSD20billionayearago.Thankstohealthymarginsandtightmarketconditions,investmentinoilrefineries(excludingmaintenancespending)continueditsgrowthin2022,reachingUSD40billion.TheincreasewasprimarilydrivenbytheMiddleEast,China,IndiaandNorthAmerica,whereseverallarge-capacityplants(e.g.theAl-ZourrefineryinKuwait,andtheJieyangandShenghongrefineriesinChina)startedoperationsorareexpectedtocomeonlinein2023.Afterthenetreductionincapacityin2021,therefiningindustryincreaseditsnetcapacitybyaround0.4mb/din2022andissettoaddalargeramountin2023.Asthecurrentwaveofnewcapacityadditionsreachescompletion,investmentisexpectedtowaneinthecomingyears.Despitethecurrenthealthymargins,itislikelytobecomeincreasinglychallengingtocommitmulti-billiondollarinvestmentinnewcapacitygivenlingeringuncertaintyaroundthelong-termoutlookforoildemand.Rather,investmentinnewgrowthareas,suchaslow-emissionhydrogen,biofuelsandpetrochemicals,andplasticrecycling,issettoaccountforalargershareofoverallinvestmentbyrefiners.Refiningcompaniesalreadyrepresentaround80%oftoday’srenewabledieselproductioncapacityandoverhalfoftheplannedprojects.Thishighlightstheriskofapotentialtighteningofrefinedproductsuppliesinthemediumtermandtheimportanceofdemand-sideandefficiencymeasurestoeasesuchtensions.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE79FuelsupplyOilandgasindustrytransitionsIEA.CCBY4.0.WorldEnergyInvestment2023PAGE80FuelsupplyRenewablepoweristhediversificationoptionbeingpursuedbythelargestnumberofoilandgascompaniesNumberofoilandgascompanieswithstrategicplansandrealisedinvestmentsIEA.CCBY4.0.Notes:Takesintoaccountcompanieshavingmadeinvestmentsand/orstrategicpledges.Low-emissionhydrogenincludeshydrogenfromelectrolysisandfromfossilfuelswithCCUSSources:IEAanalysisusingannualreports,BNEFandCleanEnergyPipeline.10203040506070RenewablepowerCCUSandDACSHydrogenfromelectrolysisandfromfossilfuelswithCCUSBioenergyPowergrids,storageandEVchargingNumberofcompaniesEuropeanmajorsUSmajorsIndependentsMiddleEasternNOCsOtherNOCsIEA.CCBY4.0.WorldEnergyInvestment2023PAGE81FuelsupplyCleanenergyinvestmentbyoilandgascompaniesdoubledin2022toaroundUSD20billion,around4%oftheirupstreamcapitalinvestmentand0.5%ofnetincomeCleanenergyspendingbytechnologyShareofcleanenergyspendinginupstreamcapexandnetincomeIEA.CCBY4.0.Notes:Spendinginthisfigureincludesmergersandacquisitions(investmentfiguresintherestofthischapterdonot);Other=hydrogen,geothermal,smallhydroandhybridprojects.Sources:IEAanalysisusingannualreports,CleanEnergyPipeline,BNEF,RystadandIJGlobal..51015202520152016201720182019202020212022BillionUSD(2022)SolarPVWindCCUSBioenergyEnergystorageOther1%2%3%4%5%20152016201720182019202020212022UpstreamcapexNetincomeIEA.CCBY4.0.WorldEnergyInvestment2023PAGE82FuelsupplyOilandgascompanies’investmentincleanenergyisincreasingbutremainssmallrelativetooverallcapitalinvestment;bioenergyinvestmentrosesignificantlyin2022Ourtrackingofoilandgascompanyexpenditureshowsthataround4%oftheirupstreamcapitalexpenditurein2022wenttoareasoutsidetraditionalsupply,suchascleanfuels,CCUSandcleanpower.Thiswas3percentagepointshigherthantherespectivesharein2020.Bioenergyaccountedformorethanhalfofcleanenergyspendingbytheindustryin2022asoilandgascompaniestookmajorstakesinseveralbioenergyproducers.Ourpreliminaryestimateisthatinvestmentlevelswillremainbroadlyconstantin2023althoughmuchdependsonthenumberandsizeofmergersandacquisitions.Therearewidecompany-by-companyvariationsinthisarea,butanincreasingnumberofoilandgascompanieshavenowmadesomesortofcommitmenttoreducingemissionsortodiversifytheirinvestmentspend(typicallyEuropeanmajorsandindependents).Themostcommontypeofpledgerelatestotheemissionsassociatedwiththecompanies’ownoperations,whetherdirectly(Scope1)orindirectly(Scope2).Ourassessmentisthatoilandgasindustryoperationsareresponsibleforjustunder15%ofenergy-relatedGHGemissionstoday.CompaniesaccountingforjustunderhalfofglobaloilandgasproductiontodayhaveannouncedplansortargetstoreducetheirScope1and2emissions.Formanycompanies,thepick-upinnon-corespendingisaimedatreducingthecompany’sownemissions.ExxonMobil,forexample,announcedplanstospendUSD17billiononemissionreductioninitiativesuntil2027;ofthis,40%willbedirectedtoinitiativeswiththirdparties(withaprimaryemphasisonCCUS,biofuelsandhydrogen),butthemajoritywillbetowardsreducingthecompany’sScope1and2targets.Reducingflaringandmethaneleakshastobeacorepriority.Themethaneemissionsintensityofoilandgasproductionisedgingdownwards,buttheIEA’sGlobalMethaneTrackerunderlinesthattheseleaksremainunacceptablyhigh.Likewise,globalgasflaringdecreasedslightlyin2022,largelythankstoreductionsinNigeria,MexicoandtheUnitedStates,aswellasconsistenteffortsfromKazakhstanandColombia,butalmost140bcmofgaswasnonethelesswastedinayearwhengassupplieswereverytightandpricesexceptionallyhigh.Thereisagrowingrealisationthatleadingoilandgascompanies’activeparticipationinemissionreductioneffortsispreferabletothemsimplysellingofftheirmostcarbon-intensiveassetstomeetemissionreductiongoals.AnalysisbytheEnvironmentalDefenseFundhighlightsthegeneralmovementofupstreamassetsinrecentyearstowardscompanieswithweakerclimatecommitments.From2018to2021,morethantwiceasmanydealsmovedassetsawayfromoperatorswithnetzerocommitmentsthanthereverse.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE83FuelsupplyRenewablepowerremainsthemainoutletfornon-coreoilandgascompanyspending,butinvestmentincleanfuels,suchasbioenergy,hydrogenandCCUS,ispickingupThepipelineofcleanenergyinvestmentprojectsthathaveoilandgasindustryparticipationispickingup.Thepastseveralyearshaveseenoilandgascompanies–particularlyEuropeanmajors–buildupaportfolioofrenewableassetsthroughacquisitions,jointventuresanddirectinvestment.Theearlyfocuswasonwindandsolardevelopments,andtherehavebeenlargemovesintooffshorewind:TotalEnergiesannouncedin2022aprojectpipelineof6GWofoffshorewind,takingthetotalto11GW,Shellalsohasaround9GWinthepipelineandEquinorhasambitionstoinstall12-16GWby2030.Ifrealised,thesecapacityadditionswouldrivalthoseofpure-playoffshorewinddeveloperssuchasØrstedoverthesameperiod.Morerecently,oilandgascompanieshaveincreasedtheirfocusonbioenergy,spendingaroundUSD11billionin2022,mainlyontheacquisitionofbiomethaneandbiodieselproducers.ThereisincreasingpolicysupportforCCUS,biogasesandlow-emissionhydrogen,allofwhichareagoodmatchfortheengineeringandprojectmanagementstrengthsofoilandgascompanies,aswellastheirexperienceinhandlingliquidsandgases.Severaloilandgascompanieshaveannouncedlarge-scalecapital-intensiveflagshipprojectsinthesesectorsinrecentyears.Forexample,in2022BPtooka40%stakeinthehydrogen-focusedWesternGreenEnergyHubinAustralia,settobeoneofthelargestrenewableprojectsintheworld.ThiswasfollowedbyBP’sUSD2billioncommitmenttodevelophydrogen,biofuelsandrenewableenergyarounditsrefiningoperationsinValencia,Spain.Shellin2022tookaFIDforanintegratedhydrogenprojectintheNetherlands–HollandHydrogenI,oneofthelargesthydrogenprojectsinEurope.NOCactivityinthisareaisalsopickingup.ADNOCisdevelopingtwoCO2recoveryprojectsatexistinggasplantsand,alongwithBPandMasdar(thestate-ownedrenewableenergycompanyintheUnitedArabEmirates),isparticipatingintheUnitedKingdom’sH2TeessideprojectforhydrogenfromnaturalgaswithCCUS.In2022SaudiAramcoannouncedplansforaCCUShubwithatargettoreach9MtCO2capacityby2027.Thecompany’sfirstsustainabilityreport,releasedinmid-2022,alsocontainsatargettoreach11Mtofhydrogenproductioncapacityby2030.PetronasreachedaFIDonthe3.3MtCO2KasawarioffshoreCCUSproject.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE84FuelsupplyLow-emissionfuelsIEA.CCBY4.0.WorldEnergyInvestment2023PAGE85FuelsupplyModerngaseousandliquidbioenergysawasharpuptickininvestmentspendingin2022,ledbyadvancesinrenewabledieselandbiomethaneAverageannualinvestmentinbiogasesandtransportbiofuelsCumulativeinvestmentbyregion,2010-2022IEA.CCBY4.0.Note:Biomethaneinvestmentincludesthecostofproducingbiogasasaninterimstepbeforeupgradingtobiomethane.2023e=estimatedvaluesfor2023.24681012142010-142015-2120222023eBillionUSD(2022)BiodieselBiogasolineBiogasBiomethane10203040UnitedStatesBrazilChinaEuropeRestofworldBillionUSD(2022)IEA.CCBY4.0.WorldEnergyInvestment2023PAGE86FuelsupplyAflurryofacquisitionsinrecentyearshasseentheoilandgasindustrytakemajorstakesinbioenergyproducersGlobaltransportbiofuelcapacityexpandedby7%in2022,itslargestannualincreaseinoveradecade.Biorefineriesfocusedonrenewabledieselmadeupthebulkofthegrowth,thankstoattractivepoliciesintheUnitedStatesandEurope,whilebioethanolcapacitysawnotableincreasesinBrazil,Indonesia,IndiaandChina.Biofuelsinvestmentsawalargeuptickin2022ascapacityadditionsreachedadecadehighofaround260kb/d.Largeinvestmentswereannouncedinrenewabledieselrefining,notablytheMarathon-NesteUSD1.2billionjointventureinCaliforniaandImperial’sUSD720millioninvestmentinCanada.Severallargecompaniesarealsomakingforaysintosustainableaviationfuels;thisunderpinnedNeste’sUSD2.2billionexpansionofitsrenewablefuelsplantinRotterdam.IntheEuropeanUnionalonethereareover30advancedbiorefineryprojectsinoperation,andafurther10areslatedforoperationbefore2025;severalaredevelopingsustainableaviationfuelsandrenewabledieselproductioncapabilities.TheUnitedStatesislikelytoleadgrowthinthissectorinthenearterm,thankstogenerousfiscalincentives;theInflationReductionActincludesanestimatedUSD9.4billionintaxcreditsandfinancialsupportfornewproductioncapacityandbiofuelinfrastructuregenerally.Throughaseriesofacquisitionsandnewpartnerships,oilandgasmajorsareincreasinglygainingafootholdinthebiomethaneindustry.BPboughtArchaeaEnergyinlate2022forUSD4billion,ShellacquiredDenmark-basedNatureEnergyforUSD2billion,andChevronboughtbiofuel-focusedRenewableEnergyGroupinaUSD3billionacquisition(alongsidetheacquisitionofBeyond6,acompressednaturalgasrefuellingnetwork).TotalEnergieshasmadeaseriesofsmalleracquisitions,suchasthepurchaseofPoland-basedbiogasproducerPGB,andenteredintoanagreementwithVeoliatoproducebiomethanefromwastetreatmentplants.Vigorousdebatecontinuesaboutthesustainabilityofdifferentfeedstocksforbioenergy;currentlyaround90%ofliquidbiofuelsandthemajorityofbiogasesarederivedfromconventionalfoodcropfeedstocks.TheEURenewableEnergyDirectiveIIforeseesa7%caponthesefeedstocks,favouringthosederivedfromwastestreamsinstead.Thecostofbioenergyfeedstockshasalsobeenrisinginrecentyearsduetovolatilecroppricesandhighdemandforbiofuelsascountriesenactmoreambitiousblendingmandates.Thereisapossibilityofafeedstocksupplycrunchoverthecomingyears,asdemandforvegetableoilandwasteandresidueoilsandfatsfortransportbiofuelsisexpectedtogrowbynearly60%to80Mtby2027.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE87FuelsupplySpendingonelectrolysisprojectsforhydrogenisgrowingfast,ledbyendusesinmobility,oilrefiningandindustry,especiallyforironandsteelInvestmentinelectrolysersbyintendeduseInvestmentinelectrolysersbyregionIEA.CCBY4.0.Notes:2022valuesareestimatedannualisedspendingonprojectsthatareunderconstructionandduetoenteroperationin2023.Estimatesarebasedoncapitalcostassumptionsandannouncedcapacitiesofelectricityinputorhydrogenoutputvolumesperprojectandincludeelectrolysersforhydrogensupplyusedforenergypurposesorasanalternativetofossilfueluseinindustry(suchaschemicalproductionandoilrefining).“Mobility”includesprojectsforwhichthehydrogenoutputisintendedforuseinvehicles;hydrogenintendedforconversiontohydrogen-basedfuelsisincludedin“H2-basedfuels”.Sources:IEAanalysisbasedonIEAhydrogenprojectdatabaseandrecentannouncements.0.20.40.60.82010201220142016201820202022BillionUSD(2022)IndustryorrefiningMobilityElectricitystorageH₂-basedfuelsortradeOther2010201220142016201820202022EuropeChinaUnitedStatesLatinAmericaOtherIEA.CCBY4.0.WorldEnergyInvestment2023PAGE88FuelsupplyHydrogenspendingisdrivenbymajorprojectsinChinaandEuropethatareduetostartupin2023-2025;USpolicyincentivesareyettotranslateintoFIDsGlobalelectrolysercapacityadditionsfellbyone-thirdin2022,yetthistrenddoesnotreflecttheamountofcapitalcommitted,nordoesitimplyaslowdownstemmingfromweakermacroeconomicconditions.Asingle150MWexpansioninChinain2021almostequalledtotalnewcapacityin2022,andnonewadditionsofthatsizebeganoperationin2022.AnothermajorChineseproject–a260MWfacilityatarefineryinXinjiang–isscheduledtostartinmid-2023.Ourestimateofspendingonprojectsnonethelessshowssignificantgrowthduetotheongoingconstructionofprojectsnotyetinoperation.Overall,thereremainsapositiveexpectationamonghydrogendevelopersthatinvestmentwillgrowexponentiallyinthenearfuture,drivenbygovernmentincentives.However,itistooearlytoseeanyboosttospendingfromrecentflagshiphydrogenpoliciesinEuropeandtheUnitedStates,forwhichrulesarestillbeingfinalised.AsignoftherisinginvestmentappetiteforhydrogenprojectsintheenergysectoraretheFIDstakenin2022formoreindustrial-scaleprojects.Allarelinkedtodedicatedrenewableelectricitycapacity.Thelargestamongthese,inSaudiArabia,willhaveelectrolysercapacityof2GWin2026ifcompletedtoplan,eighttimeslargerthanthenextbiggestintheworld.AsmostofitsoutputisintendedforexporttousersoutsidetheMiddleEast,itisanexampleoftheentryofseriousnewplayersinlow-emissionhydrogenthatarenotdrivenbylocaldecarbonisationpolicies.Egypt,OmanandtheUnitedArabEmiratesarealsoproposingtobecomeexporters.Thenextlargestgroupofprojectsareallintegratedintotheuseofthehydrogen.Shell’sHollandHydrogenIintheNetherlandsandAirLiquide’sNormand’HyinFrance,at200MWeach,willhavecapacitiestentimesthatofEurope’sbiggestexistingplantandareaimingtosupplyexistingrefineriesby2025.TheShellFIDwastakenwithoutgovernmentsupport.InChina,Sinopecstartedconstructingaroughly200MWelectrolyserinInnerMongoliawithassociatedhydrogenstoragetosupplyacoal-to-chemicalsfacility.State-ownedDalianCapitalInvestmentbeganbuilding60MWofelectrolysiscapacitythatwillrunonseawater.InSweden,anFIDcouldbetakenin2023forthefirstnewsteelmillinEuropesincethe1970s,equippedwith720MWofelectrolysis,backedbyapublicloanguarantee.TwoprojectsforproducinghydrogenfromnaturalgasequippedwithCCUSalsotookFIDsin2022.AHydrogenEnergyComplexisunderconstructionbyAirProductsinCanada,toproducearound0.5Mtofhydrogenforpowergenerationandotheruses,with95%oftheCO2capturedandstoredfrom2024.Thecapacityisequivalentto3GWofelectrolysisrunning100%ofthetime.IthasgrantfundingfromthefederalandAlbertagovernments.IntheUnitedStates,financialcloseIEA.CCBY4.0.WorldEnergyInvestment2023PAGE89FuelsupplywasreachedinFebruary2023onafacilityinTexastoproduce0.2Mtofhydrogenforfertiliserproductionfrom2025withover90%CO2capture.Thecapacityisequivalenttoaround1.7GWofelectrolysis.ThedestinationofthecapturedCO2hasnotbeenyetdisclosed.WhileseveralsimilarprojectsarewelladvancedinEuropeandtheMiddleEast,themorefavourableinvestmentenvironmentinNorthAmericahasmadeittheleaderinhydrogenproductionwithCCUS.AdditionalmajorFIDsinEuropeandtheUnitedStatesarewidelyexpectedtoflowfrommajorpolicyinitiativesstemmingfrompost-pandemicstimulusfunding,theongoingenergycrisisandregionalambitionstosecurevaluechains.UndertheImportantProjectsofCommonEuropeanInterest(IPCEI)scheme,theCommissionapprovedEUR10.6billionincountry-levelsupporttoprojectsfocusedontechnologyandinfrastructurein2022.Forexample,thedelayed100MWREFHYNE2projectatarefineryinGermanyisontheIPCEIlistandcouldtakeFIDoncefundingisclarified,aslongaselectrolysermanufacturingalsoscalesup.TheUnitedKingdom’sMarch2023budgetpromisedGBP20billionover20yearsforelectrolysisandCCUS-equippedhydrogenproduction;408MWofelectrolysisprojectswereshortlistedinMarch2023forafirstGBP340millionfundinground.Thebiggestboosttoinvestmentislikelytostemfromthe2022USInflationReductionAct,coupledwiththeHydrogenHubsinitiativelaunchedtheyearbefore.Amongotherprovisions,theactprovidestaxcreditsofuptoUSD3/kgofhydrogenproducedinlinewithcertainemissionandothercriteria,anduptoUSD85/tonneofCO2stored(noting,however,thatthisCCUSprovisionisworththeequivalentofjustunderUSD1/kgofhydrogenandcannotbeclaimedinadditiontothehydrogentaxcredit).Theactalsoprovidescreditsforinvestmentinthemanufacturingofrelatedequipment,plusgrantsandloanguaranteesfordemonstrationprojects.Thepay-for-performanceapproachandmagnitudeofthetaxcreditsystemcomparedtoproject-basedfundingcompetitionshasledtospeculationthattheactmightleadtotherelocationofprojectstotheUnitedStates,especiallyelectrolyserandcomponentfactories.UncertaintyabouttheenvironmentalrequirementsforhydrogentoqualifyforEUincentiveshasalsofuelledthisopinion.WhilemanynewUSprojectshaverecentlybeenannounced,thereisonlyanecdotalevidencetodatethatthesedevelopers’otherprojectsoutsidetheUnitedStatesnolongerhavetheirfullcommitment.Inearly2023JohnsonMattheyandPlugPowerannouncedanelectrolysermanufacturingpartnershipfora5GWfactoryby2025thatwouldmorethandoubleexistingUScapacityandbefivetimesthesizeofthelargestoperationalfactoryintheworldtoday.However,PlugPowerhasalsoannouncedanexpansioninKoreaand,ofthe38electrolyserfactoryplansannouncedwithacapacityofover1GW,onlysixareintheUnitedStates,ofwhichthreewereannouncedafterthepassingoftheInflationReductionAct.Onbalance,theactislikelytoraiseinternationalhydrogeninvestmentandpullitscentreofgravityoftowardsNorthAmericainthenearIEA.CCBY4.0.WorldEnergyInvestment2023PAGE90Fuelsupplyterm,butthiswilldependonhowEUcountriesrespondandwhetherdevelopers,suppliersandserviceproviderscanservicemultiplelargeprojectsinparallel.OthernotableannouncementsofpublicsupportincludeAUD2billioninpaymentsforhydrogenproductionfromrenewable-basedelectrolysisto2030andUSD1.6billiongrantedbyJapantotheHydrogenEnergySupplyChaininAustralia.Thatprojectwouldcombinelignite,CCUSandseaborneshippingofhydrogentoJapanfromaround2029ifapprovedbyAustralianstakeholders.IndiaannouncedUSD11millioninfundingavailableforconsortiumsdevelopinghydrogenprojects.TheEuropeanCommissionpublishedaconceptforaEuropeanHydrogenBankthatcouldcontractwithhydrogenproducersandconsumerstofillthegapbetweenproductioncostsandtolerablepurchaseprices,whethertheproducerisintheEuropeanUnionoroutside.EUR800millionissuggestedforaninitialauction,echoingasimilarmodelusedbytheGermaninitiativeH2Global,whichhasaEUR900millioninitialbudgetandlaunchedanammoniaauctionin2022.Severalinvestmentswerealsomadeintohydrogen-relatedinfrastructure.TheseincludeanFIDbyfertilisercompanyOCItoexpandby200%its0.4MtammoniaimportterminalintheNetherlandsbytheendof2023.Inmid-2022theUSDepartmentofEnergyLoanProgramOfficefinalisedaUSD504millionloanguaranteeforanelectrolysisandlarge-scaleundergroundhydrogenstorageproject.In2022multilateraldevelopmentbanksindicatedtheirwillingnesstofinancehydrogenprojects.Announcementsincluded:aWorldBankandIFCfacilityforconcessionalfinanceforprojects(Barbados,MexicoandSouthAfrica)andgovernments(Chile,IndiaandNamibia);anagreementforapotentialloanofEUR500millionfromtheEuropeanInvestmentBank(EIB)toNamibia;andtwoloansfromtheInter-AmericanDevelopmentBank(USD400million)andWorldBank(uptoUSD350million)toChile.SincetheseloanstoChilewereannouncedinNovember2022,someconsolidationofprojectsinthecountryappearstohavebegun,asfeweroftheconsortiumsshortlistedforpublicfundinghaveprogressedthroughtotheenvironmentalassessmentphasethanexpected.Thisoutcomeislikelytoberepeatedinothercountriesasthelonglistsofannouncedprojectsarewinnowedbycommercial,regulatoryandpublicbudgethurdles.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE91FuelsupplySincemid-2022,returnsfromaportfolioof41low-emissionhydrogenfirmshavestabilised,buttheirmarketcapitalisationhassufferedinlinewithlowervaluationsfortechnologyfirmsMonthlyreturnsofhydrogencompaniesandfundsMarketcapitalisationofhydrogencompaniesandfundsIEA.CCBY4.0.Notes:ETFs=exchange-tradedfunds;portfoliomembertickers:0051720DUS,288620KS,332142ZLN,336260KS,702HK,ACHNO,ADNUS,AFCLN,ALHRSFP,AMMPFUS,BEUS,BLDPCN,CASALSW,CISS,CWRLN,F3CGY,FCELUS,FHYDCN,GNCLIT,GREENHDC,H2OGY,HDFFP,HTOOUS,HYONNO,HYPRONO,HYSRUS,HYZNUS,HZRAU,IMPCSS,ITMLN,LHYFEFP,MCPHYFP,NELNO,NHHHCV,NXHCN,PCELLSS,PHELN,PLUGUS,PPSLN,PV1AU,SPNAU,TECONO,VIHDUS,VYDRUS.Source:IEAcalculationsbasedonBloomberg(2023).1002003004005002017201820192020202120222023Arithmeticreturn(January2017=100)IEAglobalhydrogenportfolioNASDAQcompositeindexS&Pcleantech204060801002017201820192020202120222023IEAglobalhydrogenportfolio(USDbillion)HydrogenETFs(USD10million)IEA.CCBY4.0.WorldEnergyInvestment2023PAGE92FuelsupplyDespiteuncertaintiesfacingsomeearly-stage“pureplay”hydrogencompanies,fundsthatraisemoneytoinvestinhydrogenprojectshaveheldtheirvalueoverthepastyearUnprecedentedlevelsofinvestmentinhydrogencompanieshavebeenmobilisedasnear-termexpectationsforhydrogenprojectshaverisen.Totrackthistrend,weassembledaportfolioofpubliclytradedcompanieswhosesuccessdependsondemandforlow-emissionhydrogengrowing.TotrytobeasrepresentativeaspossiblesinceWEI2022,wehaveexpandedtheportfoliofrom33to41members.Thesecompaniesspanarangeofsectors,includingelectrolyserandfuelcellmanufacturing,low-emissionhydrogenandammoniaprojectdevelopment,hydrogendistributioninfrastructureandhydrogen-fuelledvehicles.Thetotalmarketcapitalisationoftheportfoliotrackssomeofthemajorcleanenergytrendssince2019:initialhopesforhighgrowthwerebuoyedthroughtheCovid-19pandemicbyexpectationsthatgovernmentswouldensureaquickrecovery,butrisinginterestratesin2022werecompoundedbytheenergycrisisandthisledinvestorstowithdrawequityfromsectorsstrugglingtomeetshareholderrequirements.BytheendofFebruary2023,themarketcapitalisationoftheportfoliohaddroppedbacktoitslevelinNovember2020.Meanwhile,themonthlyinvestorreturnsandrevenuesofthisportfolioarealmostthreetimeshigherthanfiveyearsago,andtheycontinuetooutperformmoregeneralcleantechindices.Thissuggeststhatinvestorstreathydrogenstocksashigh-techinnovativebusinesses(asrepresentedbytheNASDAQcompositeindex),whichgivesthempreferentialaccesstogovernmentprogrammesfocusedonfuturecompetitiveness.Evenasthevalueoflistedhydrogencompanieshasbeenadjusteddownwards,publiclytradeddedicatedhydrogenfundshavemaintainedtheirvalue.Thesefundsareestablishedtoinvestequityinablendofprivatecompaniesandprojectsthatarescalinguplow-emissionhydrogensupplyanduse.Since2022thesefundshaveshiftedtheirattentionmoretowardsprojects,whichtheynowexpecttoyieldhigherreturnsrelativetotechnologycompaniesinthemediumterm.Forexample,HydrogenOneCapitalGrowthhasinvestedEUR17millionintheprojectdevelopersStrohmandHH2Esincemid-2022.TheunlistedCleanHydrogenInfrastructureFund,whichraisedoverUSD1billioninearly2022,hasnotexpandedfurtherbutinearly2023ittooka49%stakeinanewEUR200millionventuretodevelophydrogeninfrastructureinNordiccountries.SinceWEI2022,UnitedHydrogenLimitedjoinedtheseotherinvestors;ithasastrongerfocusoncompanyownershipand,despitealowervaluationatUSD39million,agoalofbecomingtheworld’slargestdiversifiedhydrogenconglomerate.Fundsarealsobeingraisedinregionsthathavebeenlessactivetodate:inApril2023,Avaada,aIEA.CCBY4.0.WorldEnergyInvestment2023PAGE93Fuelsupplysolarprojectdeveloper,raisedUSD1billionfromaCanadianinvestmentfundforhydrogen-relatedprojectsinIndia.Start-upsworkingonhydrogen-relatedtechnologiesandbusinessesraisedrecordamountsofearly-stageandgrowth-stageequityin2022.AtUSD660million,early-stagedealswereonlymarginallyhigherthanin2021,butthiswasovertentimeshigherthantheannualaverageofthepreviousfiveyears.NotabledealsincludedthoseforHysata,anAustralianelectrolyserdeveloperraisingUSD29million,Hygenco,anIndianprojectdeveloperraisingUSD24million,andLevidian,aBritishdeveloperofmethanecrackingraisingUSD13million.Growth-stagefundingrounds,whichtendtobemuchlargerthanearly-stage,roseby150%in2022,toUSD2.9billion.Thisisanevenmoreimpressiveachievementinlightofonlya1%increaseoverallingrowth-stageequityfundingforenergyfirms.Thelargestdeal,atoverUSD300million,wasforMonolith,aUSdeveloperofmethanepyrolysis.Asthesizeofhydrogenprojectsgrows,theshareofstart-upsthatareprojectdevelopers,nottechnologyowners,hasrisen.However,growth-stageinvestmentandacquisitionsstilltendtofavourtechnologycompanies.Inananalysisof391start-upsfoundedsince1990withactivitiesrelatedtohydrogen,70%werefoundtoholdatleastonepatentapplication.Morethan80%ofthegrowth-stageinvestmentinhydrogenstart-upssince2000wasincompaniesthathadalreadyfiledapatentapplication.Overall,55%ofallventurecapitalfundingforhydrogenstart-upswenttothe117companiesthathadfiledpatentapplicationsintheperiod2011-2020.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE94FuelsupplyRecentFIDsforCCUSprojectsaresettopush2023spendingtoanewrecordAnnualisedhistoricalandpotentialspendingonadvancedCCUSprojectsbasedonannouncedprojecttimelinesIEA.CCBY4.0.Notes:Includescommercialcaptureandfull-chainCCUSprojectswithacapacityofover0.1MtCO2peryear;projectedspendingrepresentsthecapitalcostsofprojectswithannouncedcapacitiesbasedontheirplannedFIDandoperationaldates;spendingisestimatedwhereproject-levelcostdataareunavailable;OtherincludesAfrica,SouthandCentralAmericaandtheMiddleEast.Source:IEAanalysisbasedonIEACCUSprojectsdatabase.5101520253035402010201320162019202220252028BillionUSD(2022)OilandgassupplyBiofuelsPowergenerationHydrogenproductionIndustryandrefiningCO₂infrastructureDirectaircapture2010201320162019202220252028NorthAmericaEuropeChinaAsiaPacificMiddleEastOtherIEA.CCBY4.0.WorldEnergyInvestment2023PAGE95FuelsupplyCCUSprojectannouncementshavebeengalvanisedbypublicsupportpackagesintheUnitedStates,whichsupportthetrendtowardsriskmanagementbybreakingupthevaluechainWhentheTaizhoupowerstationCCUSprojectentersoperation–itisscheduledtodosothisyear–itwillbecomethethirdfacilityinChinasince2018tocapturemorethan0.5MtCO2peryear.Oneoftheothertwoplants,attheQilurefinery,startedoperatingjustlastyear,establishingChinaasthecentreofCCUSinvestmentrecently.However,thecomingyearswillbedominatedbysignificantgrowthininvestmentintheUnitedStates,spurredbygovernmentsupportpoliciesthatclosethecostgap.SinceNovember2021,fiveUSprojectsthatwilleachhandleover0.5MtCO2peryeartookFID.TheentryoftheseprojectsintotheconstructionphaselikelyhelpedpushCCUSinvestmenttoarecordUSD3.1billionin2022.TheyalsoprovideconfidencethatCCUSspendingwillcontinuetogrow.IfalladvancedprojectstakeFIDinlinewiththeirschedules,globalCCUSspendingcouldreachUSD34billionin2025.Thisdramaticpotentialramp-upreflectstheextenttowhichtheCCUSprojectpipelinehasexpandedrecently.Over180projectshavebeenannouncedsinceJanuary2022alongtheCCUSvaluechain.CO2captureprojectsaresharedbetweendifferentsectors,withmanyrelatingtohydrogenorbioethanolproduction.Thehigherunitcostofprojectsinthepowersectorledtoitsroughly50%shareoftotalpossibleinvestmentin2023-2028.ThefullprojectpipelinecouldraiseglobalCO2capturecapacityfromaround45MtCO2peryeartodaytoover300MtCO2peryearby2030.Butthiswouldstillfallshortofthe1200Mt/yrenvisagedbytheNZEScenariointhatyear.While30%oftheannouncementssincethestartof2022wereintheUnitedStates,theprojectpipelineisbecomingmoreglobal.NewprojectsareplannedinBulgaria,Croatia,Libya,Portugal,SingaporeandThailand,amongothers.Mostdevelopersexpecttorelyondirectpublicsupporttomakeprojectsprofitable,insomecasesviathebackingofstate-ownedenterprises.Todate,FIDshavetypicallybeenenabledbygrantfunding,andmanyrecentannouncementsfollowthispattern.NewlyavailableUSgrantsupportfordevelopersofso-calledH2HubshaspromptedCO2transportandstorageprojectsthatcouldlinktomultipleCO2sources,notjusthydrogenproduction.AmongtherecentUSFIDsistheCentralLouisianaRegionalCarbonStorageproject,whichreachedfinancialcloseinearly2023onupto10MtCO2ofstoragecapacity.ThisisreflectiveofawidertrendtowardssplittingthedifferentpartsoftheCCUSvaluechainintoseparateprojects.While"full-chain"projects(whereCO2istransportedfromonecapturefacilitytooneinjectionsite,sometimesinvolvingasingleoperator)wereanaturalresponsetocallsfordemonstrationprojects,theysufferfromhighinvestmentneeds,cross-chainrisksandliabilitiesthatarebornebyIEA.CCBY4.0.WorldEnergyInvestment2023PAGE96Fuelsupplyasingledeveloper.BreakinguptheCCUSvaluechaincanhelpmitigatethesehurdles.In2022,projectstodevelopover210MtofnewdedicatedCO2storagecapacitywereannounced,morethandoubletheamountsin2020and2021.OneofmostadvancedprojectsunderconstructionisNorthernLights,inNorway,whichisdevelopinglarge-scaleCO2storagethatcanacceptCO2frommultiplesourcesthathaveincentivestoreduceemissions.InMay2023,DenmarkawardedaroundUSD1.2billiontomeetthecostsofcapturing0.4MtCO2peryearfrombiomasscombustionforstorageattheNorthernLightssitefrom2026.Separately,pilotCO2injectionbeganoffshoreinDenmarkin2023.RecentpolicydevelopmentssupportthistrendbyofferingfinancialrewardsforstorageofCO2orproductionofcleanproducts.Mechanismssuchastaxcredits,contractsfordifferenceandpublicprocurementcreatebankabledemandforCO2transportandstorageservices,whichreducestherisksassociatedwithinfrastructuredevelopment.Amongthese,thetaxcreditsofferedbytheUSInflationReductionAct–uptoUSD85/tCO2storedorUSD3/kgofhydrogen–aresettostimulatethemostinvestment,supportedbyproposedemissionsrulesforpowerplants.AdifferentmodelisfoundintheEuropeanCommission’sproposedNetZeroIndustryAct,whichlinkstheproductionoffossilfueltoarequirementtodevelopCO2storagecapacity.Theact’ssuggestedtargetof50MtCO2ofavailablestoragecapacityby2030isambitiousbutfallswellshortofthatrequiredintheNZEScenario.Together,theseinitiativesbegintoaddressalong-standingissueoverwheretheresponsibilitiesandrentswilllieinacommercialCCUSvaluechain.PoliciesarealsotakingshapeinsomeEMDEs.Forexample,inMarch2023IndonesiaissueditsfirstregulationgoverningtheproceduresandresponsibilitiesforproposedprojectsthatintegrateCCUSwithnaturalgasextractionandprocessing.Fifteenprojectshavebeenidentifiedthatcouldadvanceunderthisregulation.Malaysia,whererawnaturalgasalsohasahighCO2content,hassignalledthatitwillalsoproceedalongsimilarlines.CCUSisalsoexpectedtoplayakeyroleindeliveringthenetzeroemissionspledgesofmanyEMDEs,includingincoal-relatedsectors,wherepolicydevelopmenthasbeenslower.Start-upsworkingwithCCUStechnologiesraisedmoreearly-stageandgrowth-stagefundingin2022thaninanypreviousyear.MostoftheUSD440millionofearly-stageequitywenttotheareaofCO2capture,followedbyhydrogen-basedfuelsthatutiliseCO2.Notablegrowth-stagedealsincludedaUSD318millioninvestmentinSvantebyChevronandco-investorsincludingtheOil&GasClimateInitiative,andaUSD300millioninvestmentinEntropy;bothareCanadianfirmswithnewCO2capturemethods.Directaircapture(DAC)developerscontinuedtoattractinvestmentbetsin2022,bolsteredbyUSpolicyincentives.TheseincludedClimeworks(USD650million),CarbonDirect(USD60million),MissionZero(USD5million)andRepAir(USD1.5million).Paebbl,aDutchstart-upmakingconstructionmaterialfromCO2,raisedUSD8million.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE97FuelsupplyCoalIEA.CCBY4.0.WorldEnergyInvestment2023PAGE98FuelsupplyGlobalcoalinvestmentrosein2022–surpassing2019levels–andissettoriseagainin2023Globalinvestmentincoalproductionbyregion,2017-2023eIEA.CCBY4.0.Export-orientedcountries=Australia,Indonesia,Russia,ColombiaandSouthAfrica.Note:2023e=estimatedvaluesfor2023.204060801001201401602017201820192020202120222023eRestofworldExport-orientedcountriesIndiaChinaBillionUSD(2022)IEA.CCBY4.0.WorldEnergyInvestment2023PAGE99FuelsupplyStrongdemandandhighpricessentapowerfulsignalfornewinvestment–especiallyinChinaandIndia–althoughcostinflationhasmutedsomeoftheimpactonproductioncapacityGlobalcoaldemandreachedanall-timehighin2022,withpricesrisingtounprecedentedlevelsinOctober2021andreachingrecordhighsonseveraloccasionsin2022.Globally,coalinvestmentincreasedtoUSD135billionin2022,a20%increaseon2021levels.Almost90%ofinvestmentoccurredintheAsiaPacificregion,predominantlyinChinaandIndia.Themajorityofcoalinvestmentin2022wasusedtomaintainproductionatexistingmines,withsmalleramountsusedtoexpandproductionatbrownfielddevelopments.Newgreenfieldprojectsarelimitedinmostpartsoftheworldamidinvestorandcompanyconcernsovertheimpactsofcoalonclimatechange,environmentalsocialandcorporategovernanceissues,slowpermittingandpublicoppositionlimitingtheavailabilityoffinance.TheexceptiontothisisChinaandIndia,whereenergysecurityconcernsandpowershortageshaveledtothedevelopmentofnewminesaswellastheexpansionofexistingmines.ChinasawpowershortagesinDecember2020,mainlycausedbyalackofpowercapacityadequacy,andtherewereshortagesandrollingblackoutsin10provincesoverthesummerof2021,mainlybecauseofshortagesincoalsupply.ThegovernmenthaspledgedtoavoidarepeatoftheseeventsandcoalcapacityhasincreasedsubstantiallysinceOctober2021.Annualminingcapacityincreasedbyaround300Mtperyearin2022,halffromnewminesandhalffromexpandingproductionatexistingmines–morethantherestoftheworldcombined.ThefourmajorproducingregionsofShanxi,InnerMongolia,ShaanxiandXinjiangarethefocusofinvestmentandcapacityadditions.India’sgovernmenthasbeenlookingtoreducecoalimportsbyboostingdomesticproductionandimprovinglogistics.Akeypillarofthestrategyistotaskgovernment-ownedCoalIndiatoincreaseproductionbothbyitsownmeansandbyoutsourcingitto“MiningDeveloperscumOperators”.Thestrategyalsoaimstoincreasecommercialminingandanumberofauctionsforblockshavetakenplace:since2020,87mineshavebeenawardedlicencestocommenceproduction,andafurther106mineswereofferedintheseventhroundofauctionsinMarch2023.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE100FuelsupplyCoalindustryprofitsin2022weremainlyreturnedtoshareholdersorusedtodiversifyintoothercommodities,meaningincreasesininvestmentin2023arelikelytobemoremutedCoalproducersannouncedlargeprofitsin2022despitehigherenergypricesandotherpricepressuresdrivingupproductioncosts.Thelargestshareoftheseprofitswasreturnedtoshareholdersthroughdividendsandsharebuybacks.Profitswerealsousedtohelpproducersdiversifyintoothercommoditiesandpayoffdebt.Somecompaniesalsousedprofitstobuycoalassetsfromothercompanieslookingtoreducetheirexposuretocoal.Forexample,GlencorepurchasedsharesintheElCerrejóncoalminefromAngloAmericanandBHP,andThungelaboughtIdemitsu’sstakeinEnshammineinAustralia.CompaniesarealsoinvestingtoreducetheirScope1and2emissions.Globalcoalinvestmentisexpectedtoincreasebyaround10%in2023tojustunderUSD150billion.InChina,increasesarelikelytobemoremutedfollowingthelargeramp-upseensinceOctober2021,giventhegovernment’sgoalofreachingpeakcoaldemandbefore2030.Investmenttomodernisemineswillcontinueandoverallcoalproductionislikelytostabilisebeforestartingtodecline.InIndia,thegovernmentexpectsthattotalproductioninthecountrywillsurpass1billiontonnesby2023-2024;CoalIndiaalonetargetstoproduce1billiontonnesby2025-2026.MiningDeveloperscumOperatorsandcommercialoperatorswillbeimportantifIndiaistoachieveitstarget.Indonesia’sflexibleexport-orientedsupplychainallowedittorampupproductionquicklyinresponsetorecentpricespikes,butthishasnotrequirednewlarge-scaleinvestment.InAustralia,investmentincreasedbyaround10%,drivenbyhighprices,butitisstillathalfits2012level,inpartgivenmountingdevelopmentdifficulties,especiallyforgreenfieldprojects.IntheUnitedStates,coaldemandhasbeenfallingformorethanadecade.Someproducersarelookingtoexpandexports,particularlyformetallurgicalcoal,butalackoffinanceandlabourforce,aswellasbottlenecksinthesupplychain,haveslowedinvestmentandthistrendislikelytocontinue.InRussia,producersareincreasingtheirfocusoneasternmarketsfollowingthecountry’sinvasionofUkraine.Thiswillrequireinvestmentinnewinfrastructure,buttheprospectsforthisareveryuncertain.LogisticalchallengesandelectricityloadsheddinginSouthAfricahavebeenimpedingnewlarge-scaleinvestment.ThepublicelectricityutilityEskomisunabletofinancecoalminingitselfgivenitsfinancialdifficulties,whiletheprivatesector,DevelopmentFinanceInstitutionsandlocalbanksarereluctanttofinancecoalinSouthAfrica.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE101FuelsupplyCriticalmineralsIEA.CCBY4.0.WorldEnergyInvestment2023PAGE102FuelsupplyAfterthesurgein2021and2022,manycriticalmineralpricesstartedtomoderatein2023butremainwellabovethehistoricalaveragesPricedevelopmentforselectedenergytransitionmineralsandmetals,2016-2023IEA.CCBY4.0.Notes:AssessmentbasedonLMELithiumCarbonateGlobalAverage,LMENickelCash,LMECobaltCashandLMECopperGradeACashprices;LCE=lithiumcarbonateequivalent.Source:S&PGlobal(2023).1020304050607080JanJunDecThousandUSD/tonneLCERange2016-2020Average2016-2020202120222023Lithium510152025303540JanJunDecThousandUSD/tonneNickel102030405060708090100JanJunDecThousandUSD/tonneCobalt456789101112JanJunDecThousandUSD/tonneCopperIEA.CCBY4.0.WorldEnergyInvestment2023PAGE103FuelsupplyInvestmentincriticalmineralminingroseby30%in2022asstrengtheningmomentumforenergytransitionsoffersprospectsforrobustdemandgrowthCapitalexpenditureonnon-ferrousmetalproductionbymajorminingcompanies,2010-2022IEA.CCBY4.0.Notes:Co=cobalt;Cu=copper;Ni=nickel;fordiversifiedmajors,capexontheproductionofironore,coalandotherenergyproductsisexcluded.Sources:IEAanalysisbasedoncompanyannualreportsandS&PGlobal(2023).10203040502010201120122013201420152016201720182019202020212022BillionUSD(2022)LithiumspecialistTianqiLithiumPilbaraMineralsMineralResourcesGanfengLithiumSQMAlbemarleCu,Ni,CofocusedZhejiangHuayouChinaMolybdenumNorilskNickelKGHMFirstQuantumMineralsSouthernCopperCodelcoDiversifiedmajorGlencoreTeckResourcesFreeport-McMoRanValeAngloAmericanBHPRioTintoLithiumspecialistsFocusedplayers(Cu,Ni,Co)DiversifiedmajorsIEA.CCBY4.0.WorldEnergyInvestment2023PAGE104FuelsupplyTheneedforcontinuedinvestmentincriticalmineralsdevelopmenttosupportrapidenergytransitionsremainsfirm,despitetherecentfallinpricesManyofthecriticalmineralsthatarevitalforcleanenergytechnologiesregisteredbroad-basedpriceincreasesin2021andearly2022,whichhadtheeffectofreversingadecade-longtrendofcostdeclinesforsolarpanels,windturbinesandbatteries.Exceptforlithium,mostpricesstartedtomoderateinthesecondhalfof2022.ExpectationsofChina’sreopeningunderpinnedabriefrallyattheendof2022,butpricesresumedtheirfallin2023,includinglithium,onthebackofweakconsumption,newsupplyplansandconcernsoverpossiblerecession.TheimpactofEVsubsidyreductionsandpricecutsonconventionalcarsinChinaaddedtopressureonprices.Nonetheless,pricesremainwellabovetheirhistoricalaveragesandmedium-termpressurespersistasscheduledelaysorcostoverrunsremainapossibilityformanyannouncedprojects.Cobaltisanotableexception,astherapidadoptionoflithium-ionphosphateinbatterychemistriesisweighingonthedemandoutlookforcobalt.Thankstohighpricesandgrowingpolicysupport(e.g.theUSInflationReductionActandtheEUCriticalRawMaterialsAct),manyminingcompaniesareincreasinginvestmentincriticalmineraldevelopment.Wehaveassessedtheaggregateinvestmentlevelsof20majorminingcompaniesthathaveastrongpresenceindevelopingenergytransitionminerals.Followingthe20%increasein2021,investmentspendingrecordedanothersharpuptickof30%in2022.Companiesspecialisinginlithiumdevelopmentincreasedtheirspendingby50%,followedbythosefocusingoncopperandnickeldevelopment.CompaniesinChinaalmostdoubledtheirinvestmentspendingin2022.Explorationspendingalsocontinueditsupwardmarchin2022,largelydrivenbytherecordpaceofgrowthinlithiumexploration,followedbycopperandnickel.CanadaandAustralialedthisgrowth,especiallyinhard-rocklithiumplays,butactivitiesarealsogrowinginAfricaandBrazil.Whiletheincreaseininvestmentandexplorationspendingwilltranslateintoproductiongrowthinthecomingyears,theexpectedrateofgrowthstilldoesnotmatchthepaceofmanufacturingcapacityadditionsforbatteries,solarmodules,electrolysersandsoon.Thistriggeredconcernsamongautomakers,batterycellmakersandequipmentmanufacturersaboutsecuringrawmaterialsupplies.Long-termofftakeagreementsbecameanormintheindustry’sprocurementstrategiesandmanycompaniesstartedtobeinvolveddirectlyintherawmaterialvaluechaininordertosafeguardtheirproductionpipelines.Forexample,inFebruary2023GeneralMotorsannouncedinvestmentofUSD650millioninLithiumAmericastodevelopNevada'sThackerPasslithiumminingproject.Inthesamemonth,LGEnergySolutionstookafinancialstakeinPiedmontLithiumtosecurelithiumfromCanada.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE105FuelsupplyImplicationsIEA.CCBY4.0.WorldEnergyInvestment2023PAGE106FuelsupplyFossilfuelinvestmentin2023iscloseto2030levelsintheSTEPSandmorethandoubletheamountneededin2030intheNZEScenarioGlobalinvestmentinfuelsupply,2021-2023e,andinIEAscenariosin2030IEA.CCBY4.0.Notes:STEPS=StatedPoliciesScenario;APS=AnnouncedPledgesScenario;NZE=NetZeroEmissionsby2050Scenario.Low-emissionfuels=modernbioenergy,low-emissionhydrogenandhydrogen-basedfuels.2023e=estimatedvaluesfor2023.2004006008001000202120222023eSTEPSAPSNZELow-emissionfuelsCoalNaturalgasOilBillionUSD(2022)2030IEA.CCBY4.0.WorldEnergyInvestment2023PAGE107FuelsupplyThereareupsideanddownsideriskstofossilfueldemandbutifcleanenergymomentumismaintained,farlessfossilfuelinvestmentwillbeneededOilandgasinvestmentin2023isnowaboutthelevelneededin2030intheSTEPS,ascenariothatreflectstoday’spolicysettings.OilandgasdemandintheSTEPSrisesbyaround0.5%eachyearonaveragefrom2024to2030,muchlowerthanthe1.3%annualaverageincreaseinthe2010s.Thisdependsoncontinuedrobustglobalgrowthincleanenergyinvestment–mostnotablysolarPVandelectriccars–toarrestfossilfueldemandgrowth.Iftoday’spolicysettingschangeorifsomecleanenergydeploymentdoesnotmaterialisegloballyattheanticipatedpaceandscale,futurefossilfueldemandgrowthwouldbegreaterthaninSTEPSandadditionaloilandgasinvestmentwouldbeneededtobalancemarkets.Conversely,enhancedeffortstotackleclimatechangewouldrepresentamajordownsiderisktofossilfueldemandandacommercialriskforproducers.Fossilfuelinvestmentisnowmorethandoubletheamountneededin2030iftheworldistolimitthelong-termtemperatureriseto1.5°C(theNZEScenario).Today’scoalinvestmentisfarabovethelevelsrequiredintheSTEPSandsixtimeshigherthanthe2030requirementsintheNZEScenario.Thiscreatestheclearriskoflockinginfossilfueluseandpushingthe1.5°Ctemperaturelimitoutofreach.Ourscenariosillustratethedynamicrelationshipbetweenspendingoncleanenergyandfossilfuels.IntheSTEPS,investmentincleanenergygrowstomorethanUSD2trillionin2030,meaningthatforeveryUSD1spentonfossilfuelsin2030,USD2isspentoncleanenergy.IntheNZEScenario,theratioofclean-to-fossilinvestmentismorethannine-to-onein2030.ThedeclinesinfossilfueldemandintheNZEScenarioaresufficientlysteepthattheycanbemetinaggregatewithoutsupplyfromanynewoilandgasfields.Still,investmentinoilandgasisstillrequiredin2030,bothtominimisetheemissionsintensityofproductionandforsomelow-costextensionstoexistingfields.Astrongpolicypushtoreduceoilandgasdemandwhilstscalingupinvestmentincleanenergyiscrucialtoorderly,secureandrapidenergytransitions.Oilandgascompaniescanhelpdrivethenecessaryreallocationofcapitalbydevotingmoreoftheirresourcestocleanenergyincludingtolow-emissionfuels.Investmentinthesefuels–suchasbioenergy,hydrogenandCCUS–ispickingupbutneedstoincreasenearlytwentyfoldintheNZEScenario.Thismayappearadauntingchallenge,butitisbynomeansoutofreachofthefinancialandtechnologicalresourcesoftheoilandgasindustry.TheUSD1.5trillionreturnedtoshareholdersintheformofdividendsandbuybacksfrom2020to2022couldhavefullycoveredtheinvestmentrequirementsinallcleanfuelsintheNZEScenariobetween2023and2030.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE108EnergyenduseandefficiencyEnergyenduseandefficiencyIEA.CCBY4.0.WorldEnergyInvestment2023PAGE109EnergyenduseandefficiencyGlobalefficiency,electrificationandend-useinvestmentreachedrecordlevelsin2022,drivenbythebuildingssectorandstrongEVsales,buttheriseinspendingcouldslowin2023Globalinvestmentinenergyefficiency,electrification,andrenewablesforendusesbysector,2016-2023eIEA.CCBY4.0.Notes:Investmentswhichareaimedatreducingenergyconsumptioninbuildings,industry,andtransportationsectorsaregroupedundertheendusecategory.Theyincludeenergyefficiency,electrification,anddirectuseofrenewablesforheating,cooling,orindustrialprocesses.Energyefficiencyinvestmentsrefertospendingonnewenergy-efficientequipmentorrefurbishmentsthatdecreaseenergyusage.Electrificationencompasseselectricvehiclesintransportationandheatpumpsinbuildingsandindustrialsectors;2023e=estimatedvaluesfor2023.10020030040050060070020162017201820192020202120222023eBillionUSD(2022)BuildingsTransportIndustryIEA.CCBY4.0.WorldEnergyInvestment2023PAGE110EnergyenduseandefficiencyTheglobalenergycrisisboostedspendingonefficiency,electrificationandendusesin2022,butefficiencyinvestmentfacesheadwindsin2023Theglobalenergycrisisboostedinvestmentinenergyefficiency,electrificationandend-userenewablesby16%in2022,reachingnewhighsacrossallthreeend-usesectorsthataretrackedintheWorldEnergyInvestmentreport(buildings,transport,andindustry).Thebuildingssectorexperienced11%growthininvestmentduetogovernmentinitiativesinEuropeandtheUnitedStatesrespondingtogasshortages,risingelectricitypricesandhigherinflation.Emergingmarketanddevelopingeconomies(EMDEs)sawa19%increaseininvestment,withChinabeingtheonlycountryexperiencingadecreaseinenergyefficiencyinvestmentduetocontinuingCovid-19lockdownsandtherealestatecrisis.2022alsosawdouble-digitgrowthforheatpumpinstallations.Investmentinelectrificationofthetransportsectorgrewby60%in2022,withEVsaleshittingrecordlevels,passing10millionunitsglobally.GrowthcamefromallpartsoftheworldincludingEMDEs,whichhaveseenexponentialgrowthfromalowbase.Maintainingthistrendin2023willdependonincreasedmodelavailability,investmentincharginginfrastructure,andawell-managedphase-downofgovernmentincentivesforEVsasupfrontcostsbecomeclosertointernalcombustionengine(ICE)models.Theindustrialsectorexperiencedhighinputprices,includinggasandelectricity,leadingsomefactoriestocurtailproductionandinvestmentinEuropeandChina.However,renewedactivityinEMDEsandtheUnitedStatesledtoan3%growthinenergyefficiencyinvestmentinthesectorin2022.Whilesomeofthetechnologiesneededforcompletedecarbonisationofindustrialprocessesarestillbeingdeveloped,highenergypricescouldleadtonewinvestmentinindustrialefficiencyandelectrificationin2023.Investmentinenergyefficiencycouldfaceheadwindsin2023acrossallsectors.Theglobalindicatorsthattypicallyofferinsightsintoinvestmenttrendsweresendingmixedsignalsintheearlystagesoftheyear.TheEuropeanUnion’shousinglendingmarkethasalmostgroundtoahaltinrecentmonths.Inflationalsoremainshighinmanyregions.MuchwilldependontheextenttowhichrobustgovernmentinterventionsandregulatorypoliciesintheUnitedStatesandEuropeoffersupportforcontinuedefficiencyandend-useinvestment,notablyfortheelectrificationofheatandtransport.Atthisstage,weanticipatethatoverallspendingonenergyefficiency,electrificationandend-userenewableswillgrowmodestlyby4%in2023,withelectrificationremainingthemostdynamicsectorandefficiencyspendinglaggingbehind.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE111EnergyenduseandefficiencyBuildingsIEA.CCBY4.0.WorldEnergyInvestment2023PAGE112EnergyenduseandefficiencyEnergyefficiencyspendingonbuildingsrosein2022,buttheongoingcost-of-livingcrisisandeconomicuncertaintycouldreduceinvestmentin2023Investmentspendingonenergyefficiencyandelectrificationbyregioninthebuildingssector,2016-2023eIEA.CCBY4.0.Notes:Spendingonelectrification(e.g.,Heatpumps)isincludedinthetotalspending,andrepresentedasashareoftotalspendingontherightaxis;2023e=estimatedvaluesfor20230%5%10%15%20%25%30%5010015020025030020162017201820192020202120222023eBillionUSD(2022)EuropeUnitedStatesChinaRestofworldShareofelectrificationspending(rightaxis)IEA.CCBY4.0.WorldEnergyInvestment2023PAGE113EnergyenduseandefficiencyHeatpumpsalesexperienceddouble-digitgrowthforasecondyearinarowinmanyareasastheystarttoreplacefossilfuel-basedheatingsystemsRateofgrowthofheatpumpsalesin2021and2022(left)andmarketshareofheatpumpsinglobalheatingsystemsales(right)IEA.CCBY4.0.Notes:Air-to-waterunitsincludeheatpumpwaterheaters;totalalsoincludesground-andwater-sourceheatpumps.Sources:IEA(2023),Globalheatpumpsalescontinuedouble-digitgrowth,basedondatafromAHRI,Assoclima,Assotermica,BDH,CHPA,ChinaIOL,EHPA,JRAIA,SPIUGandUniclima.-10%10%30%50%ChinaUSEuropeGlobalChinaJapanEuropeGlobalGlobalAir-to-airAir-to-waterTotal202120220%25%50%75%100%2021202220212022202120222021202220212022PolandGermanyItalyFranceUnitedStatesFossilfuel-basedheatingsystemsHeatpumpsIEA.CCBY4.0.WorldEnergyInvestment2023PAGE114EnergyenduseandefficiencyInvestmentinbuildingsenergyefficiencyin2022wasunderpinnedbydirectpublicinvestmenttotackleenergyinsecurity,alongsideacautiousreopeningoftheglobalconstructionsectorIn2022energyefficiencyinvestmentintheglobalbuildingssectorincreasedbyaround14%on2021levels,continuingthestronggrowthtrendofthepastfewyears.Spendingonefficiencyisprojectedtofallbackin2023astheeffectsofincreasedborrowingcostsandeconomicuncertaintyreducemarketactivity.ThetotalinvestmentofaroundUSD285billionin2022marksastrongincreaseinefficiencyspendingandelectrificationfromthepreviousyearandistheresultofacontinuedeffort,ledbyEurope,inresponsetotheenergycrisistriggeredbytheRussianinvasionofUkraine,alongwithpolicy-andprice-drivenincreasesinspendinginothercountries,forexampleintheintheUnitedStateswithintheInflationReductionAct.Theincreasein2022wasinlinewithrecenttrends,butearlysignalssuggestaslowdowninspendingin2023astheglobaleconomyexperiencesincreaseduncertaintyduetothecontinuingconflictinUkraine,thegrowingimpactsofthecostofborrowingonconstructiondemandineconomiesacrosstheworld,uncertaintyofcreditavailabilityandlending,andseverallargegovernmentprogrammesseeingcurtailment.Theincreasedefficiencyinvestmentin2022wastheresultofsustainedspendinginmajormarketssuchastheUnitedStates,GermanyandItaly.OverUSD33billionwasspentintheUnitedStatesthroughthecontinuedfundingoftheDepartment.ofEnergyefficiencyprogrammes(e.g.,weatherisation)orutilitydemand-sidemanagement.GovernmentledefficiencyspendingintheUnitedStatesisexpectedtofurtherexpandbyUSD970millionin2023throughthenewlycreatedStateandCommunityEnergyOfficeundertheInflationReductionAct.BudgetallocationdedicatedtoefficiencybytheGermangovernmentmoderatedin2022toaroundUSD51billion,whichwasaccompaniedbychangestothedesignofsomesupportprogrammes.Theconditionsforthefederalfundingforefficientbuildingsprogramme(BEG)wereadjustedinseveralstages,startingfromendofJuly2022,tofacilitatebetteraccesstofundingandstreamlineapplicationprocesses.TheKfWloanprogrammescontinuedbutthegrantswerediscontinued,andsinglemeasuresarenowonlysubsidiseddirectlybyBAFA,withreducedrates(onaverageby5%ofthegivenmeasure)toallowmoreapplicantstobenefitfromavailablefunds.Anewsubsidyschemefor“climatefriendlynewconstruction”enteredintoforceatthebeginningof2023,introducingaexpandedcoverageofeligibleexpensesundertheBEG,includingmaterialcostsforownworkandabroaderdefinitionofeligibleinvestors.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE115EnergyenduseandefficiencyTheItalianSuperbonusprogrammeresultedinaneardoublingofinvestmentinenergyefficiencybetween2021and2022inItaly,fromUSD23billiontoaroundUSD57billion.However,therecentannouncementofmajorchangestotheprogrammemeansspendingbeyond2023isunclearandexpectedtofall.Themaximumtaxcreditratehasbeenloweredfrom110%to90%and,asof17February2023homeownersapplyingforthebonuswillnolongerbeabletodirectlytransfereligibletaxcreditstoabankordirectlytotheirconstructioncompanytoreceiveadiscountonthefinalinvoice.Anothermajorchangeaffectingspendingin2022resultedfroma10%reductioninrealestatedevelopmentinvestmentinChinacomparedwith2021,resultinginaslowdowninthedeliveryofgreenbuildings.ThisslowdownisalsoexpectedtofurtheraffectthedeliveryofbuildingsreachingChina’sgreenstandard,whichwereinitiallysettobearound50%ofallnewdwellingsby2020inthecountry’s13thFive-YearPlan.Likewise,France’sinvestmentinefficiencyfellsomewhatduetoaslowdowninconstructionsectoroutput.TheUnitedKingdomalsosawamodestfallinefficiencyspendingduetoaslowingconstructionsectorandchangestotheAffordableWarmthScheme,althoughthegovernmenthasaddedUSD186millionundertheGreenHomesGrantscheme.Japan’sfocusondeliveringnewbuildingsthatachievethezeroenergyhousing(ZEH)standardandthatapproachZEHhasseentheproportionofnewgreenbuildingsincreasefrom19%ofconstructionin2018toover34%in2021.Japanhasatargetof63%ofnewbuildingsachievingtheZEHstandardby2025.Someemergingmarketssawanoverallincreaseinconstructionactivityandinvestmentinbuildingsenergyefficiency.India,forexample,doubledspendingtoUSD3.25billion.Mostcountries,however,onlysawamodestincreasein2022,whichwasprimarilyrelatedtoconstructionactivitypickingupfrompandemic-levellows.Overall,Europeexperiencedaverymodestuptickofaround3%,whileCentralandSouthAmericasawanincreaseofaround5%inconstructionsectorspending,whichmighthinderfurtherinvestmentinenergyefficiencyfor2023.Internationalconcessionalfinancecontinuestosupportinvestmentintheglobalbuildingstock.Forexample,theEuropeanBankforReconstructionandDevelopmentcommittedoverEUR67.5milliontoLithuaniatofinanceenergyefficiencyrenovationsinresidentialbuildings,andEUR40milliontosupportimprovingschoolbuildingsefficiencyinAlbania.FinancingthroughtheInternationalFinanceCorporation’sEDGEprogrammealsocontinuestobenefitenergyefficiency,includingaUSD65milliongreenbondinSouthAfricaandaUSD60millionloantosupportgreenmortgagesinPeru.Greenproductsofferedbycommercialbanksarealsoslowlygainingtraction,with19ofthetop100largestbanksgloballyofferinggreenmortgagestotheirclients,althoughtheirlevelofutilisationandoverallimpactremainsunclear.Ofthese,fivearelocatedintheUnitedKingdomwherethemarketforgreenfinancialproductshasbeenquitedynamicinrecentyears.InHungary,theMagyarNemzetiBank’sGreenHomeProgrammeandGreenMortgageBondIEA.CCBY4.0.WorldEnergyInvestment2023PAGE116EnergyenduseandefficiencyPurchaseProgrammewerelaunchedtoproviderefinancingagainstgreenhomeloansat0%interestandencouragetheissuanceofhigher-qualitygreenmortgagebonds.Addressingbuildingfabricefficiencyperformanceremainsamajorpartofspending,butrecenteffortsaredirectinginvestmenttowardstechnologiesthatcanmoreeasilyenablezero-carbonreadybuildings,suchasheatpumps.DataforEuropein2022suggestthataround3millionheatpumpswereinstalledinbuildings,anincreaseofalmost40%comparedwiththepreviousyear.TheEuropeanheatpumpmarketisestimatedtobewortharoundUSD14billion.AccordingtothelatestIEAanalysis,globalheatpumpsalesgrewby11%in2022inunitterms,markingasecondyearofdouble-digitgrowthforthecentraltechnologyinthetransitiontosecureandsustainableheating.Inorderforthegrowthofheatpumpdeploymenttocontinue,itisimportanttohavesecureandresilientsupplychains.TheglobalmarketforheatpumpsisdominatedbycompanieswithheadquartersinJapanandChina,accountingfornearly70%ofthemarket.WhilethefivelargestglobalmanufacturersarebasedintheAsiaPacificregion,onlyabouthalfoftheirproductioncapacityislocatedthere.Supplychainsarecurrentlystrained,particularlyforcrucialcomponentslikechips.Manufacturershavealreadycommittedtoexpandingheatpumpproductioncapacity,withinvestmenttotallingmorethanEUR4billionasofNovember2022.However,anadditionalUSD15billioninglobalinvestmentwouldbeneededtoclosethe60%gapthatexistbetweentheexpectedoutputfromannouncedprojectsandthe2030NetZeroEmissionsby2050Scenarioneedsforthetechnology.Therearealsonewincentivesthatarelikelytodrivefurthermanufacturingannouncements,suchastheDefenseProductionActandInflationReductionActintheUnitedStatesandtheupcomingNetZeroIndustryActandEuropeanSovereigntyFundintheEuropeanUnion.Asaresult,investmentinelectrificationisthemostresilientareaofoverallspendingonbuildings,increasingbyabout4%in2023,andincreasesitsshareinthetotal.Efficienciesintechnologycostsmeanthateverydollarspentgoesfurtherandweestimateafastergrowthofheatpumpsinunitterms.Fiscalstimulusmeasuresfromthepandemicperiodhavealsobeguntobewounddown,andfurtherreductionsingovernmentandprivate-sectorspendingduetoincreasedborrowingcostsmeanthat2023islikelytoseeareductioninefficiencyspending.Investmentinglobalenergyefficiencyinthebuildingsectorisprojectedtodropbyupto5%duetobothconstructionmarketuncertaintyinAsia,SouthAmericaandEurope,andchangestoseverallargeEuropeanprogrammes.Thispotentialchangeindirectionforinvestmentinthebuildingssectorisproblematicgiventhatenergyefficiencymeasuresnotonlyreducedemandbutalsoshieldhouseholdsandbusinessesfromtheimpactsoffuturefuelpricevolatility.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE117EnergyenduseandefficiencyTransportIEA.CCBY4.0.WorldEnergyInvestment2023PAGE118EnergyenduseandefficiencySalesofpassengerEVspassedthe10millionmarkforthefirsttimein2022…Globaltrendsinelectricpassengerlight-dutyvehiclemarkets,2015-2023eIEA.CCBY4.0.Note:EVincludesbatteryelectricandplug-inhybridpassengervehicles;2023e=estimatedvaluesfor2023.Sources:IEA(2023),GlobalEVOutlook;Marklines.3%6%9%12%15%18%21%024681012142016201820202022GlobalEVsalesandmarketshareEuropeNorthAmericaJapanandKoreaOtherShareoftotalsales(rightaxis)5%10%15%20%25%30%501001502002503003504004502016201720182019202020212022BillionUSD(2022)SpendingonEVpurchasesConsumerspendingGovernmentspendingGovernmentshareofspending(rightaxis)IEA.CCBY4.0.WorldEnergyInvestment2023PAGE119Energyenduseandefficiency…drivinginvestmentinroadtransportefficiencyandelectrificationtorecordhighsInvestmentinenergyefficiency,electrification,andhydrogenintheroadtransportsectorIEA.CCBY4.0.Note:2023e=estimatedvaluesfor2023.501001502002502017201820192020202120222023eBillionUSD(2022)ElectrificationEnergyefficiencyHydrogenIEA.CCBY4.0.WorldEnergyInvestment2023PAGE120EnergyenduseandefficiencyCapitalexpenditurebylistedbatterymanufacturingcompaniessurgedtoUSD9billioninQ42022,sharplyliftingproductioncapacityGlobaltrendsinthebatterymanufacturingindustry,2017-2025IEA.CCBY4.0.Notes:ListedbatterycompaniesincludeLGEnergySolution,BYD,ContemporaryAmperexTechnology,SamsungSDI,GotionHigh-tech,EveEnergyandFarasisEnergyGanZhou;2022valuesarebasedonfullycommissionedcapacity;2025valuesarebasedonannounced,underconstructionandfullycommissionedcapacity.Sources:IEAcalculationsbasedonBenchmarkMineralIntelligenceandBloombergTerminal(2023).12345678202220252030TWhChinaEuropeUnitedStatesRestofworldBatterymanufacturingcapacity246810100200300400201720182019202020212022BillionUSD(2022)Arithmeticreturn(Q42016=100)QuarterlyreturnsCapitalexpenditure(rightaxis)FinancialindicatorsforlistedbatterycompaniesIEA.CCBY4.0.WorldEnergyInvestment2023PAGE121EnergyenduseandefficiencyWithgrowthinsalesandmarketshare,profitabilityisconsolidatingforthelargestEVmanufacturersbutremainselusivefornewentrantsandsmallercompaniesNumberofvehiclessoldandprofitmarginofselectedautomakersin2022IEA.CCBY4.0.Notes:MarginreflectssalesofbothEVsandICEvehicles;bubblesizecorrespondstomarketcapitalisation.Source:IEAanalysisbasedondatafromBloombergTerminal.VOLKSWAGENGENERALMOTORSSTELLANTISFORDHYUNDAIKIAMERCEDES-BENZRENAULTBYDTESLANIOXPENG246810-40-30-20-100102030Numbersofvehiclessold(million)Profitmargin%IEA.CCBY4.0.WorldEnergyInvestment2023PAGE122EnergyenduseandefficiencyThefutureiselectric:spendingonEVsandbatterymanufacturingremainsstrongamiduncertaintieswithvolatilerawmaterialcostsanddiminishingsubsidiesSalesofelectriccarssawyetanotherrecordyearin2022,eveninthecontextofsupplychaindisruptions,macroeconomicandgeopoliticalshocks,highcommodityandenergyprices,andaglobalcontractioninthecarmarket.Registrationsofbatteryelectricvehicles(BEVs)andplug-inhybridelectricvehicles(PHEVs)surpassed10million,representinga55%increasefrom2021.This10-millionfigureisgreaterthanthetotalnumberofcarssoldintheentireEuropeanUnion(9.4millionvehicles)andhalfthenumbersoldinChinain2022.Thepercentageofelectriccarsintotalcarsalesincreasedfrom9%in2021to14%in2022,whichismorethanfivetimestheirsharebeforetheCovid-19pandemic.Europeprovidesanillustrationofthistrend:2.7millionEVsweresoldin2022,the15%increaseon2021representingsloweryear-on-yeargrowthcomparedwiththatseeninrecentyears.Thetailendofsupplychaindisruptionscausedbythepandemic,highinflationandweakeningconsumerconfidence,andtheinstabilitycausedbythewarinUkrainecompoundedthechallengeofmaintaininghighgrowthratesastheEuropeanmarketmatures.Fossilfuelsubsidiesaimedatshieldingconsumersfrompeakoilprices,delaysinimplementinglow-emissionzonesanduncertaintyovertheEuropean2035ICEbanmayalsohaveplayedarole.In2022Chinasawan80%increaseinEVsalescomparedwith2021,reaching6.2millionvehicles.Thecountryaccountedforalmost60%ofallnewelectriccarregistrationsworldwide,andforthefirsttimein2022ithadover50%ofalltheelectriccarsontheworld’sroads,totalling13.8million.Thisimpressivegrowthcanbeattributedtoconsistentpolicysupportforearlyadopters,andtheextensionofincentivesuntiltheendof2022,whichwereoriginallyplannedtobephasedoutin2020.However,salesfellinJanuary2023asthecentralgovernmentdecidedtoenda10-year-oldnationalsubsidyforEVpurchases,beforereboundingsomewhatinFebruary.Howthiswillaffectthemarketfortherestof2023remainsunclear.SalesintheUnitedStatessurgedby50%in2022ascomparedwith2021,registeringrobustgrowthforthesecondconsecutiveyearafteraslumpin2019-2020.Overall,thecountryaccountedfor10%oftheglobalgrowthinelectriccarsales,asmodelavailabilitygrewandincentivesremainedstrong.Thetrendisexpectedtobesustainedandeventoacceleratein2023,largelysupportedbyaregulatoryboost.Forinstance,severalEVmanufacturersannouncedplanstoinvestUSD28billioninNorthAmericanEVsupplychains,astheInflationReductionActtiespurchasesubsidiestovehiclesmanufactureddomestically.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE123EnergyenduseandefficiencyThethreeregionsdescribedaboverepresentmorethan95%ofnewEVsalesglobally.Fromalowbase,2022alsosawincreasedsalesinsomeotherpartsoftheworld,especiallyinAsia,wherecountriessuchasIndiasawsalestripling,andVietNamwheresaleswentfromclosetozeroin2021to7000unitsin2022andwhereaquadruplingisexpectedfor2023.ThepenetrationofEVsinEMDEmarketsfaceschallengesstemmingfromthelowerabilitytopayandthelimitedavailabilityofaffordableEVmodels,asmanyaregearedtowardshigher-endconsumers,suchasSUVs.Smallerelectromobilitymodels,suchastwo-andthree-wheelersarerelativelymoresuccessfulinthesecountries.Onthefinancingside,asgovernmentblanketsubsidiesaretendingtowinddown,newtypesoffinancialproductsarebeingdesignedtoencourageEVadoption.Forinstance,interest-freeloanswitharepaymenttermofupto10yearsareavailableinAustralia.Lower-incomehouseholdsinFrancewillhaveaccesstointerest-freeloansforatwo-yeartrialperiodstartingin2023iftheywishtoswitchtoEVs.TheCanadaInfrastructureBankhasbeenofferingloworzero-interestloansforthepurchaseofzero-emissionbusessince2022,withrepaymentssourcedfromthesavingsgeneratedbyloweroperatingcosts.Additionally,SloveniaofferssubsidisedloansforpeopleinterestedinpurchasinganEVthroughitsEcoFundprogramme.Forthefirsttimeinrecentyearstheaveragepriceofabatterypackhasseenanincrease,atabout2%in2022,reflectingabroadertrendofchipandmaterialshortages,aswellasincreasingcommodityprices.However,thetrendseemedtobereversinginearly2023withlithiumpriceseasingandcapexinvestmentbybatterymanufacturersremainingathighlevelstoreachclosetoUSD9billioninthelastquarterof2022.Inresponsetocontinuingdemandgrowthandincentivesofferedbygovernments,whicharegraduallyswitchingfromconsumerstocharginginfrastructureandbatterymanufacturing,recordinvestmentinnewbatterymanufacturingcapacityweremadein2022,increasingavailablecapacityby60%comparedwith2021,andreachingcloseto1.6TWh.Ifallannouncementsweretomaterialise,2.5TWhofnewcapacitycouldbeavailableby2025and6.8TWhoftotalcapacitywouldbecommissionedby2030,three-quartersinChina,butpartlyasaresultoftheInflationReductionAct,agrowingshareisintheUnitedStates.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE124EnergyenduseandefficiencyIndustryIEA.CCBY4.0.WorldEnergyInvestment2023PAGE125EnergyenduseandefficiencyInvestmentintheindustrialsectorremainedstablein2022asChinacontinuedtoexperiencesupplychainconstraints,whiletheUnitedStatesandIndiapickedupEnergyefficiencyinvestmentintheindustrialsector,2016-2023e,andcostindexforselectedrawmaterials,2016-2022IEA.CCBY4.0.Note:EVincludesbatteryelectricandplug-inhybridpassengervehicles;2023e=estimatedvaluesfor2023.Source:IEAcalculationsbasedondatafromOxfordInstituteofEconomicsandStatisticsGlobalEconomicsdatabase.1001502002503002016201720182019202020212022SteelEuropeSteelUnitedStatesSteelChinaAluminiumCopperIronPriceindexofselectedindustrialrawmaterials2016=1001020304050BillonUSD(2022)ChinaEuropeNorthAmericaIndiaOtherIndustryenergyefficiencyandotherend-useinvestmentsIEA.CCBY4.0.WorldEnergyInvestment2023PAGE126EnergyenduseandefficiencyHighenergypricesandpolicysupportinkeymarketsareputtingafloorunderindustrialefficiencyinvestmentsInvestmentinenergyefficiencyandelectrificationintheindustrialsectorgrewmodestlyin2022,consolidatingtherecordgainsexperiencedin2021,despiteanadversemacroeconomicenvironment.IndustrialoutputcameunderpressureinChinaasstrictCovid-19-relatedrestrictionsremainedinforceforalargepartof2022.Steelproductionfellby16%from2020,whilecementfellevenmoresharply.Arecoveryinconstructionactivityisheldbackbyanoverhanginthestockofbuildingsasaresultofthehousingbubble.WeestimatethatindustrialenergyefficiencyinvestmentinChinawasdownby14%year-on-year.TheliftingofCovidrestrictionsandtheslowrevivalofeconomicdemandinthelastquarterof2022shouldbeconducivetoastrongreboundintheearlymonthsof2023.InEuropethewarinUkraineandsky-highgaspricesforcedindustrytoadaptandtocutitsnaturalgasdemandbyover25bcmcomparedwith2021levels.Halfofthisreductioncamefromproductioncurtailment,forinstanceinthesteelsectorwherefactoriesproduced25%lessthanbeforetheRussianinvasion.Asgasisakeycomponentintheproductionofammonia,thefertiliserindustrywasprobablythemostaffectedbythepricerise,resultinginapproximately70%ofcapacitybeingtakenofflineatsomepointduringthepastyear.Another7bcmofsavingscamefromgastooilswitching,andonly3bcmfromenergyefficiencymeasures.Industrialprocessesthatrequirehightemperaturesaremorechallengingtoreplacewithcleanerenergysources.However,somelargeEuropeanindustrialbusinesseshavealreadyannouncedplanstoaccelerateinvestmentinenergyefficiencyandgreenelectrificationasaresultofvolatilityinenergyprices.Fornow,however,capexbymajorindustrialcompanieshasremainedstableinEurope.ThestoryisdifferentintheUnitedStates,wheretheenactmentoftheInflationReductionActissettogeneraterenewedtailwindsforindustrialefficiencyandabatement.Thelegislationcontainsawidevarietyofincentivesforindustrialdecarbonisation,makingcleantechnologyinvestmentsfinanciallyaccessibleforcarbon-intensivesectors,suchassteel,cementandchemicalsmanufacturing.Theactincludesa10-yearcleanhydrogenproductiontaxcreditforfacilitiesconstructedbefore1January2033,chartingthepathforcompetitivezero-emissionsteelproduction.Theactalsoprovidesessentialincentivestodecarbonisecementmanufacturingandprovidesforgovernmentprioritypurchasingofgreenproducts,sendingastronglong-termmessagetotheindustry.AstrongreboundinproductioninChina,IndiaandSoutheastAsiaisanticipatedfor2023comparedwithotherpartsoftheworld.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE127EnergyenduseandefficiencyTheEUGreenDealIndustrialPlanandtheNetZeroIndustryActInFebruary2023theEuropeanCommissionpresentedaGreenDealIndustrialPlaninamultiprongedefforttomeetitscleanenergytransitioncommitments,respondtotheUSInflationReductionActandaddressthecontinent’shighrelianceonChinaforcleanenergytechnologies.Thestrategyhasfourmainpillars:1)apredictableandsimplifiedregulatoryenvironment,2)quickeraccesstofinance,3)enhancedskills,and4)opentradeforresilientsupplychains.Aspartofthefirstpillar,theNetZeroIndustryAct,proposedinMarch2023,aimstoprovidearegulatoryenvironmentsuitedtothescale-upofthenetzeroindustry,withtheoveralltargetofdomesticallymanufacturingatleast40%ofEurope’scleanenergytechnologybyannualdeploymentby2030.Additionally,theactsetsoutambitious2030manufacturingtargetsforeightstrategicnetzerotechnologies:solarPVandthermal,batteries,heatpumpsandgeothermaltechnologies,electrolysersandfuelcells,sustainablebiogas/biomethanetechnologies,CCUS,andgridtechnologies.Inaddition,othertechnologiessuchasadvancednuclearandsmallmodularreactors,standtobenefitfromtheact’smeasures,butarenotassigned2030targets.Toachievethetargets,theactintroducesspecificpolicymeasures,includingfast-trackingpermittingfornetzerotechnologiesbyestablishing“one-stopshops”,includingsupplychaincriteriainpublictenderstofavourdiversification,andinvestmentintheupskillingoftheEuropeanlabourforce.ContrarytotheInflationReductionAct,however,theNetZeroIndustryActdoesnotprovidedirectfundingorsubsidyschemestospurdomesticmanufacturing(Article15highlightsthatfurthersupportcanbemadeavailableviaresourcesfromtheEuropeanInvestmentBankGrouporotherinternationalfinancialinstitutionsincludingtheEuropeanBankforReconstructionandDevelopment).AccordingtothesecondpillaroftheGreenDealIndustrialPlan,mostofthecostisexpectedtobeshoulderedbymemberstates,atleastpartiallythrougharedirectionofETSrevenues.Theplangrantsmoreflexibilityformemberstatestosupportcleanmanufacturing,includingthroughhighernotificationthresholdsforstateaidandthepossibilitytoallocatetargetedaidformajornewproductionprojectsinstrategicnetzerovaluechains.TherealisationoftheEUact’stargetswould,however,comeatacost.Formostofthetechnologieslisted,importingfromthirdcountriesismuchcheaperthanEUproduction.Forexample,estimatespointtoanextracostofUSD11.9billiontomeettheact’stargetof550GWhofdomesticallyproducedbatteriesby2030,comparedtoascenariowheredemandisentirelymetbybatteriesmadeinChina.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE128EnergyenduseandefficiencyImplicationsIEA.CCBY4.0.WorldEnergyInvestment2023PAGE129EnergyenduseandefficiencySpendingonenergyefficiencyandelectrificationisreachingnewhighsthankstodynamicgrowthinelectrificationofthetransportsectorGlobalinvestmentinenergyefficiency,electrificationandrenewablesforendusesandenergydemandforendusescomparedwithannualaverageinvestmentneedsin2030,byscenarioIEA.CCBY4.0.Notes:.APS=AnnouncedPledgesScenario;NZE=NetZeroEmissionsby2050Scenario;STEPS=StatedPoliciesScenario;includesend-userenewablesinthebuildingsandindustrialsectors;2023e=estimatedvaluesfor2023.350370390410430450470300600900120015001800210020192020202120222023e2030STEPS2030APS2030NZEBillionUSD(2022)Transport(electrification)Transport(energyefficiency)Industry(endusesandelectrification)Industry(energyefficiency)Buildings(endusesandelectrification)Buildings(energyefficiency)Energydemandfromenduses(rightaxis)EJIEA.CCBY4.0.WorldEnergyInvestment2023PAGE130EnergyenduseandefficiencyButtherearesomecloudsonthehorizon,notablyforefficiencyspending:overallinvestmentwouldneedtotriplebytheendofthedecadetokeepthe1.5-degreetargetinsight.TherapidprogressmadeonEVssales,heatpumpsandenergyefficiencyinvestmentsin2022andthetransformativelegislationpassedintheUnitedStatesandEuropeasaresponsetotheglobalenergycrisismeansthantheworldhastakenstepsintherightdirectiontowardsachievingtheinvestmentlevelsforefficiency,electrificationandend-usespendingrequiredtohitclimategoals.Lastyearwereportedthatinvestmentinthesesectorsneededtoquadruplefrom2021levelsby2030,butwearenowabletoshowthat“only”atriplingofannualinvestmentby2030wouldputtheworldontrackwiththeNZEScenario,whilethegapwithannouncedpledges(theAPS)hascomedowntoa2.5-timeincrease.Thesizeofthegapislargestinemerginganddevelopingeconomies(outsideChina),whereannualinvestmentinendusesis10timeshigherthantodayintheNZEScenarioin2030.ThisreflectstheneedforasharpriseinEVsalesinsuchascenario,alongsidewide-ranginginvestmentinmoreefficientindustrialprocesses,transportandbuildings,forexampleahugeincreaseinzerocarbonreadybuildingsinresponsetorapidurbanisation.ThistenfoldincreasecompareswithlessthanatwofoldincreaseinChinaandatwoandahalf-timeriseinadvancedeconomies.Intermsofsectors,annualinvestmentinthetransportsectorisfivetimeshigherthantodayby2030intheNZEScenario.Thislevelisachievableifthegrowthofelectricvehiclessalesobservedinthelasttwoyearspersists,andifinvestmentincharginginfrastructurefollows,butensuringsuchconsistentandbroad-basedgrowthremainsanenormoustask.Theincentivesforcontinuedinvestmentinenergyefficiencyinthebuildingandindustrysectorswillcontinuetodependonlong-term,predictable,andambitioussignalsfrompolicymakersaswellasafavourablemacroeconomicoutlook.Thecurrentheadwindsintheconstructionsector,highenergypricesintheindustrialsector,highinflationandtightenedaccesstofinanceallcomplicatetheprospectsforachievingaconsistentramp-upinspendingintheseareas.By2030,investmentinenergyefficiencyinthebuildingsectorintheNZEScenarioisseventimeswhatitistodayasmandatorybuildingcodesandretrofitmandatesbecomethenormgloballyandinvestmentinenergyefficiencyandelectrificationoftheindustrialsectordoubles.Ensuringthelong-termviabilityofincentivemechanismswillbecrucial,especiallyasmanycountriesfacefiscalconstraintsinahigherinterestratesenvironment.Althoughtheuseofcapitalmarketsandcommercialfinanceisquiteatanearlystageinthisspace,itwillhavetoplayanincreasingroleinprovidingaccesstolargerpoolsoffinanceforenergyefficiencyinvestments.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE131R&DandtechnologyinnovationR&DandtechnologyinnovationIEA.CCBY4.0.WorldEnergyInvestment2023PAGE132R&DandtechnologyinnovationDidtheworldspendenoughoncleanenergyinnovationwhenmoneywascheap?Themarketandpolicycontextforenergyinnovationischanging.Ontheonehand,macroconditionsaregettingtougher,withrisinginterestratesandotherheadwindstypifiedbythecollapsein2023ofSiliconValleyBank(SVB),aUS-basedprovideroffinancetoinnovativestart-ups.Ontheotherhand,policysupportinmanycountriesissteppingupasgovernmentsrespondtotheenergycrisisandseekmoreresilientanddiversifiedcleanenergysupplychains.TheUSInflationReductionAct,forexample,providesahugeboosttocleanenergyinnovationfunding.Thisgovernmentstimulusforcleanenergyinnovationcomesatatimewhenfinancingforinnovativesmallcompaniesisunderseverepressureandco-operationontechnologybetweensomemajoreconomiesisincreasinglyshapedbygeopoliticalconsiderations.Concernsthatinvestorswillretreatfromriskierbetsonnewtechnologiesarelegitimate.Overall,theworldmayregretnotspendingmoreoncleanenergyR&Dandearly-stageinnovatorswhencapitalwascheapoverthepast15years.ThefalloutfromthefailureofSVBshowshowinflationcanrapidlyhitstart-upfunding,whichisthemechanismbywhichmanyideasaretestedand,ifsuccessful,launchedonthemarket.Ithighlightshowfragilethebalancebetweenthefinancialneedsofinnovativestart-upsandthefinancialentitiesthatprovidetheircapitalcanbecomeattimesofstress.In2022thevalueofnon-venturecapital(VC)assetsintheportfoliosofmanylargefinancersfellasinterestratesroseandrevenueforecastswerereviseddown.ThisincreasedtheshareofVCassetsinportfoliosabovetheinstitutionaltargetsofthesefinancers(so-calledlimitedpartners),whobegantowithdrawfromVCfundsandindicatethattheywouldinvestlessinthenearfuture.Anervousatmospherehaspermeatedapreviouslybuoyantpartoftheinnovationsystem.However,therearebrightspotsrelatingtocleanenergyinnovation.Governmentpoliciesprovideinvestorswithconfidencethateffectivenewtechnologiescanfindreceptivebuyersforcleanenergyproducts.Early-stageVCinvestmentintocleanenergystart-upsreachedanewhighofUSD6.7billionin2022.Inrealterms,publicspendingonenergyR&Dgrewby10%in2022,anoutcomelargelydrivenbygrowthinChina,whileincreasesinotherregionswereoffsetbyinflation.Expectationsforpublicfundingforpre-commercialtechnologiessoaredwiththepassingoftheUSInflationReductionAct,especiallyinareassuchashydrogen,CCUSandcriticalminerals.Theadventofnewindustrialstrategiesandthepriorityattachedtoreshoringcleanenergysupplychainswillhavemultipleimplicationsforinnovation,reinforcingpolicysupportinkeycountrieswhilealsohavingthepotentialtofragmentaspectsofinternationaltechnologylearning.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE133R&DandtechnologyinnovationSpendingonenergyR&DIEA.CCBY4.0.WorldEnergyInvestment2023PAGE134R&DandtechnologyinnovationGovernmentspendingonenergyR&Dcontinuedtorisein2022,asmarkedgrowthinChinaoutpacedmodestprogressinotherregionsGovernmentspendingonenergyR&D,2015-2022IEA.CCBY4.0.Notes:Includesspendingondemonstrationprojects(i.e.RD&D)whereverreportedbygovernmentsasdefinedinIEAdocumentation;2022isapreliminaryestimatebasedondataavailablebymid-May2022;state-ownedenterprisefundscompriseasignificantshareoftheChinesetotal,forwhichthe2022estimateisbasedonreportedcompanyspendingwhereavailable;IEAestimatesforcountriesincludingIndiaandRussiaincludestate-ownedenterpriseR&D,whichwasnotincludedinWEI2022;theIEASecretariathasestimatedUSdatafrompublicsources.Source:IEAEnergyTechnologyRD&DBudgets:Overview.510152025303540455020152016201720182019202020212022BillionUSD(2022)RestofworldJapan,Korea,AustraliaandNewZealandEuropeNorthAmericaChinaIEA.CCBY4.0.WorldEnergyInvestment2023PAGE135R&DandtechnologyinnovationGrowthindirectpublicR&DspendingisbeingsupplementedbyajumpinsupportforprojectsthatwillindirectlycatalyseinnovationGlobally,publicspendingonenergyR&Droseby10%inin2022,tonearlyUSD44billionaccordingtoourestimates,with80%devotedtocleanenergytopics.Thiscontinuesatrendthathasbuoyedinnovationinrecentyearsdespitemacroeconomicuncertainty.However,growthinChinamaskssluggishnesselsewhere.China’s14thFive-YearPlan(2021-2025)includesaplannedincreaseinenergyR&Dspendingof7%peryear,whichweestimateittohaveexceeded,basedonpolicystatementsandrecentfilingsbyChinesestate-ownedenterprises.ThismaintainsChina’sstatusasthelargestpublicspenderonenergyR&D.Australia,BelgiumandNorwayhavealsoreportednotableincreases,buttheydonotoffsetanoveralldipof1.5%inrealtermsamongthoseIEAcountriesforwhich2022dataareavailable.Suchastagnationdoesnotbodewellforcountriesthatareseekingtoinvigoratetheircompetitivenessincleanenergysupplychainsandmanageinflationarypressures.However,whilesomegovernmentsarestrugglingtoincreasedirectR&Dfunding–weestimatethatitfell3%intheUnitedStatesin2022,forexample–mostattentioninthepastyearhasfocusedonsomemajorpolicypackagesforcountercyclicalinvestment.Thesecouldsignificantlyacceleratethecompetitivenessofpre-commercialcleanenergytechnologiesbutalso,insomecases,coulderectbarrierstoknowledgesharingbetweenregions.TheUSInflationReductionAct,adoptedinAugust2022,isperhapsthelargestsingleboosttocleanenergyinnovationfundinginrecenthistory.ItsmixofdirectR&Dfundingandsupportforthescale-upofnear-commercialtechnologiesandinducedinnovation(i.e.creationofamorelucrativeandlessriskymarket,therebyincentivisingcompaniestodevelopbetterproducts)isexpectedtoraisethepaceoftechnologydevelopment.DirectR&DfundingintheactincludesUSD2billionforimprovementstofederallaboratoriesupto2027,whichislikelytobeadditionaltonormalannualexpropriations.AneasierpathtoscalingupwillbesupportedbyUSD3.6billiontoguaranteeuptoUSD40billionofloanstoinnovativetechnologyprojects,50%grantstodemonstrationprojectsforindustrialdecarbonisationby2026,andtaxcreditsupto2045thatofferuptoUSD180/tCO2thatiscapturedfromtheatmosphereandgeologicallystored.Inducedinnovationislikelytobespurreddramaticallybyawiderangeoftaxcreditsandrebatesforthedomesticmanufacturingofcleanenergyequipment,low-emissionfuelproduction,homeretrofitsandvehiclepurchases.TheseincentivesareadditionaltotheInfrastructureInvestmentandJobsActmeasuresdescribedinWEI2022,forwhichtherulesandnumerouscallsforprojectshavesincebeenpublished.Thereareindicationsfromcompaniesthatthelevelsofsupportwillbesufficienttomakeotherwiseuncompetitivetechnologiesattractive.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE136R&DandtechnologyinnovationIntheEuropeanUnion,asimilarpackageofmeasureswilltakeshapeascountriesimplementtheNetZeroIndustryActandGreenDealIndustrialPlan.TheseincludetargetsforEU-basedmanufacturingofcleanenergytechnologies,publicprocurementguidelinesandendorsementofcertainregulatoryexemptionsgrantedtocleanenergytechnologyprojects.However,whilethefinancingforthesestrategiesisnotyetclear,amorelong-standingEUprogramme,theInnovationFund,awardedEUR1.8billionofdirectfundingto17largeprojectsinmid-2022.Thesecoverbatteries,hydrogen,solarandwind.Asaresponsetotheongoingenergycrisis,thebudgetforthefund’snextroundhasbeendoubledtoEUR3billion.Individualcountriesarealsoexpandingindirectinnovationsupportbydirectingattentiontosupplychains.Canada’s2023budgetproposesa30%taxcreditandahalvingofcorporateincometaxformakersofcleanenergyequipmentandhighercreditsforhydrogenandCCUSprojects.Germanyhastakenaleadinestablishingfundsforlarge,earlycommercialhydrogenprojectsasameansofstimulatingthemarket.Italy’sRecoveryandResiliencePlanallocatesEUR2billionforinvestmentsto2026topursueItalianleadershipinselectedenergytechnologyareas,includingfinancialsupportforcleanenergystart-ups.FrancepublishedcallsforprojectsunderitsEUR1billionfundforbuildingsolarPVandfloatingwindsectors.In2022AustraliaunveiledaCriticalMineralsAcceleratorInitiativeforprojectsthatbuildnewsupplychains.Newprogrammesforresearchanddemonstrationwerealsoannouncedoverthepastyear.FundingfornewnuclearreactordesignswasboostedbyhigherbudgetsinFrance,whereEUR1billionwasmadeavailableto2030,andtheUnitedKingdom,whichplanstospendGBP0.4billion.Canada’s2023budgetproposesanadditionalCAD0.5billionforitsmaincleanenergyresearchprogramme.InDecember2022GermanyannouncedoverEUR150millionforbatteryresearchprojects,includingfordigitalisationandrecyclingtechniques.InChina,anationalinnovationplatformisproposedtouniteuniversityandindustryR&Deffortstoimplementthedevelopmentplanforlarge-scalecommercialisationofnewenergystoragetechnologiesby2030,complementedbynewpoliciesinGuangdongandInnerMongolia.TheSixthAssessmentReportoftheIntergovernmentalPanelonClimateChangeconcludedthatcleanenergyinnovationsystemsinEMDEsneedstrengthening.Inlate2022Indiaadvanceditsplanforhydrogen,oneofitsstrategicinnovationpriorities,withaUSD11millioncallforproposalsfromregionalconsortiums,whileitsGreenHydrogenMissionearmarkedUSD200millionforR&Dandpilotprojects.IndonesiasignedanagreementwithJapantoacceleratetechnologicalinnovationsrelatingtohydrogen,ammoniaandCCUS.Alsoin2022,theUnitedKingdomexpandeditssix-yearGBP1billionfundforenergyR&DprojectsinEMDEstoincludehydrogenandcriticalmineraltopics.Brazillaunchedprocessesin2023fornewstrategiesforinnovationingeneralandelectricitysectorinnovationspecifically.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE137R&DandtechnologyinnovationCorporateenergyR&Dspendingroseby10%in2022,returningtoitspre-Covidtrajectory,butitdidnotkeeppacewithhigherrevenuesSpendingonenergyR&Dbylistedcompanies(left)andR&Dbudgetsasashareofrevenues(right),bysectorofactivity,2015-2022IEA.CCBY4.0.Notes:Valuesfor2022areestimatesbasedonreporteddataatthetimeofdrafting;includesonlypubliclyreportedR&Dexpenditurebycompaniesactiveinsectorsthataredependentonenergytechnologies,includingenergyefficiencytechnologieswherepossible,basedontheBloombergIndustryClassificationSystem;automotiveincludestechnologiesforfueleconomy,alternativefuelsandalternativedrivetrains;fuelcellsareincludedwithhydrogen;toallocateR&Dspendingforcompaniesactiveinmultiplesectors,sharesofrevenuepersectorareusedintheabsenceofotherinformation;valuesmayincludebothcapitalisedandnon-capitalisedcosts,includingforproductdevelopment;theright-handfigureconsidersthetop20companiesearningoverhalfoftheirrevenuesineachsector,andrepresentsaverageR&DspendingasashareofrevenuesweightedbythesectoralR&Dspendingofeachcompany.Source:IEAanalysisbasedondatafromBloomberg(2023).2040608010012014020152016201720182019202020212022BillionUSD(2022)AutomotiveElectricitygeneration,supplyandnetworksOilandgasRenewablesCoalThermalpowerandcombustionequipmentBatteries,hydrogenandenergystorageNuclear0%1%2%3%4%5%6%7%2016-20182019-20212022R&DspendingasashareofrevenuesIEA.CCBY4.0.WorldEnergyInvestment2023PAGE138R&DandtechnologyinnovationCorporatespendingonR&Dkeepsrisinginmost“hard-to-decarbonise”sectorsR&Dspendingbygloballylistedcompaniesinheavyandlong-distancetransport(left)andindustry(middle,right)byactivity,2015-2022IEA.CCBY4.0.Notes:Valuesfor2022areestimatesbasedonreporteddataatthetimeofdrafting;classificationsarebasedontheBloombergIndustryClassificationSystem;trucksincluderecreationalvehicles,butnotindustrialvehicles.Year-on-yearchangescanresultfromnewcompaniesenteringthedatasetorcompaniesceasingoperations,aswellaschangesinR&Dspending.SomechangescomparedtoWEI2022relatetoavoidingdouble-countingofparentandsubsidiarycompanies.Source:IEAanalysisbasedondatafromBloomberg(2023).4812162020152016201720182019202020212022BillionUSD(2022)AviationTrucksShippingRail1020304050602015201720192021ChemicalsIronandsteel0.51.01.52.02.53.03.54.02015201720192021CementPulpandpaperIEA.CCBY4.0.WorldEnergyInvestment2023PAGE139R&DandtechnologyinnovationPublic-sectorcreditforcorporateR&Dcansustaininnovationduringtimesofmacroeconomicuncertainty,steeringittowardscleanenergy,asillustratedbyEuropeanInvestmentBankloansEIBloanstocompaniesforenergy-relatedR&D,bysector,2009-2022IEA.CCBY4.0.Notes:“Other”includescement,energyefficiency,energystorage,hydrogen,marinetransport,fossilfuelsandrail.Source:IEAanalysisbasedondataprovidedtotheIEAbytheEuropeanInvestmentBank.1234520092010201120122013201420152016201720182019202020212022BillionEUR(2022)AutomotiveElectricityRenewablesSteelAviationOtherIEA.CCBY4.0.WorldEnergyInvestment2023PAGE140R&DandtechnologyinnovationCompaniesarereactingtothecompetitivepressuresofenergytransitionsbyfundingmoreR&Dandhigherrevenuesin2022offerafurtheropportunitytosupportcleaninnovationPreliminarydatashowpositivenewsfortheR&Doutlaysoflistedcompaniesinenergy-relatedsectors.The10%year-on-yeargrowthin2022washighrelativetorecentyearsdespiteeconomicuncertaintyandhighercostsofcapital.Whilethetrendsandcompetitivepressuresvaryacrosssectors,intheaggregatethiscanbeinterpretedasaresponseofcompaniestothethreatsandopportunitiesoftheenergytransition.Asthetechnologicalbasisofthesesectorsshifts,R&Disacentralstrategyforgrowing,orsimplymaintaining,marketshare.Theshiftintheautomotivemarketisalreadyverypronouncedandincreasinglyglobalised,anditisthegrowthinthissegmentofenergyR&Dthatsteerstheoveralltrend.Abumperyearforenergysectorcorporaterevenuesin2022offersafurtherchancetoincreasespending.Thiswasnotyetreflectedinresearchbudgets,reflectingthefactthatthesearetypicallysetinadvanceandthathighenergypriceswereunanticipated.Therefore,amajoropportunityarisesforenergycompaniestoincreasecleanenergyR&Dbudgetsin2023andbeyond,evenifjusttokeeptheaverageratioofR&Dtorevenuestable.Thereisalsoagoodstrategiccaseforaspendingincreaseinareaslikecleanenergymanufacturing:theabilitytopairinternalR&Dwithnewpublicfundingsourcesforenergyinnovationcanmakethiscapitalmoreproductiveinanenvironmentofgreatercapitaldiscipline.Outsidethetypicalscopeoftheenergysector,corporateR&Disrisinginso-calledhard-to-decarbonisesectors.Thisisapositivesignalthatcompaniesintheindustrialsectorsareembracingthechallengeofrapidlychangingtheirlong-standingtechnologicalpractices.MostspendinginthesesectorsisbyChinesefirms.WithnouptickinR&Dspendingyet,thelong-distancetransportsectors(aviation,rail,shippingandtrucks)remainoutliers,however.Intimesofeconomicuncertainty,governmentscanadoptmeasurestoprotectcorporateR&Dbudgetsfromthethreatofcutsarisingfromlowerrevenuesormoreexpensivecapital.Thiscanbolstercompetitivenessthroughadownturnandcanalsobeachancetodirectcompaniestowardsspecificpolicypriorities.Since2020theEIBhasextendedEUR7billioninloanstosupporttheenergy-relatedR&Dprogrammesof45firms.In2022newenergyR&DcreditfromtheEIBreacheditshighestvaluesince2013,whensuchloanswerearesponsetotheglobalfinancialcrisis.Therecentfocusislessontheautomotiveelectrificationthanin2012-2017andmoreonrenewableenergyandindustrialdecarbonisation.Germany’sfederalR&Dtaxcredit,launchedin2020,hassofarattractedapplicationsfromover2000mechanicalengineeringprojects,among14000overall.TheUSInfrastructureInvestmentandJobsActdelaystheneedtoamortisecorporateR&Duntil2025.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE141R&DandtechnologyinnovationVCfundingofearly-stageenergytechnologycompaniesIEA.CCBY4.0.WorldEnergyInvestment2023PAGE142R&DandtechnologyinnovationEarly-stageequityfundingforenergystart-upsisbooming,ledbycleanmobilityandrenewables,but2023couldbeleanerforlater-stagedealsVCinvestmentinenergystart-ups,bytechnologyarea,forearly-stageandgrowth-stagedeals,2004-2023eIEA.CCBY4.0.Notes:2023eisanestimatebasedonQ1data;early-stagedealsaredefinedasseed,SeriesAandSeriesBdeals;verylargedealsinthesecategories–aboveavalueequaltothe90thpercentilegrowthequitydealsinthatsectorandyear–areexcludedandreclassifiedasgrowth-stageinvestments;industryincludesstart-upsdevelopingalternativeroutestomaterialssuchasbuildingmaterials,steelandchemicals;mobilityincludestechnologiesspecifictoalternativepowertrains,theirinfrastructureandvehicles,butnotgenericsharedmobility,logisticsorautonomousvehicletechnology;“Other”includesCCUS,nuclear,criticalmineralsandheatgeneration;fossilfuelscoverstart-upswhosebusinessesaimtomakefossilfuelusecheaperorotherwisemoreattractive,includingfossilfuelextractionandfueleconomyofhydrocarboncombustionvehicles;areviewofthedataclassificationsforWEI2023hasmodifiedtrendspublishedbytheIEAinprioryearsSource:IEAanalysisbasedonCleantechGroup(2023)andCrunchbase(2023).123456789102005200620072008200920102011201220132014201520162017201820192020202120222023eBillionUSD(2022)RenewablesEnergyefficiencyIndustryEnergystorageandbatteriesMobilityHydrogenandfuelcellsOtherpowerandgridsFossilfuelsOtherEarlystage5101520253035402005200620072008200920102011201220132014201520162017201820192020202120222023eBillionUSD(2022)GrowthstageIEA.CCBY4.0.WorldEnergyInvestment2023PAGE143R&DandtechnologyinnovationMostVCfundingforenergytechnologieshasflowedtoUS-basedstart-ups,withEuropehavingastrongpresenceinhydrogenandChinaactiveinmobilityandbatteriesEarly-andgrowth-stageequityinvestmentinenergystart-upsbyregionandtechnologyarea,2020-2022IEA.CCBY4.0.Note:Regionsarepresentedaccordingtotheheadquartersofthestart-upreceivinginvestment.Source:IEAanalysisbasedonCleantechGroup(2023)andCrunchbase(2023).0%20%40%60%80%100%EnergyefficiencyEnergystorageandbatteriesFossilfuelsHydrogenandfuelcellsIndustryMobilityOtherpowerandgridsRenewablesChinaIndiaAustraliaRestoftheworldUnitedKingdomOtherEuropeCanadaUnitedStatesIEA.CCBY4.0.WorldEnergyInvestment2023PAGE144R&DandtechnologyinnovationMostoftherecentVCinvestmentboominenergyisforcompaniesworkingonhardwareimprovements,butmorethan25%wenttolessriskydigitaltechnologyandprojectdevelopersShareofearlyandgrowth-stageVCinvestmentinenergystart-ups,bytypeofstart-up,2004-2023IEA.CCBY4.0.Note:2023dataareforQ1only.Source:IEAanalysisbasedonCleantechGroup(2023)andCrunchbase(2023).0%20%40%60%80%100%2004200720102013201620192022HardwareDigitalProjectdevelopmentEarlystage0%20%40%60%80%100%2004200720102013201620192022GrowthstageIEA.CCBY4.0.WorldEnergyInvestment2023PAGE145R&DandtechnologyinnovationEnergyhasoutperformedotherVCsegmentssince2021,particularlyforearly-stageequityfundingforstart-ups,whichhasexperiencedgrowthwhileVCinvestmenthasfalleningeneralGrowthinglobalVCinvestmentbysectorofstart-ups,2010-2023IEA.CCBY4.0.Note:2023trendisbasedontherateofchangebetweenQ12022andQ12023.Source:IEAanalysisbasedonCleantechGroup(2023)andCrunchbase(2023).204060801001201402010201220142016201820202022AgricultureandfoodBiotechnologyMedicalDigitalAllEnergyEarlystageIndex(2021=100)204060801001201402010201220142016201820202022GrowthstageIEA.CCBY4.0.WorldEnergyInvestment2023PAGE146R&DandtechnologyinnovationCleanenergycontinuestooutperformotherVCsegments,demonstratinginvestorconfidenceinenergytransitions,butitisnotescapingtheslowdowninthewidertechnologysectorForenergystart-ups,2022wasthebiggestyeartodateforearly-stageequityfunding,withincreasesinmostcleanenergytechnologyareas.Mostnotably,start-upsinCO2capture,energyefficiency,nuclearandrenewablesnearlydoubledormorethandoubledtheir2021leveloffunding,whichwasalreadymuchhigherthantheaveragefortheprecedingdecade.Thistypeoffundingsupportsentrepreneurswithtechnologytestinganddesign,andplaysacriticalroleinhoninggoodideasandadaptingthemtomarketopportunities.Growth-stagefunding,whichrequiresmorecapitalbutfundslessriskyinnovation,rosebyonly1%in2022andwasveryweakinQ12023.IfQ1isagoodguidetotheannualtrend,thevalueofgrowth-stagedealsforenergystart-upscouldfallbynearly60%in2023.Prevailingmacroeconomicconditionshavedentedtheamountofcapitalavailableandraisedthecostofscalingupnascentbusinesses.Thisisdespitehigherfossilfuelpricesin2022thatcouldhavepushedmanycleanenergystart-upsclosertomarket.Withongoingrestraintinthebankingsector,investmentisnotexpectedtobouncebackquickly.Limitedpartners,theprimarybackersofVCfunds,willcontinuetorebalancetheirportfoliostomanageriskexposure,leavingmoreintensecompetitionbetweenstart-upsforearly-stagefunding.Inaddition,bankingservicesandloansarelikelytobecomemorecostlyforsmall,innovativefirms.WhilethedownwardcyclefortechnologycompaniesinNorthAmericawasunderwaybeforethecollapseofSiliconValleyBank,thetrendshavenowbecomemorepronounced.Itisexpectedthatstart-upswillhavetosurvivelongerbetweenfundingroundsorbeforean“exit”(becomingapubliclistedcompanyorbeingacquiredbyalargerfirm),withlessaccesstobridgingcapital.Forhardwarestart-ups,therewillbedifficultdecisionsrelatingtoretentionofresearchstaffandinvestmentinprototypingandtesting.However,theprospectoflowergrowth-stageinvestmentisnotreflectedintheearly-stagetrend.DealsinQ12023,ifmaintained,indicatethatearly-stageVCfundingin2023couldcontinuetogrowstrongly.Inaddition,cleanenergyissettocontinuetooutperformothersegmentsforwhichVCinvestmenthasfallendramaticallysince2021,asignofhowmuchcleanenergyVCinvestinghasmatured.Muchoftheneedforcleanenergytechnologyinnovationrelatestothedevelopmentofhardwaresolutions,yetgrowthinearly-stagefundingforenergystart-upsdevelopinghardwareisflat.Forgrowth-stageinvestment,VCfundingforhardwarecompaniesfellin2022.Whilefundingforhardwaredevelopersremaineddominant,atalmost75%,theirshareofearly-andgrowth-stagedealstendstoshiftwithIEA.CCBY4.0.WorldEnergyInvestment2023PAGE147R&Dandtechnologyinnovationchangingriskperceptions.Intheaftermathofthe“cleantechbust”in2010-2011,theshareoffundingforhardwaredroppeddramatically,toaround65%ofearly-andgrowth-stageequityinvestmentinenergystart-upsatitslowestpoint.HardwareproductscantakemanyyearsofVCfundingtobedevelopedtomeetcustomers’needs,butthesestart-upscanachievehighvaluationsandpay-offsforinvestors.Bycontrast,energysoftwareandprojectdevelopmentcompaniescanhaveaquickerpathtomarketbutofferlowerreturns.Theshareofhardwareclimbedupagainin2020-2021,buthasdeclinedin2022-2023,likelyreflectinglowerwillingnessamongVCfundstomakelarge,long-termbets.Asanindicator,theproportionofenergyVCgoingtodigital,hardwareandprojectdevelopmentcanhelptrackinvestorpreferencesandtheinvestmentclimateforsolvinghardwarechallenges.Inagiventechnologyarea,thesharerepresentedbyprojectdeveloperscanindicatetechnologyandpolicymaturity.Regionally,start-upsbasedintheUnitedStatesraisedmorethanthoseinotherregionsineverytechnologyareabetween2020and2022.TheinvestorsinthevastmajorityofthesedealswereUS-based.WhileChina,EuropeandIndiahaveconsistentlyrepresentedgrowingsharesofthetotalasinvestmenthasincreasedinrecentyears,thisisnotevenlyspreadbetweenfundingstagesortechnologies.Whenlookingatearly-stageinvestmentonly,Europeanstart-upsattracted29%oftheglobaltotal,butthisfallsto22%forgrowth-stagefunding.Chinahasbecomeamajorlocationforthescale-upofenergystorageandelectricvehiclecompanies,butbarelyregistersinthedataforenergyefficiencyandpowergridtechnologies.Indianstart-upsaremostpresentinrenewableenergyandmobilitytechnologies,especiallyelectrictwo/three-wheelersandcharging.Amonghardwaretechnologies,early-stagefundingwasmostlydirectedtoelectricvehiclestart-ups,buttheserepresentedamuchlowershareofthetotalin2022thaninthepastfiveyears.Thisispotentiallyduetothegreaterchallengesfacingstart-upslookingtobreakintoamorematureelectricvehiclemarket.Gainsweremadeinareasincludingnuclear(exemplifiedbyNewcleoraisingUSD294million),batteries(exemplifiedbyGreaterBayTechnology,USD150million,VerkorUSD118million,andLithionRecyclingUSD116million),geothermal(exemplifiedbyQuaiseraisingUSD52million),andheatingandcooling(exemplifiedbyExergynandSubmerraisingUSD33millionapiece).IEA.CCBY4.0.WorldEnergyInvestment2023PAGE148R&DandtechnologyinnovationCorporateVCinvestmentincleanenergystart-upsremainshigh,withahighercontributionin2022fromelectricity,oilandgas,andheavyindustrycompaniesCorporateVCinvestmentinenergystart-ups,bysectorofcorporateinvestor,2010-2022IEA.CCBY4.0.Notes:Includesearly-andgrowth-stagedeals;includesonlyinvestmentbyprivate-sectorinvestors;wherethereareseveralinvestors,dealvalueisevenlysplitacrossthem;ICT=informationandcommunicationstechnology;Industryincludeschemicals,cement,commodities,construction(excludingrealestate),ironandsteel,andotherequipmentsuppliers;Powersectorincludesindependentpowerproducers,andelectricityandrenewablesequipmentandservices;“Other”includesfood,health,researchandmining;valuesareslightlylowerthaninWEI2022duetosomereclassificationsbytheIEAofstart-upsandinvestors.Source:IEAanalysisbasedonCleantechGroup(2023)andCrunchbase(2023).1234567892010201120122013201420152016201720182019202020212022USDbillion(2022)OtherEnergystorageandbatteriesIndustryTransportICTandelectronicsOilandgasPowersectorIEA.CCBY4.0.WorldEnergyInvestment2023PAGE149R&DandtechnologyinnovationHigherstrategiccorporateinvestmentinenergystart-upsindicateshowfirmsareseekingtostaycompetitiveorbreakintoafast-movinglandscapeCorporateventurecapital(CVC)investmentincleanenergystart-upsstayedathistorichighsin2022,exceedingUSD8billion.Withthetechnologicallandscapechangingrapidly,companiesincreasinglyuseCVCinvestmentsinstart-upstoenternewtechnologyareas.Theincreasein2022wasledbyinvestorsfromtheindustrial,electricityandenergystoragesectors.MirroringourfindingsaboutthehighshareofenergyVCfundingforfirmsdevelopingdigitalproductsbetween2013and2020,CVCinvestmentinenergystart-upsbyICTfirmsgrewmarkedlyfrom2016(asthesestart-upsbecameclosertothemarket).However,theICTsector’sshareofenergy-relatedCVCwasnotmaintainedandin2022therewasamoreevenspreadofCVCamongcorporatesectorsthanpreviously.Industrysectorslikechemicals,constructionmaterials,andironandsteelareplayingalargerroleinCVCinvestmentincleanenergystart-upswithhardwareproducts.WhileCVCremainslowerthancorporateR&Dbudgets,ithasbeengrowingquicklysince2015.Inanenergysectorthatanticipatesdisruptionfrommass-produced,modularandquick-to-scaletechnologies,CVCcanbeparticularlyattractiveasalower-costandquickermeansofacquiringknowledge,newtechnologiesandbusinessmodels.Thenimblenessofstart-upsandthe“optionality”forinvestorscanbeparticularlyvaluableunderconditionsofuncertainty,competitionandbudgetpressures.Forstart-ups,CVCcomplementsothersourcesoffundingandcanacceleratescalingupbyprovidingaccesstocorporateexperienceandresources,especiallyformanufacturing,aswellasaccesstoconsumersaroundtheworld.Thisismostevidentinthecaseoffossilfuelcompanies,whichincreasedtheirenergy-relatedCVCactivityin2022.OilandgascompaniesinvestedUSD2billionbetween2020and2022,mostlyinCCUS,energyefficiencyandrenewableenergydevelopers.Start-upsmustweighthebenefitsofCVCagainstthepossibilitythattheiragilityandrapidgrowthambitionsmaynotalwaysfitwiththestrategiesofthefirmsthattakestakesinthem.Notableinvestmentsin2022includedequityfromChevronandtheOil&GasClimateInitiativeintoSvante,aCanadianCO2capturefirmthatraisedUSD318millionofgrowthequity,andSinopec’sparticipationinaUSD130milliongrowth-stageroundforKuntianNewEnergy,aChinesebatterycomponentmaker.EquinorinvestedinSolidPower,aUSsolid-statebatteryfirm.RepsolinvestedinEnerkem,aCanadianwaste-to-energycompany.EniinvestedinC-Zero,aUSnaturalgas-to-hydrogenstart-up.GerdauandAsahiKaseiinvestedinPlantPrefab,aDutchmakerofefficientbuildings.HolciminvestedinBluePlanet,aCO2mineralisationstart-up.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE150R&DandtechnologyinnovationImplicationsIEA.CCBY4.0.WorldEnergyInvestment2023PAGE151R&DandtechnologyinnovationEnergyinnovationinvestmenthaslargelyremainedresilienttoshocksinaturbulent2022,butmoretestslieaheadandcapitalavailabilityvariesbetweenregionsandtypesofinnovationThelatestinvestmentdataforenergyR&Dandinnovationarebroadlypositive,andreflectsomeofthethemesrunningthroughthechaptersofthisreport.TheimpactsoftheRussianinvasionofUkraineareyettobecomefullyapparent,withgovernmentsupportforcleanenergyhelpingittobuckmacroeconomictrendssofar.Ininnovation,thisismostevidentintheresilienceofVCfundingforcleanenergy,despiteadownturninVCfundingfortechnologystart-upsmoregenerally.Similarly,corporateR&Dspendingdataechothefindingsforcapitalexpenditureintheenergysector:thereislittleevidencefrom2022thatspendingwillriseinlinewithhigherrevenues,butthereisastrongcaseforanincreasein,forexample,oilandgascompanyR&Dincomingyears.Anyoutlookforcleanenergyinnovationgloballymustaccommodateseveralcompetingdriversthathavebecomemorepronouncedinthepastyear.Firstly,anyreductioninbilateralco-operationandtradebetweenmajorregionsrestrictsflowsofknowledge,therebyslowingtheadvanceofthetechnologyfrontier.Secondly,regulatorypreferencesformorelocalsupplychainscouldleadequipmentsuppliers,suchasvehiclemanufacturers,torelaxtheireffortstokeepupwithtechnologicaldevelopmentsabroad.Thirdly,andincontrastwiththeprevioustwopoints,hindrancesmaybecounteractedbyindustrialpoliciesinspiredbycompetitionininternationalcleanenergyvaluechains.Byprojectingstrongermarketsignalsoverthemediumterm,industrialpoliciescansteersignificantnewcapitaltoselectedtechnologychallenges,whichspurseligibleinnovatorstocompetewitheachothertosecurecontractsandwinmarketshare.Regionaldifferencesaresettowiden,notconvergeUnlikeinsomeotherareasofenergyinvestment,China’sshareofinnovationspendingdoesnottoweroverglobalspending.PublicR&DspendingisquiteevenacrossChina,EuropeandNorthAmerica,whileVCinvestmentismoreconcentratedintheUnitedStates,followedbyEurope.Thesethreeregions,plusJapanandKoreaforR&Dspending,playanoutsizedroleinenergyinnovationcomparedwiththeirfutureenergyinvestmentneeds.TheNZEScenariorequiresoverhalfofcleanenergyinvestmenttobeinEMDEs.However,in2022EMDEs(excludingChina)accountedforjust5%ofpublicenergyR&D,3%ofcorporateenergyR&D(bycountryofheadquarters)and5%ofenergyVC(bycountryofstart-up).GovernmentsupportiscruciallyimportantforstimulatingR&Dinvestment,andpolicyincentivesforcleanenergyinnovationareexpandingimpressivelyintheregionsthatarealreadyleaders.CostsIEA.CCBY4.0.WorldEnergyInvestment2023PAGE152R&DandtechnologyinnovationofcapitalaredivergingbetweenadvancedeconomiesandEMDEsinawaythatcouldentrenchthisdifferenceatatimewheninnovationco-operationbetweenregionsappearsmorechallenging.InnovationinEMDEsistypicallymoretargetedtotheirspecificsocial,economicandclimaticcontexts.Inaddition,itcanhelptopositionthemincleanenergytechnologyvaluechains,therebyboostingeconomicgrowthandacceleratingglobaleffortstowardsclimategoals.Advancedeconomiesandmultilateraldevelopmentbankshavearoletoplayinensuringthatinvestmentopportunitiesforenergyinnovatorsareasglobalaspossible,evenascompetitionintensifiesinareasfrombatteriestoenergymanagementsoftware,hydrogen,heavyindustry,heatpumpsandairconditioning.Thescopeofenergyinnovationinvestmentisexpanding,signallingmoreVCappetiteforhardwaredevelopersTherecentsurgeinVCinvestmentincleanenergyhasbeenaccompaniedbyahighshareofbetsonhardware-focusedstart-ups.However,theinnovationeffortsdevotedtodigitalsolutionsseenduring2013-2019,whichdrewtheworld’sbiggestITcompaniesintoenergy-relatedresearch,remainimportant.Rather,theshareofhardwarehasrisenalongwithabroadeningrangeofhardwareareasattractingfundingfrompublicandprivatesources.Investorsincleanenergytechnologiesnowcoveraerospace,criticalminerals,directaircapture,industrialfeedstocksandmanufacturingtechniques.Demonstrationprojectfundinggrabsheadlines,butunderlyinginnovationsystemsalsoneedattentionInthecomingyears,editionsofWorldEnergyInvestmentwilltrackhowthemajorgovernmentfundingannouncementstranslateintopublicbudgets,projectawards,projectexpenditureandthentechnologyimprovements.Forfirst-of-a-kinddemonstrationprojects,theextenttowhichtaxcreditsandperformanceincentivesattractprivatecapitalwillbewatchedclosely.Themagnitudeofthisspending,especiallywithmanyincentivesintheUSInflationReductionActbeinguncapped,willensurepublicityfortheseprojects.However,energytransitionsdependjustasheavilyonfunctioninginnovationsystemsthatchannelappropriatetypesofcapitaltoresearchersandentrepreneursastheydevelopnewideas.Effectiveinnovationsystemsbalancepublicspending,intellectualpropertyrights,knowledgenetworks,marketopportunitiesandincentivesfortheprivatesectortoputcapitalatrisk.Foradecade,cheapcapitalhasloweredbarrierstoinvestmentinlong-term,riskybetsandtherebyconcealedweaknessesininnovationsystems.Withthecostofmoneysettorise,thehealthofthesesystemswillbeamorecriticaldeterminantofwhethernewtechnologyideascontinuetoflowinlinewiththe“learningcurve”assumptionsofdecarbonisationscenarios.ThereisplentythatgovernmentscandotonurturegoodideasandgivethemthehighestchanceofbeingavailabletoapplyforthenextIEA.CCBY4.0.WorldEnergyInvestment2023PAGE153R&DandtechnologyinnovationwavesofVCordemonstrationfundingin5or10years’time.Thisincludesguidingthebrightestmindstowardskeypolicychallengesforcleanenergytechnologies.Morethaninotherpartsoftheenergysector,innovationinvestmentreflectsthebalancebetweenlong-termthinking(tomitigatetherisksoflong-termunsustainabilityanduncompetitiveness)andnear-termshocks.Despitepositiveoutlooksinsomeareas(suchaspublicR&Danddemonstrationfunding,andfundraisingbyprojectdevelopers),othersfaceheadwinds(includingthecostofcapitalforearly-stagehardwarestart-ups,andinternationalknowledgeflows).Allstakeholdersinsuccessfulenergytransitionsarethereforeboundbyaneedtoaddressweaknessesandkeeptheinvestmentbalanceinfavourofseekinglong-termopportunities.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE154FinanceSustainablefinanceIEA.CCBY4.0.WorldEnergyInvestment2023PAGE155FinanceOverviewIEA.CCBY4.0.WorldEnergyInvestment2023PAGE156FinanceTheenergycrisisledfossilfuelcompaniestosignificantlyoutperformthebenchmarklastyear,althoughrenewablesprovedresilientfollowingyearsofstrongreturnsMonthlyreturnsofenergy-relatedsampleportfolios,2013-2023(left)andQ42021-Q12023(right)IEA.CCBY4.0.Note:MSCIACWI=MSCIAllCountryWorldIndex.Source:IEAanalysisbasedondatafromBloomberg(2023).5010015020025030035020132014201520162017201820192020202120222023Arithmeticreturn(Q42012=100)GloballistedrenewablesGloballistedfossilfuelsMSCIACWI5010015020222023(Q42021=100)IEA.CCBY4.0.WorldEnergyInvestment2023PAGE157FinanceInvestingincleanenergyhasfacedchallengesduetothestrongperformanceoffossilfuelsin2022,butthecontinuingdevelopmentofsustainablefinanceregulationcanactasatailwindThefinancialcommunityhasacriticalroletoplayinthemassiveramp-upofcleanenergyspendingneededtomeetclimategoalsandtheorderlyreallocationofcapitalawayfromfossilfuels.Theproliferationofsustainablefinancepracticesisastrongindicatorofthisdirectionoftravel,withagrowingnumberoffinancialinstitutionspledgingtoaligntheirfinancingwithnetzeroscenarios.Lastyearrepresentedamajorchallengetothesepractices,withtheRussianinvasionofUkrainecausingfossilfuelcompaniestosignificantlyoutperformthemarket.Thisputshort-termpressureoninvestmentstrategiesthatunderweightedorexcludedtheseentities.Despitethis,signsfromEuropeanandNorthAmericanshareholdervotingseason(March-June)showthatactorswithinthefinancialcommunityremainconcernedaboutclimaterisksandtheimplicationsofrapidtransitionsforfossilfuelassets.Climate-relatedproposals,particularlyonemissionstargets,areupcomparedtolastyear–althoughthetestwillbehowmanywinamajorityvote.Therearealsomoreproposalstocutofforphaseoutfossilfuelfinancingatbanksandinsurers,althoughlastyearallninesuchproposalsthatwenttovoteintheUnitedStatesfailedtoreceivesupportabove20%,andthecurrentenergysecurityclimateislikelytosoftensupport.Thecontinuingappetiteforsustainablefinancepracticesinsuchachallengingmarketdemonstratestheimportantfoundationlaidbyregulatorsglobally.Regulatorsarestrengtheningsustainablefinancearchitecturebyissuingcleardefinitionsofgreenorsustainableactivitiesandguidelinestoprevent“greenwashing”,whilemandatinggranularsustainabilitydisclosuresandreflectiveriskandopportunityassessments.Someofthemajortrendsanddevelopmentsare:Greentaxonomies:In2022greentaxonomieswereintroducedinSouthKorea,Indonesia,SouthAfrica,Colombia,SriLankaandGeorgia.MexicoalsoannouncedanewtaxonomyinMarch2023,withseveralothercountriesannouncingthattaxonomiesareunderdevelopment,asinAustralia.MeanwhileChina,oneofthelargestgreenfinancemarkets,publishedtheGreenBondPrinciplesinJuly2022andlatertheCommonGroundTaxonomy,whichoutlinescommonalitieswiththeEUtaxonomy.Transparencyandlabelling:Therehasbeengrowingconcernaroundtheuseof“ESG”(environmental,socialandgovernance),“sustainable”and“green”terminologyonfinancialproductsandthedatathatgointoit.Regulatorsfromatleast13jurisdictionshaveproposedorintroduceddisclosurerequirementsonESGorsustainablefundstoimprovelabelling.Regulatorshavealsolookedatindividualcompanies,withcasesbroughtagainstDWS(Germany)andGoldmanSachs(UnitedStates)overtheallegedmisleadingofinvestorsingreenorESGinvestments.RegulatorsarealsoIEA.CCBY4.0.WorldEnergyInvestment2023PAGE158FinanceincreasinglylookingatESGdataandratingsproviders;Japan,theUnitedKingdomandtheEuropeanUnionarepublishingeithercodesofconductorproposingfutureregulationforratingsproviders.Disclosures:Theproliferationofnon-financialreportingstandardsandregulationgenerallyemphasisesemissionandclimateriskdisclosures.TheInternationalSustainabilityStandardsBoardissuedtwovoluntarystandardsonclimate-relatedreporting–IFSR1and2–inJune2022,becomingeffectiveinJanuary2024.EUsustainablefinanceregulationsalsoadvancedwiththeCorporateSustainabilityReportingDirective,whichwillrequirelargeandlistedcompaniestoreporton,amongotherthings,theirenvironmentalrisks,opportunitiesandimpacts.TheSustainableFinanceDisclosuresRegulation(SFDR)alsoentereditssecondphaseinearly2023wherebysustainabilitydisclosuresandreportingonclimateandenvironmentalimpactsbecamemandatoryforfinancialmarketparticipants.AreportbyISSalsofoundthatcountriesinAsia–notablyMalaysia,Singapore,IndiaandJapan–hadbeenparticularlyactiveinintroducingsustainablefinance-relatedregulation,includingarounddisclosures,sustainablelendingandstewardshippractices.Climatestresstesting:Agrowingnumberofcentralbanksareconductingclimatestresstestsandinatleast18jurisdictionsbankseitherareorwillsoonbesubjecttorequirementstoimplementsuchtesting.AclimateriskstresstestbytheEuropeanCentralBankconductedin2022foundthataround60%ofthe104participantbanksdidnothaveaclimatestresstestingframeworkinplace,andthatabouttwo-thirdsofbanks’incomefromnon-financialcorporatecustomersstemmedfromgreenhousegas-intensiveindustries.TheNetworkforGreeningtheFinancialSystem,whichprovidescentralbanksandsupervisorswithclimatescenariosandguidanceforsuchtests,foundthattherearemultipledifferentapproachestostresstestingacrossjurisdictionsandencouragedgreaterco-ordination.Equally,theyhighlightedthatthelackofavailabilityandcomparabilitywasreducingthequalityofstresstesting.Asaresult,stresstestscurrentlyserveprimarilyaslearningexercises,withnoimmediaterequirementforfollowups,buttheyshowthatbanksstandtoexperiencenotablyhighercreditlossesunderadisorderlytransition.AchievingtheNZEScenariorequirescleanenergyspendingtorisenearlythreefoldby2030,withanestimated65%ofthisneedingtocomefromtheprivatesector.Sustainability-relatedregulationandguidanceactasatailwindfortheseinvestments.Thischapterexploresthealignmentbetweengrowthinsustainablefinanceandcleanenergyinvestment,particularlyinrelationtoEMDEs,whichaccountfor55%ofcleanenergyinvestmentby2030undertheNZEScenario.Whiletheemphasishereisonprivateinvestment,numerousotherpublicfinanceinitiativesarealsounderwaythatarelikelytosupportanincreaseincleanenergyspending.Notably,theseincludetheBridgetownInitiativeannouncedbyBarbadosPrimeMinisterMiaMottleyatCOP27,whichproposesseveralstepstoreformdevelopmentandclimatefinance.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE159FinanceSustainableinvestingIEA.CCBY4.0.WorldEnergyInvestment2023PAGE160FinanceThevalueofassetsinfundsgloballyfellduring2022,althoughsustainablefundsshowedmoreresilienceandhavereboundedinearly2023despitemajoroutflowsfromsomelargeESGfundsTrendsinsustainablefundandESGexchange-tradedfunds(ETF)flows,Q12022-Q12023IEA.CCBY4.0.Notes:ESGU=iSharesESGAwareMSCIUSAETF;ESGD=iSharesESGAwareMSCIEAFEETF;ESGV=VanguardESGUSStockETF;ICLN=iSharesGlobalCleanEnergyETF;VSGX=VanguardESGInternationalStockETF;ETF=exchange-tradedfund.Sources:IEAanalysisbasedondatafromRefinitiv(2023),Morningstar(2022,2023).0204060801001200.51.01.52.02.53.0Q12022Q22022Q32022Q42022Q12023IndexQ12022=100TrillionUSD(2022)SustainablefundsassetsrightaxisSustainablefunds(rightaxis)Allfunds(rightaxis)Sustainablefundflows01020304050-45%-30%-15%0%15%30%Q12022Q22022Q32022Q42022Q12023BillionUSD(2022)ESGUESGDESGVICLNVSGXTotalNetAssetsTop5ESGexchange-tradedfundflows(rightaxis)IEA.CCBY4.0.WorldEnergyInvestment2023PAGE161FinanceSustainablefundsweatheredachallengingyeardespitethepressureoninvestmentstrategiesthatlimitedexposuretohigh-performingfossilfuelsAfteryearsofinflows,in2022ESGfundsrecordedtheirfirstnetoutflowssince2011.Outflowswereparticularlyheavyinthefirsthalfoftheyear,asfossilfuelpricesspikedandconcernsaroundinflation,interestratesandrecessionhitthemarketasawhole.HowthesepressuresimpactedESGfundsvariedsignificantlyaccordingtotheirchosenapproach.Fundsthatfocusedonscreening–whichofteninvolvesunderweightingorexcludingfossilfuelcompaniesandoverweightinghigh-performingsectorswithlowerESGrisksliketechnology–facedparticularlytoughquestionsaroundtheirperformancecomparedtothemarket.Largeone-offoutflowsfromESGETFsinearly2023havealsohighlightedtheimpactofconcentrationriskwithincertainareasofsustainableinvesting.InMarch,nearlyUSD4billionwaswithdrawnfromiSharesESGAwareMSCIUSAETF(ESGU),thelargestESGETF,contributingtoa38%fallintheETF’sassetvalueinQ1.Thisquarteralsosawwithdrawalsfromothermajorfunds,includingiSharesGlobalCleanEnergyETF,whichsawaUSD260millionoutflowtriggeringa5%lossinassetvalue.Severalanalystshaveattributedtheseoutflowstoriskrebalancingbyinstitutionalinvestorswhoownlargeportionsofthesefunds.In2022Bloombergestimatedthatroughly22%ofnewinvestmentinESGETFswenttojust10funds,andmostoftheseinvestmentsweremadeasone-offallocations.ThisindicatesthatchoicesamongcertainlargeinvestorsorbykeyfundsorindexesthatETFstrackcanskewtrendswithinthemarket.Despitethesechallenges,sustainablefundsgenerallyprovedresilientagainstmarketconditions,basedonquarterlyreviewsbyMorningstar.Throughouttheyearandintothefirstquarterof2023,thevaluationofsustainablefundssawlessvolatilitythanallfundsglobally,andthankstoareboundinequityvaluationsinearly2023,sustainablefundshavealmostreturnedtolevelsseeninearly2022.TheimpactthesetrendshaveonalignmentwithinvestmentundertheNZEScenarioismixed.Thecorrelationbetweenapushforsustainableinvestmentpracticesandareductioninfossilfuelspendingisclear,butquestionsremainovertheextenttowhichsustainableinvestingisdrivingthenecessaryincreaseincleanenergyinvestment.Forexample,theEUSFDRgroupsfundsintothreebroadcategoriesbasedontheirlevelofsustainability.Article9fundsarethemostambitious,wherebyfundsdemonstratetheyhavea“sustainableinvestmentobjective”.InQ42022therewasaseriesofreclassifications,with40%ofArticle9fundsdowngradedtothelessambitiousArticle8,wherefundsmust“promoteenvironmentalorsocialcharacteristics”.Notably,theseincludedtheiSharesGlobalCleanEnergyETF,suggestingthatArticle9alignmentisnotaprerequisitetosupportingtheenergytransition.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE162FinanceInstitutionalcapitalisheavilyconcentratedinadvancedeconomieswithonlyasmallsharebeingallocatedtoEMDEs…PensionassetregionalspreadandallocationstoEMDEsatselectedpensionsIEA.CCBY4.0.Notes:ThesevencountriesthatmakeupthemajorityofpensionassetsareAustralia,Canada,Japan,theNetherlands,Switzerland,theUnitedKingdomandtheUnitedStates;NBIM=NorgesBankInvestmentManagement;ABP=StichtingPensioenfonds;CPP=CanadaPensionPlan;thesefourfundswereselectedbasedontheirinclusioninanOECDsurveyonpensionfundassetsindevelopingcountries.Sources:OECD,PensionMarketsinFocus;WorldBank,WorldDevelopmentIndicators;AnnualreportfromNBIM,ABP,CPPandPGGM.10203040506020132015201720192021TrillionUSD(2021)AdvancedeconomiesEMDEsPensionassetsAssetsfromsevencountriesmakeupthevastmajorityoffundsinadvanced30060090012001500NBIMABPCPPPGGMBillionUSD(2021)RegionalsplitatselectedpensionsIEA.CCBY4.0.WorldEnergyInvestment2023PAGE163Finance…andincreasingtheseallocationsiscomplicatedbythelackofaccessibleinvestableassetsCharacteristicsofindexesinselectedEMDEsandleadingbenchmarkprovidersIEA.CCBY4.0.Notes:EMDEindexeswereselectedbasedonthesizeofthelocalstockmarketsandavailabilityofdata;benchmarkindexesdonotincludeMSCI,thethirdmajorprovider,becauseconstituentcountrydatawerenotpubliclyavailable.Sources:IEAanalysisbasedondatafromRefinitiv;WorldBank,WorldDevelopmentIndicators;IndexfactsheetsfromS&PandFTSERussell.20%40%60%80%2468SSE(China)HangSeng(HongKong)Nifty500(India)TASI(SaudiArabia)Bovespa(Brazil)Constituentmarketcap(trillionUSD)FossilfuelsPowerOtherEnergyandutilitiesSelectedEMDEindexesasshare(rightaxis)3%6%9%12%481216FTSES&PFTSES&PFTSES&PGlobalEmergingmarketsFrontiermarketsConstituentmarketcap(trillionUSD)AdvancedeconomiesChinaOtherEMDEsEnergyandutilitiesLeadingbenchmarksbymarkettypeasshare(rightaxis)72trn54trn30bn570bnIEA.CCBY4.0.WorldEnergyInvestment2023PAGE164FinanceStructuralissuesandthelimitedpoolofinvestableassetsarepreventingcapitalfromflowingtokeyareasneededtomeettheNetZeroEmissionsby2050ScenarioIntheNZEScenario,cleanenergyinvestmentinEMDEstriplesby2030,bywhichtimeitaccountsforoverhalfoftheglobaltotal.Thisrepresentsasharpbreakfromcurrenttrends;cleanenergyinvestmentinEMDEshasrisenbyonlyaround30%inthepastfiveyears(mostofwhichhasbeeninChina).Theimbalancesareunsurprisingwhenyouconsiderthataround80%offinancialassetsareheldinadvancedeconomies,accordingtoestimatesbytheFinancialStabilityBoard.Lookingatpensionfunds,whichcanprovideavaluablesourceofpatientcapital,sevenadvancedeconomiesaccountedfornearly90%ofglobalpensionassetsin2021(latestdataavailable).AnOECDsurveyfoundthatonlyaround8%ofsurveyedpensionassetswereallocatedtodevelopingcountriesand85%oftheseassetscamefromjustfourfunds.1Accordingtothesefunds’latestreporting,allocationstoEMDEstotalledroughlyUSD300billionin2021,or11%oftheircombinedportfolios.Theseallocationsmayhavefallenover2022duetochangingriskperceptionsinthewakeofRussia’sinvasionofUkraineandthesubsequentenergycrisis,andtheworseningmacroeconomicenvironmentinmanyEMDEs.1ThesurveydidnotincludeUS,UKorJapanesepensions,whicharesomeofthelargestglobally.OneofthemajorconstraintsonfurtherinvestmentinEMDEsfromsuchinstitutionsisthelackofprojectsthatmeettheirsizeandliquidityrequirements.EntitiesfromEMDEs(excludingChina)accountforlessthan15%oftheglobalmarketcapitalisationoflistedcompanies.Indexestrackingthe10largestEMDEstockexchanges,excludingSaudiArabiawhoseexchangeisdominatedbyAramco,showthatenergyandutilitycompaniesonaverageaccountfor15%oftheindexesbymarketcapitalisation,andwithinthisfossilfuelcompaniesareonaveragetwoandahalftimeslargerthanpowercompanies.Combinedwiththeirdifferentrisk–returnprofiles,thisputspowercompaniesatadisadvantagewhenseekingtoattractinvestment.Thedifficultyofaccessinginvestableprojectsisalsovisiblewhenreviewingmajorequityindexes.Indexesplayakeyroleasbenchmarksandasthebasisforpassiveinvestment,whichhasriseninpopularityinrecentyears.Indexesaregenerallysplitintodeveloped,emergingandfrontiermarketcategories,andalthoughperformanceofthelattertwohasbeenrelativelysimilar,manymainstreaminvestorswilllimittheirexposuretofrontiermarkets.Therearecurrently40EMDEs2includedinemergingorfrontierindexesfromthetopthreeindexproviders,butfrontiermarket2BasedontheIEAcategorisation.Pleaseseeglossaryinmethodologyforfurtherdetails.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE165Financeindexesareonaveragelessthan5%thesizeoftheiremergingmarketpeers,basedonnetmarketcapitalisation.Frontiermarketindexesalsotendtobealotmoreconcentrated.Forexample,thetop10constituentsaccountfor37%oftheS&PFrontierBMIIndex,comparedto14%intheGlobalBMIIndex.Thisthereforelimitsthenumberofcompaniesthatinvestorscanaccesswithintheseriskiermarkets.PerformanceofkeyemergingandfrontierbenchmarksIEA.CCBY4.0.Source:IEAanalysisbasedondatafromBloomberg(2023).Whenlookingatclimate-alignedbenchmarks,theinvestableuniverseinEMDEsshrinksevenfurther.MSCI’sEmergingMarketsClimateParisAlignedIndexincludesonly427constituentscomparedwith1377intheirEmergingMarketsIndexthatitisbasedon.ThereisnoParisalignedversionofMSCI’sFrontierMarketsIndex,whichmakesitverychallengingforinvestorstoaccessthesemarketswhilealsopursuingastrategybasedonParis-alignment.Evenwithouttheindexchallenge,thereisariskthatthemovetodecarbonisefinancialportfolioswilldisadvantageEMDEssinceESGandclimate-relateddataarelesswidelyavailableinthesemarkets.Forexample,ofthenearly5000companiesthathavecommittedtosetscience-basedtargets,only16%areinEMDEs(and29%ofthoseareChina).WhereESGscoresdoexist,theIMFrecentlyfoundthatlistedEMDEfirmstendtohavelowerscoresonaveragethantheiradvancedeconomypeersandthatallocationstoEMDEsbyESGfundsarelowerthannon-ESGfunds.AlloftheselimitationsrestricttheamountofequityinvestmentfromlargeinstitutionalcapitalintocleanenergyinEMDEs.Suchcapitalcanplayakeyroleinsupportingon-balancesheetfinancing,refinancingortheacquisitionofexistingassets.Institutionalinvestorsneedtobalanceregionalandsectorriskacrosstheirportfolios,whichisalwayslikelytoactasaceilingontheirinvestmentincleanenergyinEMDEs.FurthereffortstoincreasethepooloflistedcleanassetsinEMDEswouldsupportdiversification,butthesemusthappenintandemwithotherstrategiestoreduceperceivedandactualriskinthosemarkets.Publiccapital,aswellasconcessionaltoolssuchasguaranteesorblendedfinanceapproaches,willplayakeyrolehere.Overthelongerterm,growingdomesticinstitutionalcapitalwillalsobevital.ThishastheadvantageofnotcreatingacurrencymismatchandisalsolikelytobebetteralignedgiventhesmallersizeofmanydomesticfinancesourcesinEMDEs.5075100125150Jan-20Jul-20Jan-21Jul-21Jan-22Jul-22Jan-23Monthlyreturns(January2020=100)S&PFrontierBMIS&PEmergingBMIFTSEFrontierIndexFTSEEmergingIndexIEA.CCBY4.0.WorldEnergyInvestment2023PAGE166FinanceSustainabledebtissuancesIEA.CCBY4.0.WorldEnergyInvestment2023PAGE167FinanceLabelledsustainabledebtissuancesfellin2022forthefirsttime,butwerestillsignificantlyhigherthanin2020,includingfromissuersofcorporateenergyandutilitydebtSustainabledebtissuancesbytype,2016-Q12023IEA.CCBY4.0.Source:IEAanalysisbasedondatafromBloomberg(2023).25%50%75%100%400800120016002016201720182019202020212022Q12023BillionUSD(2022)Sustainability-linkeddebtSustainabilitybondGreenloanGreenbondEnergyandutilitiesasshareofcorporateissuancesIEA.CCBY4.0.WorldEnergyInvestment2023PAGE168FinanceAdvancedeconomiescontinuetodominateissuances,andinEMDEs(excludingChina)mostissuancesarestillinforeigncurrency,primarilyUSDandEURSustainabledebtissuancesbyregionandcurrency,2020-2023IEA.CCBY4.0.Sources:IEAanalysisbasedondatafromBloombergandRefinitiv(2023).0300600900120015001800202020212022Q12023BillionUSD(2022)AdvancedeconomiesChinaOtherEMDEsByregion20%40%60%80%100%202020212022202320202021202220232020202120222023DomesticForeignBycurrencyAdvancedeconomiesChinaOtherEMDEsIEA.CCBY4.0.WorldEnergyInvestment2023PAGE169FinanceDespiteadifficultyear,earlyindicationsshowapositiveoutlookforsustainableissuancesin2023,includinginthegrowinggreen-labelledloanspaceLabelledsustainabledebtissuancesremainedsignificantlyhigherin2022thanthe2016-2020average,butsawadeclineinissuancesforthefirsttimesincetheirinception.Thisreflectedtrendsacrossthefixedincomemarket,withsustainableissuancesholdingsteadyat5%oftheglobalmarketinboth2021and2022.Greenbondsstillmakeupthelargestshareofissuancesat40%,closelyfollowedbysustainability-linkedbonds,despitequestionsaroundtheirreal-worldimpact(seeBoxbelow).Althoughcorporateissuancesintheenergyandutilitysectorsfellslightlyfrom2021levels,theywerenearlydoublethelevelseenin2020,showingthegeneralupwardtrend.Advancedeconomiesstillaccountforover80%ofissuances,althoughChinahasbeenthesecondlargestissuersince2021.IssuancesinotherEMDEsmarginallyincreasedfrom8%in2020to10%in2022.WhereEMDEissuancesdooccur,theyarestilldominatedbyhardcurrency,makingthemmoreappealingtointernationalinvestorsbutexposingthemtoforeignexchangerisk.TrendsinEurope,ChinaandtheUnitedStatesindicatethat2023islikelytoseeacontinuinghighlevelofissuances.InEurope,theEuropeanCentralBank–thelargestbuyerofcorporatebonds–hascommittedtotiltitscorporatebondpurchasestogreen,whichislikelytoresultinhigherspreadsforheavyemitters,andfurtherdemonstratethepricingbenefitsofgreenissuances.MeanwhilethereleaseofChina’sGreenBondPrinciplesinJuly2022andtheCommonGroundTaxonomythatoutlinescommonalitieswiththeEUtaxonomyislikelytospurfurthergrowthinChina’sgreenbondmarket.GreenbondissuancesintheUnitedStatesarealsolikelytobeboostedbytheInflationReductionAct,asincentivesdrivecleanenergyprojectdevelopment.Alongsidetheseregulatorytailwinds,higherinterestratesarelikelytopushmoretowardssustainabledebtissuancesduetothepossibilityofa“greenium”,i.e.apricingbenefitbasedontheissuance’sgreencredentials.Aninterestingdevelopmentisthatlabelledgreenloanshadbeenrelativelystaticsince2019,totallingbetweenUSD90-100billion,butrosebynearly20%in2022asmoresectorsoutsideenergyandutilitiesbeganadoptingthem.Greenloansplayanimportantroleinpartbecausetheyaresmallerinstrumentsthanbondsandhencehaveawidearrayofuses,includinginEMDEs.Despitetheriseingreenloans,banksarestillprovidingmoresupporttofossilfuels.AreportfromBloombergfoundthatin2021(latestavailabledata),bankslent81centsforfinancinglow-carbonenergysupplyforeveryonedollartheyprovidedtofossilfuels.Thereportfoundlargeregionalvariationsbasedonsupplyconditionsandregulations,rangingfromaratioof2.6:1inEuropeto0.1:1inAfricaandtheMiddleEast.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE170FinanceSustainability-linkedbondsSustainability-linkedbonds(SLBs)provideaflexiblewayforcompaniesorgovernmentstoaccessthegreendebtmarket,especiallythoseinsectorsthataredifficulttodecarboniseorthosethatneedtoimplementorganisation-widedecarbonisationmeasures.Thesebondsareliketraditionalbondsbuthaveauniquestructurewheretheinterestpaidtobondholderscanvarybasedontheissuer’sachievementofcertainsustainabilitytargets,suchasreducingemissionsintensityorabsoluteemissionsreductions.Unlikegreenbonds,SLBsdonotrequirestrictreportingontheuseofproceeds,makingthemavailabletoawiderrangeofcompaniesandgovernmentswhomayotherwisestruggletoidentifyenoughprojectsthatwouldmeettheuseofproceedslimitations.SLBshavebeenusedbyawidevarietyofindustriesincludingfossilfuelpoweroperators,notablyinChina,andutilitiesinEurope.ChileandUruguaypilotedtheissuanceofsovereignSLBslinkedtoGHGreductiontargets.SLBscanserveasvaluablesourceoftransitionfinance,althoughtherehavebeenoccasionalinstanceswhereconcernshavebeenraisedregardingtheperceivedjustificationofthefinancialbenefitsenjoyedbyissuers,forinstanceinthecasewherethespecifiedsustainabilitytargetsarealreadymetatthetimeofissuance.Orwhencompanieswithhigheremissionprofilesusethesebondswhilehavinglessambitiousdecarbonisationtargetsthantheirpeers.Analysishasalsoshownthat,onaverage,thesavingsfromreductionsinthecostofdebttendedtoexceedthemaximumpotentialpenaltythatissuerswouldneedtopayincaseoffailureofthesustainabilityperformancetarget.ThecredibilityofSLBswouldbenefitfromstandardisationandclearerregulation,throughinitiativessuchastheICMASustainability-LinkedBondsPrinciplesthathelpholdgovernmentsandcompaniestotheirclimatecommitments.SLBissuancebysectorandcountry,2019-2022IEA.CCBY4.0.Source:IEAanalysisbasedondatafromBNEF(2023).15304560752019202020212022TransportUtilitiesNorthAmericaEuropeIndustryFossilfuelsOtherEMDEsChinaPowergenerationRenewableenergySLBsissuancebysectorBillionUSD(2022)15304560752019202020212022SLBsissuancebygeographyIEA.CCBY4.0.WorldEnergyInvestment2023PAGE171FinanceAfteraslowstart,sovereignsissuanceshavemorethandoubledsince2020,providingausefultooltoraiselower-costcapitalandtodrivesustainablepracticeswithinlocalcapitalmarketsThefirstsovereigngreenbondswereissuedin2017byPolandandFrance,andsincethentherehavebeen41newissuers,manyofwhosebondshavebeenoversubscribed.Sovereignshavegrownfrom4%oftotalsustainabledebtissuancesin2017to7%in2022.Muchofthegrowthhasbeeninhardcurrency,andEuropeangovernmentsmakeupoverhalfofissuances.Thereissignificantpotentialforfurthergrowth,withsustainabledebtissuancesbetween2017and2021accountingforonly0.5%oftotalsovereignissuances.Thelongtenorsandpricingadvantagesofsustainabledebtmakethemausefultoolforgovernments.ThelongestgreenbondissuancecamefromSingaporeinAugust2022whenthegovernmentraisedSGD2.4billion(USD1.7billion)witha50-yeartenor.Aswithcorporateissuances,mostsovereigngreenbondshaveattractedloweryieldsthancomparablevanillabonds.Thiscanbeparticularlyvaluableinmiddle-incomecountriesthatdonothaveeasyaccesstoconcessionaldebtbutwherethedebtburdenremainshigh.Despitetheirbenefits,challengesremain.“Useofproceeds”bondshavebeenslowertotakeholdwithsovereignsbecauseofconcernsaroundfungibility.Publicfinancemanagementpractices,sometimesenshrinedinlaw,mayprecludetheuseoffundsforaspecificpurpose.Thisisdrivingtheriseofsustainabilityorsustainability-linkedbonds,whichprovidemoreflexibility.Sovereignsustainabledebtissuances,2017-Q12023IEA.CCBY4.0.Sources:IEAanalysisbasedondatafromBloombergandRefinitiv(2023).Beyondprovidingausefulsourceofpublicfinance,sovereignissuancesplayakeydevelopmentroleforlocalcapitalmarkets.Notably,38countriesthathaveissuedsovereigngreenorsustainablebondshavealsoannouncedgreenbondframeworksinlinewiththeInternationalCapitalMarketAssociationprinciples.Oftenfacinghigherlevelsofscrutiny,sovereignissuancesareabletodemonstratebestpractices,suchastheuseofexternalreviewers,mandatoryimpactassessments,andrulesontheshareofcapitalraisedthatcanbeusedforrefinancingversusnewinvestments.4%8%12%16%20%255075100125201720182019202020212022Q12023BillionUSD(2022)OtherEMDEsChinaAdvancedeconomiesSovereignsasshareofsustainabledebt(rightaxis)IEA.CCBY4.0.WorldEnergyInvestment2023PAGE172FinanceSovereigngreenbondsinEMDEshavebenefitedfromagreenium,demonstratingtheirvalueasatoolforgovernmentsthatalreadyhavehighdebtburdensYieldcurveofsovereignbondsfromselectedemerginganddevelopingcountriesIEA.CCBY4.0.Sources:IEAanalysisbasedondatafromRefinitivandBloomberg(2023).7.0%7.1%7.2%7.3%7.4%7.5%051015DurationYieldYieldcurve8%10%12%14%16%02468Yield(asof27February2023)Duration9.5%10.0%10.5%11.0%11.5%12.0%12.5%0246DurationNigeriaColombiaIndiaGreenIEA.CCBY4.0.WorldEnergyInvestment2023PAGE173FinanceSovereignbondscanhaveknock-oneffectsforgreencorporatebondsanddomesticcurrencyfinancingfrombothlocalandinternationalsourcesEMDEgovernmentshaveusedgreenbondstoraiselocalcurrencyfinancingforinfrastructureprojects,andevenwithoutaninvestment-graderating,theyhavebenefitedfromthegreenium.Greenbondsarelikelytobemostapplicabletocountriesthathavereasonabledebtsustainabilityandhaveagrowingdomesticcapitalmarket.Nigeria:TheNigeriangovernmentlaunchedtheGreenBondMarketDevelopmentProgrammein2017.Sofar,undertheprogrammetherehavebeentwosovereignissuanceswithacombinedvalueofNGN25.7billion(USD~70million)andfourcorporateissuancestotallingNGN32.7billion(USD~72million).The2017sovereigngreenbondwasthefirstofitskindinAfricaandwasfollowedbyasecondin2019.Bothbondsachievedagreeniumandwereusedtosupportprojectsinrenewableenergy,primarilyrooftopsolarandruralelectrification,andafforestation.However,questionshavebeenraisedabouttheimplementationofprojectsandreportinghasnotbeenmadeavailableontheenvironmentalimpactofthebondproceeds.Ensuringbestpracticesonreportingislikelytoincreaseconfidenceinthemarket,particularlyamonginternationalinvestors.Colombia:InSeptember2021theColombiangovernmentreleasedanationalgreentaxonomy,followedbyaCOP750billion(USD200million)greenbond.OriginallyplannedatCOP500billion,thebondwasupsizedafterbeing4.6timesoversubscribedbyinvestors.Atthetimeofissuance,itwasestimatedthatthebondsecuredagreeniumof7basispoints(bps).Asecondsovereigngreenbondwasissuedamonthlater,withthegovernmentestimatinga15bpsgreenium.Roughly40%ofthebondinvestorsweredomestic,demonstratingtheircomfortwiththistypeofinstrumentandhavingknock-onpositiveeffectsforcorporategreenissuances.Proceedsfromthebondswillsupportthedevelopmentofsustainabletransportsystemsandrenewables,amongotherenvironmentalgoals.India:Inlate2022theIndiangovernmentlaunchedthecountry’sfirstgreenbond–anINR80billion(USD1billion)dealdividedequallyintoa5-yearanda10-yeartranche.Thedealwas4timesoversubscribed,andamonthaftertheinitialoffering,bothtrancheswerereopenedforafurtherINR40billion(USD500million).Theproceedswillbespentonavarietyofrenewablepowerprojects,low-emissionshydrogen,publictransportandafforestation.Boththeinitialofferingsandthereopeningattractedagreeniumof5-6bps,althoughthesehavereducedovertimeduetoilliquidityinthemarket.Alongsidepricing,oneoftheprimarybenefitsoftheseinstrumentsistappingintonewfinancingsources.ManyofthecorporategreenbondissuancesinIndiahavepreviouslybeeninUSdollars,anditislikelythatthegovernmentishopingthesovereignissuanceswillhelpdevelopalocalmarket.Themajorityofinvestorsweredomestic,withforeigninvestorsseeminglydeterredbythecurrencyrisk.IEA.CCBY4.0.WorldEnergyInvestment2023PAGE174AnnexAnnexIEA.CCBY4.0.WorldEnergyInvestment2023PAGE175AnnexAcknowledgementsThisreportwaspreparedbytheEnergyInvestmentUnitintheEnergySupplyandInvestmentOutlook(ESIO)DivisionoftheDirectorateofSustainability,TechnologyandOutlooks(STO).ItwasdesignedanddirectedbyTimGould,ChiefEnergyEconomist,andJonathanCoppel,HeadoftheEnergyInvestmentUnit.TanguydeBienassiscoordinatedthereportandledthesectiononenduseandefficiency.LucilaArboleya,DavidFischerandAlanaRawlinsBilbaoledtheanalysisofthepowersector.ChristopheMcGlade,PaulGrimalandPeterZeniewskiwerethemainauthorsofthesectiononfuelsupply;SimonBennettledtheR&Dandtechnologyinnovationsection;EmmaGordonledthesectiononenergyfinance;RyszardPospiechco-ordinatedmodellinganddataacrosssectors.MusaErdogancontributedtotheoverviewanddatavisualisation.EleniTsoukalaprovidedessentialadministrativesupport.ThereportbenefitedgreatlyfromcontributionsfromotherexpertswithintheIEA:CarlosAlvarez(coal),HeymiBahar(renewables),JoseMiguelBermudezMenendez(hydrogen),PiotrBojek(renewables),StéphanieBouckaert(demandmodelling),EricBuisson(criticalminerals),ClaraCamarasa(buildings),ElizabethConnelly(transport),Franced'Agrain(cross-cuttingsupport),ChiaraDelmastro(buildings),MichaelDrtil(power),StavroulaEvangelopoulou(hydrogen),MathildeFajardy(CCUS),AlexandreGouy(batteries),IanHamilton(buildings),JérômeHilaire(oilandgas),PaulHugues(industry),MarcoIarocci(industry),Tae-YoonKim(refining&criticalminerals),SilviaLaera(buildings),Jean-BaptisteLeMarois(R&Dandtechnologyinnovation),SuzyLeprince(R&Dandtechnologyinnovation),YannickMonschauer(heatpumps),AloysNghiem(R&Dandtechnologyinnovation),SungjinOh(buildings),FrancescoPavan(hydrogen),ApostolosPetropoulos(transport),AmaliaPizarro(R&Dandtechnologyinnovation),CorneliaSchenk(buildings),SiddharthSingh(cross-cuttingsupport),JacobTeter(transport),BrentWanner(power).Internalreviewers:AlessandroBlasi,TorilBosoni,LauraCozzi,DanDorner,RebeccaGaghen,KevinLane,GergelyMolnar,BrianMotherway,UweRemme,ThomasSpencerandDanielWetzel.ThanksalsotoJadMouawad,CurtisBrainard,PoeliBojorquez,AstridDumond,JethroMullen,IsabelleNonain-SemelinandThereseWalshoftheCommunicationsandDigitalOffice.JustinFrench-BrookseditedthemanuscriptandCharnerRamseydesignedthecover.Thisreportcouldnothavebeenachievedwithoutthesupportandco-operationprovidedbydonorstotheIEACleanEnergyTransitionsProgramme(CETP)thatendorsedthe2022JointCommitment,notably:Australia,Belgium,Canada,Denmark,France,Germany,IEA.CCBY4.0.WorldEnergyInvestment2023PAGE176AnnexIreland,Italy,Japan,theNetherlands,Spain,Sweden,Switzerland,UnitedKingdom,UnitedStatesandtheEuropeanCommission,onbehalfoftheEuropeanUnion.ThefinancialassistanceoftheEuropeanUnionwasprovidedaspartofitsfundingoftheCleanEnergyTransitionsinEmergingEconomies(CETEE)programwithintheCETP.ManyexpertsfromoutsideoftheIEAprovidedinput,commentedontheunderlyinganalyticalwork,andreviewedthereport.Theircommentsandsuggestionswereofgreatvalue.Theyinclude:MarinaAlbuquerqueBTGPactualAntoniBallabrigaBBVAHarmeetBawaHitachiEnergyNathanBockChevronRinaBohleZellerVestas,DenmarkBarbaraBuchnerClimatePolicyInitiativeMickBuffierGlencoreAnne-SophieCastelnauINGRyanCastillouxAdamasIntelligenceKanikaChawlaSE4AllMichaelChenOxfordInstituteforEnergyStudiesDeirdreCooperNinety-OneCharlieDonovanImpaxAssetManagementMasayukiFujikiMUFG,JapanCharlotteGardesInternationalMonetaryFundPabloGonzalezGasconIberdrolaFrancescaGostinelliENELAdilHanifaEBRDLucyHeintzActisJimHendersonOxfordInstituteforEnergyStudies,UnitedKingdomAndrewHerscowitzU.S.InternationalDevelopmentFinanceCorporationRonanHodgeGFANZSeanKidneyClimateBondsInitiativeFranciscoLaveronIberdrolaEvanLiHSBCAkosLoszColumbiaUniversityElchinMammadovMSCIAntonioMerinoGarciaRepsolIreneMonasteroloEDHECBusinessSchoolPeterMorrisMineralsCouncil,AustraliaIEA.CCBY4.0.WorldEnergyInvestment2023PAGE177AnnexArjunN.MurtiBaysaNaranWarburgPincusLLCClimatePolicyInitiativeTiagoOliveiraEBRDFilippoRicchettiEniSimoneRuiz-VergoteMSCIJohnScottZurichInsuranceGroupGireeshShrimaliOxfordUniversityBjarneSteffenETHZurichJonathanSteinHessCorporationAkhileshTilotiaNationalInvestmentandInfrastructureFundSwamiVenkataramanMoody'sInvestorsServiceNamitaVikasGerhardWagnerauctusESGSwisscantoRachelWilliamsOxfordUniversityBetsyWinnikeBostonCounsultingGroupKelvinWongDBSBankRyoYamasakiMizuhoFinancialGroupIEA.CCBY4.0.WorldEnergyInvestment2023PAGE178AnnexAbbreviationsandacronymsADNOCAbuDhabiNationalOilCompanyAPSAnnouncedPledgesScenarioBEVBattery-ElectricVehiclesCAGRCompoundAnnualGrowthRateCCGTCombined-CycleGasTurbineCCUSCarbonCapture,UtilisationandStorageCO2CarbonDioxideCVCCorporateVentureCapitalDACDirectAirCaptureEMDEEmergingMarketsandDevelopingEconomiesESGEnvironmental,Social,andGovernanceETFExchange-TradedFundETSEmissionsTradingSchemeEUREuroEVElectricVehicleFIDFinalInvestmentDecisionFSRUFloatingStorageRegasificationUnitGBPBritishPoundSterlingGHGGreenhouseGasICEInternationalCombustionEngineICTInformationandCommunicationsTechnologyIPCEIImportantProjectsofCommonEuropeanInterestITInformationTechnologyLCELithiumCarbonateEquivalentLCOELevelizedCostofElectricityLNGLiquifiedNaturalGasMENAMiddleEastandNorthAfricaNOCNationalOilCompaniesNZENetZeroBy2050ScenarioOCGTOpen-CycleGasTurbineOECDOrganisationForEconomicCo-OperationandDevelopmentOPECOrganizationofThePetroleumExportingCountriesPACEProperty-AssessedCleanEnergyPHEVPlug-InHybridElectricVehiclePVPhotovoltaicR&DResearchandDevelopmentRD&DResearch,DevelopmentandDemonstrationSESSolidEnergySystemsSOEState-OwnedEntitySTEPSStatedPoliciesScenarioUSDUnitedStatesDollarVCVentureCapitalWEIWorldEnergyInvestmentUnitsofmeasuregGramGWGigawattGWhGigawattHourkgKilogrammb/dMillionBarrelsofOilperDayMBtuMillionBritishThermalUnitsMtMillionTonnesIEA.CCBY4.0.WorldEnergyInvestment2023PAGE179MWMegawattMWhMegawattHourTWhTerawattHourIEA.CCBY4.0.AnnexInternationalEnergyAgency(IEA)ThisworkreflectstheviewsoftheIEASecretariatbutdoesnotnecessarilyreflectthoseoftheIEA’sindividualmembercountriesorofanyparticularfunderorcollaborator.Theworkdoesnotconstituteprofessionaladviceonanyspecificissueorsituation.TheIEAmakesnorepresentationorwarranty,expressorimplied,inrespectofthework’scontents(includingitscompletenessoraccuracy)andshallnotberesponsibleforanyuseof,orrelianceon,thework.SubjecttotheIEA’sNoticeforCC-licencedContent,thisworkislicencedunderaCreativeCommonsAttribution4.0InternationalLicence.Thisdocumentandanymapincludedhereinarewithoutprejudicetothestatusoforsovereigntyoveranyterritory,tothedelimitationofinternationalfrontiersandboundariesandtothenameofanyterritory,cityorarea.Unlessotherwiseindicated,allmaterialpresentedinfiguresandtablesisderivedfromIEAdataandanalysis.IEAPublicationsInternationalEnergyAgencyWebsite:www.iea.orgContactinformation:www.iea.org/about/contactTypesetinFrancebytheIEA–May2023Coverdesign:IEAPhotocredits:©ShutterstockRevisedversion,May2023Informationnoticefoundat:www.iea.org/corrections

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