Global energy investment is set to reach a record $3.3 trillion in 2025, two-thirds of which will be on "clean energy" technologies, double the amount going to fossil fuels, according to a report released today by the IEA.

The total marks a 2pc rise "in real terms" compared to 2024, "despite headwinds from elevated geopolitical tensions and economic uncertainty", the agency said.

The IEA forecasts that around $2.2 trillion will go to renewables, nuclear, grids, storage, low-emissions fuels, energy efficiency and electrification in 2025, compared to $1.1 trillion for oil, gas and coal.

The rise in "clean energy" investment reflects "not only efforts to reduce emissions but also the growing influence of industrial policy, energy security concerns and the cost competitiveness of electricity-based solutions", the agency said.

Energy security is "a key driver" of the growth in investment globally, IEA executive director Fatih Birol said. Although the "fast-evolving economic and trade picture means that some investors are adopting a wait-and-see approach to new energy project approvals… in most areas we have yet to see significant implications for existing projects," he added.

Age of electricity

Investment trends are being shaped by a "rapid rise in electricity demand", the IEA said. Global spend on the electricity sector is set to hit $1.5 trillion this year, driven mainly by record investment on low-emissions generation, the organisation said. It expects solar power alone to attract $450bn this year.

Investment in power grids is "struggling to keep pace with the rise in power demand", although spending is still forecast to surpass a record $400bn this year, it said.

In contrast, investment in fossil fuel supply is expected to fall by around 2pc this year — the first decline since 2020 — owing to a "drop in prices and uncertain investment climate", the IEA said. Upstream oil and gas investment is forecast to fall by approximately 4pc to just under $570bn, led by a 6pc decline in upstream oil spending to roughly $420bn.

"The sharp drop in oil prices, rising operational costs, the impacts of tariffs and concerns about potential oversupply have led many companies to revise their investment plans," the IEA said.

Investment in coal supply is set to grow again in 2025, but more slowly — up by 4pc on the year, compared with an average 6pc annual increase over the past five years, the IEA said. Coal investment is largely driven by China and India.

Spending on "low-emissions fuels" is expected to hit a new record in 2025, but will remain below $30bn, the IEA said. The agency flagged that such projects "are particularly prone to policy uncertainty".

The IEA noted regional disparity across energy spending. China remains the world's largest investor "by a wide margin", it said, adding that the country's share of global clean energy investment has risen from a quarter a decade ago to almost one-third today.

In the US, investment in renewables and lower-emissions fuels is "set to level off as supportive policies are scaled back", the IEA said. It noted that US shale oil producers are particularly challenged by falling oil prices, and that upstream oil and gas spending "is gravitating towards large resource-holders in the Middle East".

By Georgia Gratton