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The International Energy Agency (IEA) warns that energy innovation is slowing as shifting priorities and financing changes hamper progress, despite past investments that have driven economic and security advances. Investment in global energy innovation is losing momentum, according to a new IEA report. The State of Energy Innovation report highlights a slowdown in technological progress due to changes in funding and policy priorities, according to the IEA, even though innovation remains central to national energy strategies. The report notes that innovative activity has increased steadily in recent years, with public and corporate spending on energy research and development (R&D) growing at an average annual rate of 6%. However, initial estimates for 2024 indicate that growth may be slowing in some advanced economies. Annual energy-related venture capital funding fell by more than 20% in 2023 and 2024. The report attributes this decline to inflation and uncertainty about the climate policy commitments that many startups rely on to boost demand. The decline reverses a trend that saw venture capital funding for energy technologies more than sixfold between 2015 and 2022, reaching levels equivalent to total public energy R&D. According to the report, low interest rates and falling costs for solar and battery technologies drove this increase. Between 2021 and 2022, private capital helped finance around 1,800 new energy companies. Even if only a fraction successfully scales, the IEA said, the impact on energy by the 2030s promises to be very significant. IEA Executive Director Fatih Birol said innovation remains the lifeblood of the energy sector, and emerging technologies are poised to improve energy security, affordability, and long-term sustainability. But we need investment, both public and private, to scale up innovative solutions, Birol added. The payback wont always be quick, but it will be long-lasting. The IEA report includes a survey of nearly 300 professionals from 34 countries, who stated that energy innovation has gained momentum in recent years due to political commitments and recent energy crises. However, experts noted that progress has not been equal across the globe, and that emerging markets and developing economies have yet to fully benefit from technological advances. Respondents identified solar energy, batteries, and thermal storage as the fastest-growing areas of innovation. They also said that solar energy, batteries, and electric vehicles have matured to the point where market competition, rather than political support, will drive future progress. This points to a shift in the innovation landscape, where policy is needed above all to ensure that innovation ecosystems deliver the continuous improvements that drive competitiveness, the report notes. |
