Cleantech Investment Surpasses Fossil Fuels in 2025

Jan. 10, 2025 /Mpelembe Media/ —  An S&P Global Commodity Insights report forecasts a significant shift in 2025, with cleantech investments exceeding fossil fuel investments for the first time, reaching $670 billion. Solar PV is predicted to dominate cleantech investment. However, the report also highlights challenges, including supply chain tensions stemming from Chinese oversupply and the need for battery storage to improve renewable energy project economics. Furthermore, the report discusses the increasing role of AI in optimising renewable energy and the growing importance of datacentres in corporate clean energy procurement. Finally, the report notes the growing importance of carbon capture and ammonia in decarbonisation efforts.

Several key factors are driving the surge in cleantech investment, according to the sources:

Growing dominance of renewable technologies: Cleantech energy supply investments are projected to reach $670 billion in 2025, surpassing upstream oil and gas investments for the first time. This shift highlights the increasing importance of renewable technologies. Specifically, solar photovoltaic (PV) is expected to represent half of all cleantech investments and two-thirds of installed megawatts.

Corporate clean energy procurement: Datacenters are expected to significantly increase their role in corporate clean energy procurement, with expectations to source approximately 300 TWh of clean power annually by 2030. Currently, datacenters account for around 200 TWh, or 35%, of the global corporate clean energy procurement. North American datacenters are expected to lead this transition, representing about 60% of the global increase in clean energy procurement by 2030.

Integration of AI in energy management: The growing influence of artificial intelligence (AI) in the cleantech sector is a significant driver, particularly in renewable generation forecasting and grid planning. AI-powered trading applications are also emerging as critical tools to mitigate risks associated with discrepancies between forecasted and actual energy generation, thus enhancing energy management and facilitating the integration of renewables into the grid.

Battery energy storage: Battery energy storage is becoming essential for enhancing project economics and mitigating low wholesale electricity prices in regions with high renewable energy penetration. To remain competitive, solar projects must integrate battery energy storage solutions, enabling developers to navigate price fluctuations and improve the economic viability of renewable investments.

Ammonia as a key player: Ammonia is emerging as a key player in low-carbon hydrogen production, contributing significantly to both electrolytic and fossil fuel projects with carbon capture and storage (CCS). The CCUS sector is expected to secure approximately 70 million metric tons per year of CO2 capture capacity in 2025.

Carbon Dioxide Removal (CDR) Technologies: Despite high costs, the last three years have shown a surge in CDR offtake removal agreements, suggesting an increasing corporate interest and more government policy support for these technologies.

These factors, along with the increasing need for sustainable energy solutions, are contributing to the transformative shift in the energy sector.

In 2025, solar PV is projected to represent half of all cleantech investments. This is also expected to equate to two-thirds of installed megawatts. This projection is part of a larger trend where cleantech energy supply spending is expected to reach $670 billion, surpassing upstream oil and gas investments for the first time.

The projected total cleantech investment for 2025 is $670 billion. This investment includes renewable power generation, green hydrogen production, and carbon capture and storage (CCS). This figure marks the first time that cleantech investments are expected to surpass projected upstream oil and gas spending.

Within this total, solar PV is expected to represent half of all cleantech investments and two-thirds of installed megawatts. Despite this significant financial commitment, the sources note that the overall investment levels remain insufficient to meet urgent climate goals, particularly the target of tripling renewable capacity by 2030.

In 2025, solar PV is projected to represent half of all cleantech investments. This is also expected to account for two-thirds of installed megawatts.

The sources highlight several key challenges within cleantech supply chains:

Oversupply from China: The global cleantech landscape is experiencing an oversupply of equipment from China, particularly in the solar, wind, and battery sectors. This oversupply is creating pricing pressures within the industry.

Price declines: Due to the oversupply, price declines in the cleantech sector are expected to continue, although they may stabilize in 2025. Competition from Chinese manufacturers is expected to keep prices low, fundamentally altering industry pricing dynamics.

Slowing domestic economy in China: China’s slowing domestic economy is making it more difficult to maintain its expansive supply chain. This is leading to efforts to control manufacturing growth and raise barriers for new entrants in the market.

Market share shifts: Projections indicate that China’s market share in PV module production is expected to decline to 65% and battery cell manufacturing to 61% by 2030. This suggests a potential shift in the global distribution of manufacturing within the cleantech sector.

These challenges indicate that while cleantech investment is growing, there are significant supply chain dynamics that need to be navigated, particularly regarding manufacturing capacity and pricing pressures.