Government and corporate spending on energy research and development hit record highs last year, as did venture capital bets on clean energy technologies. However, risks lie ahead, and the availability of capital varies between regions and types of innovation. Fortunately, the G7 and G20 are starting to address the barriers to energy R&D investment and the disparities between countries, reports IEA.
World Energy Investment 2023 report
The World Energy Investment 2023 report is a barometer on the world’s progress achieving clean energy transitions, given that financial commitments and spending are the ultimate tests of whether policies and pledges translate into action. The report shows that investment in clean energy technologies is significantly outpacing spending on fossil fuels, as affordability and security concerns triggered by the global energy crisis strengthen the momentum behind more sustainable options.
A similar test can also be applied for technology innovation and ideas. Investment reflects the market’s confidence in future clean energy technologies. It also shows the extent to which governments and companies are serious about plugging the most challenging technology gaps to deliver a net zero emissions trajectory. Chapter 5 of the World Energy Investment report offers the most comprehensive collection of new data on these trends, and this article shares its headline findings.
Public spending on energy R&D grew by 10% in 2022, to nearly USD 44 billion according to our estimates, with 80% devoted to clean energy. For listed companies in energy-related sectors, preliminary data show a similar rise in R&D budgets in 2022, while early-stage venture capital investment into clean energy start-ups reached a new high of USD 6.7 billion. These solid outcomes came despite higher costs of capital and pervading economic uncertainty.
While this counter-cyclical pick up in investment is good news, the market and policy context for energy innovation is also changing. On the one hand, macroeconomic conditions are getting tougher, with rising interest rates and other headwinds leading to the 2023 collapse of Silicon Valley Bank, a United States-based provider of finance to start-ups, bringing a nervous atmosphere to a previously buoyant part of the innovation system. On the other hand, policy support for innovation in many countries is intensifying as governments respond to the energy crisis and seek more resilient and diversified clean energy supply chains. The United States Inflation Reduction Act, for example, provides a huge boost to the drivers of clean energy innovation.
New industrial strategies and the priority attached to de-risking clean energy supply chains will reinforce policy support in key countries, but they risk creating ring-fenced national or regional markets. Unless some restrictive measures are averted, any continued growth in public R&D spending could be partly wasted due to reduced international cooperation, curtailed information sharing and lack of free movement of talent
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