China spends nearly as much on energy as US and EU combined – IEA

The IEA projects global energy investment to reach a record $3.3 trillion in 2025, with $2.2 trillion allocated to clean energy technologies, double the investment in fossil fuels, driven by energy security concerns and China's dominance in clean energy spending. Solar investments lead at $450 billion, followed by surging battery storage at $65 billion, while grid investments lag, posing risks to electricity security; of concern is Africa's lagging investment, receiving only 2% of global clean energy investment despite representing 20% of the world's population.

Analysis

Global energy investment is projected to reach a record $3.3 trillion in 2025, with a significant skew towards clean technologies, which are expected to attract $2.2 trillion, double the amount allocated to fossil fuels, according to the International Energy Agency (IEA). This surge is largely driven by countries seeking to enhance energy security amidst geopolitical uncertainties and economic turbulence. China is solidifying its position as the leading global energy investor, with expenditures nearly matching the US and EU combined, and its share of global clean energy investment has risen from 25% to nearly 33% over the past decade. Solar power remains a dominant force, with anticipated investments of $450 billion this year, while battery storage is projected to reach $65 billion in 2025, and nuclear capital flows have increased by 50% over five years to approximately $75 billion. Concurrently, investments in electricity (generation, grids, storage) are expected to be 50% higher than those in oil, gas, and coal, a stark reversal from 2015 when fossil fuel investment led by 30%. However, a critical concern is the underinvestment in grid infrastructure, with annual spending of $400 billion lagging behind the pace of new generation and electrification, posing a risk to electricity security due to permitting delays and supply chain bottlenecks. Furthermore, China and India continue to invest in coal, with China initiating construction on nearly 100 gigawatts of new coal-fired plants in 2024. While oil investment is set for a 6% dip this year, investment in Liquefied Natural Gas (LNG) is booming, particularly in the US, Qatar, and Canada, with significant capacity growth expected between 2026 and 2028. A troubling trend is Africa's marginalization in clean energy investment, attracting only 2% globally despite holding 20% of the world's population, with overall energy investment on the continent declining by a third over the last decade.

Key Decisions for Investors

• Investors should identify opportunities within the clean energy sector, particularly in solar, battery storage, and nuclear technologies, given their strong projected investment growth and supportive policy drivers.
• Consider potential investments in companies involved in grid infrastructure development and related supply chains, as significant upgrades are required to support the energy transition, presenting a potential growth area despite current bottlenecks.
• Monitor geopolitical developments influencing energy security and critically assess regional disparities in energy investment, such as continued coal financing in Asia and underinvestment in Africa, which could present both risks and targeted opportunities in specific markets or for development finance initiatives.
• Evaluate exposure to the LNG sector, as substantial capacity expansions are underway, potentially benefiting companies involved in LNG production, transportation, and infrastructure.