Investment in clean energy is projected to reach US$2.2 trillion by 2025, which is expected to be twice the anticipated investment in fossil fuels for this year. This information comes from the latest data released by the International Energy Agency (IEA). Despite ongoing political turbulence, trade disruptions, and economic challenges, the energy sector’s overall investment is forecasted to grow by 2% in real terms, reaching a total of US$3.3 trillion in 2025.
According to the IEA, approximately two-thirds of this investment will be directed towards renewables, nuclear energy, grid enhancements, energy storage, low-emission fuels, energy efficiency, and electrification. However, the IEA’s report on World Energy Investment 2025 acknowledged that the outlook for new projects remains uncertain. “Questions concerning the economic and trade landscape have led some investors to adopt a wait-and-see stance regarding new project approvals; however, we have not yet observed significant repercussions for spending on existing projects,” the report indicated.
The report highlights that the largest sectors for investment are renewable energy—primarily solar and wind—and energy efficiency, with estimated investments of US$780 billion and US$773 billion, respectively. This trend reflects the growth initiated in the post-pandemic recovery phase, spurred by government recovery initiatives and efforts to bolster energy independence in regions such as China, the EU, and India. Continuous investments in renewable energy have been fueled by increasingly mature and cost-competitive technologies.
While policies aimed at reducing emissions are a significant factor in driving investments, the IEA noted that the economic and energy security advantages of renewable energy are becoming more influential in investment decisions.
Certain trends remain consistent in the new report. For example, grid infrastructure is struggling to keep up with rising power demand and the increased integration of renewable energy. Current investment levels must double for the world to fulfill the COP28 commitment to triple renewable capacity by 2030. Additionally, costs associated with renewable energy technologies, including solar modules and energy storage systems, are generally declining.
The landscape of research and development (R&D) has undergone a significant transformation over the past decade. In 2015, the leading firms in R&D were predominantly US and European automotive and fossil fuel companies. By 2024, however, only three state-owned fossil fuel companies—Petrochina, Sinopec, and Saudi Aramco—are included in the top tier, having been surpassed by electric vehicle manufacturers like BYD and Tesla, along with the Chinese battery producer CATL.
The IEA also emphasized the importance of lowering capital costs for clean energy investments in developing nations, stating that this needs to be a key focus to achieve COP29 targets. The goal is to mobilize US$1.3 trillion for low-emissions projects in these economies by 2035. The report stressed that enhancing climate finance to developing countries necessitates targeted policy actions to mitigate various risks that hinder clean energy investments, thereby raising financing costs in these regions.
Even in India, recognized as a leading market for solar PV and renewable energy investments, the cost of capital for utility-scale renewable projects remains challenging. While India boasts one of the lowest costs of capital for grid-scale renewable energy among emerging markets, it is still 80% higher than in advanced economies. Elevated financing costs impact project viability, leading to increased energy prices, while both real and perceived risks affect the attractiveness of these projects to investors.
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