In a landmark development for the global energy sector, BloombergNEF (BNEF) has reported that investments in clean energy technologies reached an unprecedented $2.1 trillion in 2024. This figure represents an 11% increase from 2023 and more than doubles the investments made in 2020, highlighting the rapid acceleration toward sustainable energy solutions worldwide.

This surge in clean energy investment is reflective of growing commitments from governments, corporations, and financial institutions to transition away from fossil fuels and embrace low-carbon technologies. With climate change concerns intensifying and international policy frameworks tightening, the financial backing for renewables, electrified transport, and energy infrastructure has reached record highs.

Breaking Down the Investments by Sector

The historic level of funding was distributed across various clean energy sectors, with electrified transport, renewable energy, and power grids emerging as the top recipients. These investments indicate the growing momentum in critical areas that drive the global transition toward sustainable energy.

Electrified Transport: The Largest Sector at $757 Billion

Electrified transport attracted the largest share of clean energy investments in 2024, reaching $757 billion. This growth was driven by several key factors, including record-breaking sales of electric vehicles (EVs), expansion in EV charging infrastructure, and continued advancements in battery technology.

Major automotive manufacturers such as Tesla, BYD, Volkswagen, and General Motors have committed to increasing EV production, with several countries introducing policies to phase out internal combustion engine (ICE) vehicles. The European Union, for example, has mandated that all new cars sold by 2035 must be zero-emission, while the United States is offering federal incentives for EV purchases under the Inflation Reduction Act.

Furthermore, public transportation systems are undergoing electrification at an unprecedented rate. Cities worldwide are investing in electric buses, rail networks, and ride-sharing programs powered by clean energy. These efforts are essential for reducing transportation-related carbon emissions, which account for nearly a quarter of global greenhouse gas emissions.

Renewable Energy: $728 Billion in Investments

Renewable energy was the second-largest recipient of funding in 2024, with $728 billion invested across solar, wind, hydro, and emerging clean technologies. Solar power saw continued cost reductions, making it one of the cheapest sources of electricity generation. The falling price of solar panels, along with government incentives and corporate sustainability commitments, contributed to its record-breaking investment levels.

Wind energy also received significant backing, particularly in offshore wind projects. Countries such as the United Kingdom, China, and the United States have increased offshore wind capacity, driven by technological improvements and declining costs of wind turbines. In addition, large-scale hybrid projects that combine wind, solar, and energy storage are becoming more common, improving the reliability of renewable energy supply.

Despite the growth in renewables, challenges remain. Grid congestion, permitting delays, and supply chain disruptions have slowed some projects, underscoring the need for continued infrastructure development to support the clean energy transition.

Power Grids and Energy Storage: Essential for a Clean Energy Future

Investment in power grids reached $390 billion in 2024, reflecting the urgent need to modernize aging infrastructure and integrate a higher share of renewable energy. Many existing grids were designed for centralized fossil fuel-based generation and require significant upgrades to accommodate decentralized renewable sources such as solar and wind.

Advanced grid technologies, including smart grids and digital monitoring systems, are playing a crucial role in improving grid efficiency and reliability. Countries are also investing in high-voltage direct current (HVDC) transmission lines to enable long-distance electricity transport from renewable energy-rich areas to high-demand urban centers.

Energy storage investments reached a record $54 billion, driven by the expansion of battery storage facilities and the growing deployment of pumped hydro storage. Large-scale battery storage systems are essential for balancing the variability of solar and wind power, ensuring a stable energy supply even when weather conditions fluctuate.

Geographical Insights: China and the United States Lead the Way

China’s Dominance in Clean Energy Investment

Mainland China has reaffirmed its position as the global leader in clean energy investment, accounting for two-thirds of the global increase in 2024. The country has rapidly expanded its renewable energy capacity, particularly in solar and battery manufacturing. With strong government policies supporting clean energy development, China continues to set the pace for the energy transition.

Additionally, China has made significant investments in electric vehicle production and infrastructure, outpacing the rest of the world in EV adoption. Chinese automakers such as BYD and NIO are expanding globally, challenging Western competitors and pushing innovation in battery technology.

United States: The Leader in Energy Transition Debt Issuance

The United States led in energy transition debt issuance, with $206 billion in investments, representing a 5% year-over-year increase. This growth has been driven by federal incentives, state-level clean energy mandates, and private sector commitments.

The Inflation Reduction Act (IRA), signed into law in 2022, has played a pivotal role in driving clean energy investment in the U.S. by offering tax credits for renewable energy projects, energy-efficient manufacturing, and electric vehicle production. Corporate America has also ramped up sustainability efforts, with tech giants such as Apple, Google, and Amazon committing to 100% renewable energy in their operations.

Challenges and Areas for Improvement

Despite record investments, the BNEF report highlights that the world remains far from meeting its net-zero emissions targets. Current investment levels represent just 37% of what is required for the remainder of this decade to stay on track for net-zero by 2050.

Several key areas require additional investment and policy support:

1. Industrial Decarbonization: Heavy industries such as steel, cement, and chemicals are among the hardest to decarbonize due to their reliance on fossil fuels. More funding is needed for carbon capture and alternative low-emission processes.
2. Hydrogen Development: Green hydrogen has been touted as a clean energy solution for industrial and transportation sectors, yet investment remains relatively low. Increased government incentives and infrastructure development are required to scale up production.
3. Carbon Capture and Storage (CCS): While CCS technology has seen some progress, adoption remains slow due to high costs and a lack of financial incentives. Increased investment in research and deployment is necessary to make CCS a viable part of the energy transition.

Debt Issuance and Venture Capital Trends

Energy transition debt issuances hit $1 trillion in 2024, with utilities being the largest fundraisers, followed by governments and financial institutions. This debt is crucial for financing large-scale renewable energy projects, infrastructure upgrades, and grid modernization.

However, venture capital investment in climate and energy saw a sharp decline in 2024, falling by 40%. In recent years, climate tech startups had shown resilience amid broader market struggles, but rising interest rates and economic uncertainties led to reduced investor appetite. Initial public offerings (IPOs) also saw a significant drop, with capital raised declining 85% compared to 2021 levels.

Future Outlook: What’s Next for the Clean Energy Transition?

While 2024 marked a record-breaking year for clean energy investment, the road to net zero remains challenging. Governments, investors, and corporations must work together to accelerate the transition by addressing financial, technological, and policy barriers.

Looking ahead, several trends are expected to shape the clean energy landscape:

• Growth in Energy Storage: As battery costs continue to decline, energy storage will play a more significant role in balancing renewable power supply and demand.
• Emergence of New Clean Technologies: Innovations in nuclear fusion, carbon removal, and biofuels could offer new pathways to decarbonization.
• Global Collaboration on Climate Finance: Developing countries will require more financial assistance to transition away from fossil fuels, necessitating stronger international partnerships.

The record $2.1 trillion investment in 2024 marks an important milestone, but sustained growth and targeted action are needed to ensure a successful energy transition. The coming years will be crucial in determining whether the world can meet its climate goals and build a sustainable energy future.

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photo source: Google

By: Montel Kamau

Serrari Financial Analyst

31^st January, 2025