Booming Investment In Renewables Is Set To Continue In 2023 And Beyond

Climate tech has come to the fore like never before with its potential to be a safe haven investment in a macroeconomic environment of uncertainty.

Within the next five years, PitchBook forecasts the climate tech sector will become a $1.4 trillion market – this represents a compound annual growth rate for climate tech of 8.8%. – enough to make any self-respecting investor raise eyebrows.

Renewables have clearly come out as the winners of 2022 and the coming years. Russia’s invasion of Ukraine sparked an energy pricing crisis that highlighted the urgency of transitioning to clean energy – not just for the sake of the environment – but for economic and political stability. Interest in wind, solar power and large battery technology surged to never before seen heights.

The total energy bill paid by consumers globally is expected to surpass $10 trillion – a record-setting price, according to a report from the International Energy Agency (IEA).

Clean energy investment significantly accelerated and is expected to surpass $1.4 trillion in 2022, says the World Economic Forum. Three-quarters of overall growth in energy investment is down to clean energy, which has been growing at an average annual rate of 12% since 2020.

The EU installed 47% more solar in 2022 compared to 2021 – enough to power 12.4 million homes and Euronews reported that the bloc’s capacity to generate solar increased by 25% overall in 2022.

Meanwhile, in the U.S., demand for residential solar energy is growing at record-breaking speed as households move to towards home-grown solar power as retail electricity prices increase.

Governments across Europe are finally doing their part to assist in the energy transition in a meaningful way, with the EU accelerating the speed at which permits are given to renewable energy projects. In addition, the European Commission has proposed countries set aside areas of land or sea for renewable energy where the environmental impact of the project would be low.

Germany approved plans for each state to allocate a minimum amount of land on onshore wind farms and EU energy ministers backed laws with targets to get 40% of energy from renewable sources by 2030.

In the U.S., the Inflation Reduction Act (IRA) gave renewables a further boon, with the extension of tax credits through to 2032 that give developers long-term support for implementing new, large scale renewable projects. Deloitte’s Renewable Energy Outlook for 2023 report, forecasts that this will lead to up to 550 gigawatts of additional clean energy by the end of the 2020s.

Private investment in renewables in the U.S. reached a record high of $10 billion in 2022, investment levels that Deloitte forecasts are expected to continue into 2023 as investors are attracted by transparent and predictable returns on mature technologies that are backed by the IRA’s 10-year tax credits.

The booming renewables sector could meet supply chain constraints in 2023, which could extend project timelines and hamper growth until supply chain capacity grows to meet demand at which point, renewables would be set for faster growth throughout 2024 and beyond.

It’s fair to say the energy transition is in full swing. And it’s a transition that will permanently change geopolitical dynamics, with the potential to empower each nation with self-reliance and a stronger, safer economy that’s no longer fuelled by fossil fuel.

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