Global new investment in renewable power and fuels (not including hydropower projects larger than 50 megawatts, MW) reached a record high in 2022, at an estimated USD 495.4 billion ⁱ . ¹ Investment increased 17.2% from 2021, due largely to the global rise in solar photovoltaic (PV) installations. ² These estimates do not include investment in renewable heating and cooling technologies, for which data are not collected systematically. Global investment in heat pumps ⁱⁱ reached USD 63.4 billion, up 9.6% from 2021. ³ (see Buildings Module.) Hydropower investment (including projects above 50 MW) has hovered at around USD 8 billion for the past several years, although data remain limited. ⁴

The increase in renewable energy investment came amid drastic changes in the energy landscape in 2022, including the Russian Federation's invasion of Ukraine, skyrocketing inflation and ongoing supply chain disruptions related to the COVID-19 pandemic. In Europe, the war in Ukraine and its implications for imports of Russian gas amplified calls for greater deployment of renewables and related investment. ⁵ Together, these factors prompted sweeping government interventions to fast-track a clean energy transition, including the Inflation Reduction Act in the United States, the REPowerEU plan in Europe and the GX Green Transformation Programme in Japan. ⁶ (see Policy section.)

Inflation (of around 8%) played a role in the investment growth in renewables in 2022, contributing to higher costs for components, construction and financing. ⁷ However, inflation represented only a fraction of the overall investment increase, meaning that investment expanded well beyond the effects of inflation. ⁸ In general, the declining costs of renewables over the past decade have meant that a dollar invested today translates into higher capacity installed than it did in years past. ⁹ Without these cost reductions, much more investment would be needed to bring the same level of capacity online. ¹⁰

FIGURE 9.

Global Investment in Renewable Power and Fuels, by Technology, 2018-2022

Investment by Technology

Solar PV and wind power continued to dominate new investment in renewables, with solar PV accounting for 62% of the 2022 total and wind power for 35%. ¹¹ (See Figure 9.) The strong growth in solar PV investment of 2021 expanded further in 2022, rising nearly 36% to reach USD 307.5 billion. ¹² Wind power investment fell 1.3% to USD 174.5 billion, a reflection of policy uncertainties, long and complex permitting regulations in many countries, and high inflation in the costs of inputs. ¹³

The private sector has been the primary source of global investments in renewable energy in recent years, although the balance between public and private investments varies depending on the technology and context. ¹⁴ In 2020, the most recent year for which data are available, private sources accounted for 69% of renewable energy investment, with most of this originating from commercial financial institutions and corporations. ¹⁵

Private finance accounts for the vast majority of solar PV technologies (around 83% in 2020), as these technologies are commercially viable and highly competitive; in contrast, geothermal and hydropower technologies rely mostly on public finance, with private finance representing only around 32% and 3%, respectively. ¹⁶ Hydropower investments often require public finance because of the large upfront investments, the need for long-tenor loans (as construction can take more than a decade), high construction risks, complex and lengthy permitting procedures, and high social costs and environmental risks, all of which hamper private sector investments. ¹⁷

Investment by Economy

Investment in renewable power and fuels varied by region in 2022, rising in Brazil, China and India but falling in Europe and the United States. ¹⁸ (See Figure 10.) China continued to account for the largest share of global renewable energy investment (excluding hydropower larger than 50 MW), at 55%, followed by Europe (11.3%), Asia & Oceania (excluding China and India; 10.8%) and the United States (10.0%). ¹⁹ All other world regions accounted for 4% or less of the total. ²⁰

China's overall investment in renewables increased sharply in 2022, rising 56.2% to reach USD 274.4 billion. ²¹ This was due largely to continued growth in the country's solar PV capacity, which grew 78.9% to USD 164.5 billion. ²² Wind power investment also increased in China, rising 33.2% to reach USD 109.0 billion. ²³ Investment in all other renewable energy technologies was marginal by comparison. ²⁴

Renewable energy investment in China is driven in part by the country's long-term decarbonisation goals and by the growing demand for electricity compared with countries in the Organisation for Economic Co-operation and Development (OECD), where electricity demand is relatively stagnant or growing far more slowly. ²⁵ Investment in solar PV has been supported by policies enacted by Chinese provincial and local governments, as well as by growing interest in distributed solar PV from commercial and industrial entities. ²⁶ Although China has phased out direct subsidy support for wind power at the national level, provincial and local governments have continued to support project investments, particularly by facilitating land acquisition and other project logistics. ²⁷

In Europe, investment in renewable energy projects fell 26% to USD 55.9 billion in 2022. ²⁸ This decline reflects inflation-related challenges (with costs rising at a higher rate than prospective revenues) as well as national interventions in electricity markets that set varying revenue caps for different technologies, shaking investor confidence. ²⁹ Despite these challenges, some European countries showed remarkable investment growth: in Italy, renewable energy investment increased 53.2% to USD 3.69 billion, and in Spain it grew 36.3% to USD 10.5 billion. ³⁰ Bulgaria, Estonia and Romania also showed notable growth, although starting from a much smaller base. ³¹

Other countries saw significant drops in investment. In France, investment fell 35.6% to USD 4.4 billion, in Germany it was down 32.8% to USD 8.8 billion, and in the United Kingdom it plummeted 81.4% to USD 2.2 billion. ³² The dramatic drop in UK investment reflects policies that have banned solar PV from farmland (citing food security concerns) as well as planning laws that have blocked onshore wind farms. ³³ In the regional ranking, Spain again took the lead in renewable energy investment, followed by Germany and Poland. ³⁴

FIGURE 10.

Global Investment in Renewable Power and Fuels, by Country and Region, 2013-2022

In Asia & Oceania (excluding China and India), investment in renewables fell 7.7% to USD 53.8 billion. ³⁵ This decline reflects decreases in Japan (down 29.4% to USD 12.5 billion) and the Republic of Korea (down USD 4.2% to USD 6.7 billion). ³⁶ Although investment in solar PV in the region grew slightly (3.4% to USD 39.8 billion) in 2022, it was nowhere near the levels seen in 2020. ³⁷ A contributing factor was the ongoing decline in solar PV investment in Vietnam, the region's largest solar PV market, following the discontinuation of the country's feed-in tariff at the end of 2020. ³⁸

Investment in wind power in Asia & Oceania fell 15.9% to USD 12.1 billion, attributed in part to difficulties in acquiring grid connections, a common problem in the region. ³⁹ Investment in biofuels increased markedly during the year, up 239.6% to USD 0.18 billion. ⁴⁰ The increase is due largely to incentives that Indonesia and Malaysia put in place to support the local palm oil industry, after the European Union (EU) imposed sustainability restrictions on palm oil imports. ⁴¹

The United States attracted the most renewable energy investment among developed economies, although investment continued its decline of recent years, falling 10% to USD 49.5 billion. ⁴² Investment fell in both solar PV (down 16.1% to USD 25.5 billion) and wind power (down 24.6% to USD 15.2 billion). ⁴³ The US investment decline continued to reflect the challenges seen in 2021: difficulties with supply chains, road blocks in permitting and grid connection, the fall-off in available federal tax credits (which was reversed during the year), and continued uncertainty about tariffs and other trade measures that impact module imports. ⁴⁴

In India, total new investment in renewables increased 4.4% to USD 11.5 billion in 2022. ⁴⁵ Investment in solar PV rose 19% to USD 8.6 billion. ⁴⁶ Biofuel investment grew marginally, and investment in all other renewable technologies, including wind power, fell during the year. ⁴⁷ Although auctions continue to support investment in both solar PV and wind power in India, the scalable nature of solar PV (which allows it to be deployed more quickly with fewer complications for grid connection) has given it a great advantage over wind power, explaining in part the large difference in investment between the technologies. ⁴⁸ Wind power investment in India has not yet recovered to its 2016 peak, due largely to difficulties with procuring land for new projects in areas with strong wind resources or near transmission networks, but also because of the national shift from feed-in tariffs to tendering. ⁴⁹

Brazil's total investment in renewables was up 18.3% to USD 14.8 billion. ⁵⁰ Continuing the growth of 2021, investment in solar PV increased 23.7% in 2022 and in wind power increased 14.5%, whereas investment in all other renewable energy technologies either stagnated or declined. ⁵¹ The flurry of investment in rooftop solar PV continued, in advance of revised legislation that will gradually introduce grid-access charges for residential and commercial system owners beginning in June 2023. ⁵²

Wind power investment reached a new high in Brazil and is increasingly being supported by power purchase agreements that are not connected with government-run auctions. ⁵³ This demonstrates the rise in unregulated electricity market shares coupled with growing corporate demand for clean energy. ⁵⁴

Although the shares of biomass in Brazil's total renewable power investment are decreasing, dependable sugarcane feedstocks and ongoing government auctions targeting biomass-generated electricity have helped to ensure ongoing investment in the technology. ⁵⁵

FIGURE 11.

Global Investment in New Power Capacity, by Type,2022

Outside Brazil and the United States, renewable energy investment in the Americas totalled USD 16.6 billion, down slightly from 2021. ⁵⁶ Solar PV investment in the region increased 16% to USD 11.8 billion, whereas investment fell in all other technologies, including wind power, which was down 9.6% to USD 4.8 billion. ⁵⁷ Biofuel investment dropped 100% to only USD 1.1 billion. ⁵⁸ Investment in renewables was impacted by inflation, the discontinuation of COVID-19 stimulus packages, weak local currencies and slow economic growth. ⁵⁹

In Argentina, new renewable energy investment has fallen sharply due mainly to economic and financial turmoil, as well as to bottlenecks in the transmission infrastructure that have greatly slowed the integration of additional variable electricity supplies. ⁶⁰ Chile remains a key destination for new renewable energy investment in the region, despite relatively lower levels spent in 2022, and Colombia has emerged as an important new market for wind and solar power investment. ⁶¹ To enable greater grid integration of variable renewables, both countries have taken steps to support utility-scale battery capacity ⁱⁱⁱ , which is only beginning to be deployed in the region at scale. ⁶²

Investment in renewables in the Middle East and Africa was up 3.0% to reach USD 8.4 billion in 2022. ⁶³ Regional investment leaders included South Africa (up 45.4% to USD 2.2 billion), Egypt (up 669.2% to USD 1.8 billion) and Israel (up 9.2% to USD 0.99 billion). ⁶⁴ At least some of South Africa's remarkable growth in renewable energy investment may be in response to the November 2021 announcement of dedicated finance (initially USD 8.5 billion) for decommissioning coal-fired power plants and deploying renewables. ⁶⁵ Partners in this Just Energy Transition Investment Plan for the country include France, Germany, the United Kingdom, the United States and the EU. ⁶⁶

Many developing and emerging economies face unique challenges in financing renewable energy projects, compared to the developed world. Investment in these countries may be complicated by political instability, macroeconomic uncertainty (related to inflation and exchange rates), policy and regulatory issues (such as poorly designed or implemented processes for obtaining licences, permits, rights and other approvals to build), institutional weaknesses and a lack of transparency. ⁶⁷ (see Sidebar 1). Country-related risks and underdeveloped local financial systems also can directly affect the cost of capital. ⁶⁸ Nominal financing costs can be up to seven times higher in emerging and developing countries than in developed countries, such as the United States and countries in Europe. ⁶⁹

Renewable Energy Investment in Perspective

Renewable power installations continued to attract far more investment in 2022 than did fossil-fuel based or nuclear generating power plants. ⁷⁰ Investment in new renewable power capacity accounted for 74% of the total investment committed to new power generating capacity (including fossil fuels and nuclear). ⁷¹ (See Figure 11.)

Most scenarios that limit the increase in the global mean temperature are accompanied by a near-complete phase-out of fossil fuel power generation (without carbon capture and storage) by 2100. ⁷² The Paris Agreement (in Article 2.1c) highlights the need to make finance flows consistent with the goal of limiting global temperature rise to 1.5 degrees Celsius. ⁷³ Achieving this goal would require large growth in overall renewable energy investment compared to the last decade. Estimates of the annual investment in renewable power needed by 2030 to achieve the Paris Agreement goals are in the range of USD 1,300–1,400 billion. ⁷⁴ (See Figure 12.)

FIGURE 12.

Range of Annual Renewable Energy Investment Needed in Climate Change Mitigation Scenarios, Compared to Recent Investments