Energy Transition Investment Tops $1 Trillion in 2022
Total Investment in Low Carbon by Category, 2022 ($Billions)
Source: BloombergNEF
Key Points: Global spend on energy transition hardware was US$1.1 Trillion in 2022, up 31% from 2021, per BloombergNEF. Another $350 Billion went towards power grids and manufacturing capacity. China continues to dominate, reflecting its ambition but also highlighting geopolitical/supply chain risk. Net Zero investment modeling suggests far more spend is needed.
BloombergNEF cites US$1.6 Trillion put or raised toward the energy transition in 2022. In its latest annual study of energy transition investment, BloombergNEF tallied $1.1 Trillion (T) of spending globally on specific hardware related to the supply and demand for low carbon power (with a sliver of spending on carbon capture); $274 Billion (B) on power grids to support growth in electrification; and $79B in Supply Chain & Manufacturing (=investments in factories/capacity to build low carbon equipment). See Exhibit.
It also counted $119B of equity capital raise (public and private) for companies in the energy transition space. This category is a bit of an orphan. It does not jive with the other figures, which are of spending, and it doesn’t reflect equity raised by, say, legacy firms that also engage in non-climate tech activity but that have raised money to invest in low carbon energy. It can, however, offer some perspective on spending capacity and prospects for new technology development and trends over multiple years may be telling.
Just under 90% of the $1.1 Trillion in energy deployment spend on renewables or electrified transportation. Renewable energy comprised $495B (45%) of the $1.1T spent; electrified transport (which includes EVs and charging infrastructure) spend was $466B (42%). See Exhibit.
China accounts for ½ of the $1.1 Trillion; India is the only other non-OECD country in the top 10. BloombergNEF tallies $546B in energy transition spending by China in 2022, or 49% of its global total (excludes the grid and the supply chain spending categories described above). The U.S. ranked second with $141B and Germany third with $55B. Of the rest of the top 10, only India (8th place with $17B) was not in the OECD.
Supply Chain & Manufacturing spend dominated by China; skewed to batteries. Global Supply Chain & Manufacturing spend rose 44% in 2022 to $79B. By target, $45B (58%) of the total was directed at batteries followed by $24B (30%) at solar. China accounted for over 90% of the spend, up from ~70% in 2021; the mix was impacted by year-over-year decline in Europe after strong spending on battery manufacturing in 2021 partially offset by growth in the U.S.
Net Zero Studies have estimated that far more needs to be spent per annum. BloombergNEF notes in this current study that the approximately $1.4T spent in 2022 (hardware plus grid) pales in comparison to the average $6.4T in annual spend that it has calculated separately will be required for the world to achieve Net Zero emissions by 2050. Its estimate is in the ballpark with McKinsey’s estimate, made ~one year ago, of $5.5T of required annual spend on mobility and power to achieve the same. Such estimates suggest dramatically higher spending will be required for much of the world outside of China.
1/30/2023