Investments in the energy transition reached US$1.1 trillion last year with a T

Here comes the hockey stick.

Investments in the energy transition seem to be gaining momentum after years of hesitation. Companies, financial institutions, governments and consumers around the world have invested $1.11 trillion in low-carbon technologies, according to a new report from BloombergNEF. That was just over 30% more than in 2021 and the second year in a row that the growth rate has surpassed that number.

Perhaps most notably, money invested in energy transition coincided with money spent on investments in fossil fuels for the first time. If you include the $274 billion spent upgrading the power grid, investment in the energy transition has skyrocketed, well beyond fossil fuels, to $1.38 trillion.

Over the past two decades, most low-carbon investments have gone to renewable energy, including wind, solar and biofuels. They hit another record last year with investments of $495 billion, up 17% from 2021. However, in recent years, money has also flowed into more diversified sectors, including energy storage, space heating, renewable materials and electrified transportation.

Last year was no exception. Investments in electrified transportation (think electric vehicles and charging networks) grew 54% to $466 billion by 2022. Hydrogen, often touted in connection with battery electric vehicles, contributed $1.1 billion to the total value of $1 trillion . While this number may seem small, it is three times what the sector received in 2021. In general, investments are balanced between demand (energy production and storage) and demand (energy consumers such as transport, heat and renewable materials).

Most of the money came from China. The country accounted for about half of the total, US$546 billion. In second place was the United States with US$141 billion and Germany in third place with US$55 billion. If you add up the entire EU, the bloc comes second with $180 billion.

In particular, China dominates in areas such as manufacturing capacity and supply chain development. Last year he spent a lot of money on electrified transport and renewable energy sources such as solar and wind. Given this combination, we could see Chinese solar panels flooding the market again, albeit this time accompanied by cheap batteries. What is needed is cheap solar energy combined with cheap batteries to take significant amounts of fossil fuel off the grid.

If there was a pain point, it was global equity and private investment in climate technology. Those numbers fell 29% to $119 billion. This should come as no surprise; 2021 has been a crazy year for venture capital and private equity.