The International Energy Agency (IEA) has released the 10th edition of its Global Energy Investment Report 2025, providing crucial insights into global energy investment trends. The report indicates a notable shift towards clean energy technologies, though significant challenges remain, particularly in developing economies.
Key Global Investment Trends
- Overall Investment Growth: Global energy investment is projected to reach an unprecedented $3.3 trillion in 2025, marking a 2% real-terms increase from 2024.
- Dominance of Clean Energy: Clean energy investments are forecasted to hit $2.2 trillion in 2025, which is double the combined investment in oil, natural gas, and coal. A substantial 70% of this increased spending on clean energy originated from net fossil fuel importing nations, driven by energy security concerns and climate goals.
- Solar Leads the Way: Investment in solar power, encompassing both utility-scale and rooftop installations, is anticipated to reach $450 billion in 2025, making it the largest single investment area in the energy sector.
- Regional Disparities:
- China has more than doubled its clean energy investments to over $625 billion since 2015, establishing itself as the largest energy investor globally.
- Africa, despite housing 20% of the world’s population, accounts for a mere 2% of global clean energy investment, indicating a significant financing gap.
- Insufficient Progress Towards COP28 Goals: Despite increasing clean energy investments, current capital flows are not sufficient to achieve the ambitious targets set at COP28 in 2023, where countries committed to tripling renewable energy capacity and doubling the rate of energy efficiency improvements by 2030.
- Grid Infrastructure Lag: While approximately $1 trillion is invested annually in electricity generation assets globally, only about $400 billion is allocated to grid infrastructure, which is crucial for integrating growing renewable energy sources and ensuring electricity security.
India-Specific Findings
The report highlights India’s evolving energy investment landscape:
- Growing Renewable Investment: India’s investments in renewable power have significantly increased from $13 billion in 2015 to an estimated $37 billion in 2025.
- Continued Fossil Fuel Investment: Concurrently, India’s fossil fuel investments also saw a rise, from $41 billion in 2015 to $49 billion in 2025. This indicates a dual thrust as India balances its growing energy demand with decarbonization efforts.
- Diversification Efforts: India is actively promoting investments in renewables and nuclear energy to diversify its energy mix and meet its rapidly increasing electricity demand.
- High Cost of Capital: A significant roadblock for India is the cost of capital for grid-scale renewable energy, which is 80% higher than in advanced economies, making financing clean energy projects more expensive. This affects project viability and ultimately, energy prices.
- Declining Grid and Storage Investment: Worryingly, India’s investment in grids and storage has declined, falling from $31 billion in 2015 to an expected $25 billion in 2025.