It says the total energy bill paid by the world’s consumers is likely to top $10 trillion for the first time in 2022, hitting the poorest parts of society the hardest. It will put pressure on governments to cushion the blow via fiscal measures and price interventions. Investment is increasing in all parts of the energy sector, but the main boost in recent years has come from the power sector – mainly in renewables and grids – and from increased spending on end-use efficiency. But, cost pressures are most visible in fuel supply. They are affecting clean energy technologies as well -- after years of declines, the costs of solar panels and wind turbines are up by between 10% and 20% since 2020. Concerns about cost inflation are a brake on the willingness of companies to increase spending, despite the strong price signals.

Clean energy investment is starting to pick up and is expected to exceed $1.4 trillion in 2022. It will account for almost three-quarters of the growth in energy investment. The annual average growth rate in clean energy investment in the five years after the signature of the Paris Agreement in 2015 was over 2%. Since 2020, the rate has risen to 12%. The highest clean energy investment levels in 2021 were in China ($380 billion), followed by the European Union ($260 billion) and the United States ($215 billion). The IEA Sustainable Recovery Tracker estimated in early 2022 that governments worldwide earmarked $710 billion for long-term clean energy and sustainable recovery measures.

Renewables, grids and storage now account for more than 80% of total power sector investment. Solar PV makes up almost half of the new investment in renewable power, with spending divided between utility-scale projects and distributed solar PV systems. The focus on wind power is shifting offshore, with more than 20 GW commissioned and around $40 billion of expenditure.

Investment in improved efficiency is another major growth area, driven by higher fuel prices and government incentives. There was a 16% increase in buildings efficiency investment in 2021. The spike in fuel prices is prompting increasing interest in technologies like electric heat pumps (sales of which grew by 15% in 2021). However, efficiency investment faces headwinds, with higher borrowing costs, household incomes, and lower consumer and business confidence, observes IEA's World Energy Outlook 2002 analysis.

It says investment in battery energy storage is hitting new highs and is expected to more than double to reach almost $20 billion in 2022. The pipeline of projects is immense, with China targeting around 30 GW of non-hydro energy storage capacity by 2025 and the United States having more than 20 GW of grid-scale projects either planned or under construction.

The energy crisis and Russia’s invasion of Ukraine are spurring new investment in fuels, including an expansion of coal supply in emerging Asian economies. Around $105 billion was invested in the coal supply chain in 2021, an increase of 10% year-on-year, and a further 10% rise is expected in 2022 as tight supply continues to attract new projects, says IEA.

Russia’s invasion of Ukraine

50% of 2022 global energy investment is geo-political cost: IEA