Investment in clean technologies – renewables, nuclear, grids, storage, low-emission fuels, efficiency and electrification – is on course to hit $2.2tn this year, according to the IEA’s latest World Energy Investment report. This reflects not only efforts to reduce emissions but also the growing influence of industrial policy, energy security concerns and the cost competitiveness of electricity-based solutions, it says. Investment in oil, natural gas and coal is set to reach $1.1tn.

China continues to dominate the global investment picture, now accounting for nearly one-third of all clean energy spending – twice as much as the EU and nearly matching the combined investments of the EU and US. Chinese capital is flowing across a broad spectrum: from solar and wind to hydropower, nuclear and EVs. At the same time, global spending on upstream oil and gas is gravitating towards the Middle East.

Globally, spending on low-emissions power generation has almost doubled over the past five years, led by solar PV. Investment in solar, both utility-scale and rooftop, is expected to reach $450bn in 2025, making it the single largest item in the global energy investment inventory. Battery storage investments are also climbing rapidly, and are expected to exceed $65bn this year.

Meanwhile, capital flows to nuclear power have grown by 50% over the past five years and are on course to reach around $75bn in 2025, forecasts the report.  

The IEA report identifies the rise of the ‘Age of Electricity’ as a defining theme, with electrification outpacing fossil fuel investments by a widening margin. A decade ago, investments in fossil fuels were 30% higher than those in electricity generation, grids and storage. This year, electricity investments are set to be some 50% higher than the total amount being spent bringing oil, natural gas and coal to market, it notes.

This shift is being driven by rising demand from industries, cooling systems, EVs, data centres and AI – creating both opportunities and bottlenecks. Notably, while generation and storage spending have accelerated, investment in electricity grids, currently at $400bn annually, is lagging dangerously behind. According to the IEA, grid investment must reach parity with generation spending by the early 2030s to ensure security of supply. Delays due to permitting and supply chain constraints for key components like transformers and cables are already raising red flags.

Despite the clean energy surge, fossil fuel investments remain substantial. However, the sector is undergoing a recalibration, suggests the report. Upstream oil investment is expected to decline for the first time since the pandemic, led by a sharp downturn in US tight oil spending. In contrast, LNG is experiencing robust growth, with new facilities in the US, Qatar, and Canada set to significantly expand global export capacity between 2026 and 2028. Projects under construction in the US (130bn m³ of annual export capacity) promise to nearly double its export capacity, bringing not only additional volumes but also destination-flexibility to international gas markets.  

Coal also remains a contentious part of the investment landscape. China and India continue to add capacity, with China initiating construction of nearly 100 GW of new coal-fired plants in 2024 – pushing global approvals to their highest since 2015.

The report also highlights the persistent disparity in energy investment across regions. Africa, home to 20% of the global population, receives just 2% of global clean energy investment. Total energy capital flow into the continent has fallen by a third over the past decade, largely due to a drop in fossil fuel financing and insufficient growth in renewables.

The IEA also argues that achieving global climate goals requires mobilising significant public finance to de-risk projects and attract private capital in emerging markets. It cites the ‘Baku to Belem Roadmap’ – a COP29 initiative aiming to raise $1.3tn for clean energy in developing economies by 2035 – as a critical step, but warns that reducing the cost of capital must be a central focus. ‘International public finance needs to be better targeted at managing project risks through guarantees and credit enhancement tools,’ the report states.

The IEA warns that investment flows are not yet on track to deliver on the renewable energy and efficiency goals agreed at COP28. The annual investment required in renewable power still needs to double to achieve a tripling of installed renewable capacity by 2030.  

Call for smarter tech and more inclusive funding

Meanwhile, a new report from KPMG, based on a survey of 1,400 senior energy transition investors across 36 countries and 11 industries, reinforces many of the IEA’s findings while adding insight into investor sentiment. It says that clean energy investment hit $2tn in 2024, up from $1.2tn in 2020. It adds that 72% of respondents reported increased allocations to the energy transition, despite high interest rates and geopolitical volatility. This confidence isn’t limited to one sector: 64% invested in energy efficiency technologies (including electrification), followed by renewables (56%), storage and grids (54%), and transport infrastructure (51%).

Yet the path ahead will not be smooth. Regulatory and policy uncertainty was cited as the top barrier to investment, followed closely by market volatility and the performance risk of new technologies. Investors are also becoming more pragmatic, favouring partnerships that spread risk and enable knowledge-sharing – 94% of those surveyed now prioritise collaborative models.

While East Asia, North America and Europe continue to dominate, there is rising interest in other regions. Around 20% of respondents highlighted the Middle East and North Africa (MENA) and Southeast Asia as prospective destinations for future investment. However, the challenges of developing markets – such as political instability, regulatory opacity and insufficient infrastructure – continue to stifle long-term commitments.

KPMG’s findings also underline a potential misalignment between investor priorities and decarbonisation opportunities. Most capital continues to flow into large-scale infrastructure projects – solar farms, wind parks, and grid expansions. But relatively inexpensive and high-impact digital solutions, such as predictive maintenance, digital twins, and advanced building management systems, remain underutilised.