IEA: clean energy investment in 2023 will exceed USD 1.7 trillion, almost twice as much as in fossil fuels

The International Energy Agency (IEA) published the World Energy Investment 2023 report in May 2023. It shows that global energy investment is expected to exceed USD 2.8 trillion in 2023, of which more than USD 1.7 trillion will go to clean energy: renewable sources, grids, storage, electromobility and other low-carbon technologies. For every dollar invested in fossil fuels there are around USD 1.7 in clean technologies. For the biogas and biomethane sector the report is the backdrop to investment decisions: capital is flowing, but competition for it is growing.

What is changing

The report shows several trends. First, investment in clean energy is growing faster than in fossil fuels, and the ratio of spending on clean energy to spending on fossil fuels has clearly improved compared with previous years. Second, rising energy prices and security-of-supply policies after Russia's invasion of Ukraine have accelerated spending on renewable sources, grids and efficiency. Third, regions differ in pace: investment is growing fastest in China, the USA and Europe, while developing countries have more difficult access to capital.

In the IEA's analysis, renewable gases, biogas and biomethane, are a small segment compared with wind and solar, but they are growing along with policies that favour gas from waste and residues.

Significance for the industry in Poland

Polish biogas and biomethane projects compete for funding with investments in photovoltaics, wind farms, energy storage and grids. For banks and funds, predictable revenues, support rules and the level of regulatory risk matter. In May 2023 the Polish biogas industry is awaiting the final rules: the act facilitating investment in agricultural biogas plants and the amendment of the Act on Renewable Energy Sources (ustawa o OZE) for biomethane. Their adoption would accelerate investment decisions.

It is also worth noting the rising cost of capital: higher interest rates reduce the profitability of long-term projects. Installations with stable contracts and support have an advantage, because the risk is lower.

What to pay attention to

When planning an investment, it is worth testing the financial model for sensitivity to interest rates, feedstock and energy prices, and changes in regulations. Well-documented sources of substrates, digestate offtake agreements and connection agreements reduce risk and improve assessment by financial institutions.

What the report says about gas

The analysis also covers investment in gas and oil. The high prices of 2022 improved producers' results, but part of the funds is directed at increasing the resilience of the system: LNG terminals, interconnectors, storage. For the biomethane market it is important that capital is looking for projects that can be launched quickly and are independent of imports. Biomethane fits these criteria, provided that permits and connections can be obtained quickly.

What next

The IEA announces further analyses on the cost of capital and security of supply. For Poland, the key will be translating the growing global flow of capital into local projects, including biogas ones, which depends on clear rules, access to the grid and co-financing programmes.