How much will renewable energy benefit from global stimulus packages?

Encouraged by its job creation potential and low cost as a CO₂ abatement technique, energy efficiency sector has received USD 144 billion, the greatest clean energy spending globally. The renovation of public and private buildings and energy efficiency investment in the industrial sector are the largest beneficiaries of the allocated spending. Depending on country-level regulations, renewable heat technologies can also benefit from spending allocated to energy efficiency. The second most supported sector is public transport (USD 94 billion), followed by low-emission vehicles and charging infrastructure (USD 79 billion). Investment in railways, mass/urban transit and walking/cycling infrastructure have so far received the largest portion of this funding, followed by EVs and alternative-fuel vehicles and their charging infrastructure. 

Of the spending on low carbon power, we expect solar PV to receive the largest amount, accounting for almost half of low-carbon electricity spending (USD 24 billion) and split between utility-scale and distributed PV. This stimulus money will mostly support already developed markets in China, Korea and the European Union to further accelerate investments. Nuclear power has received around USD 9 billion in public spending, followed by offshore wind and onshore wind. Despite increasingly needed flexibility capabilities, dispatchable renewables including hydropower, geothermal and bioenergy received only USD 3.5 billion. Similarly, biogas and biofuels only received around USD 3 billion, despite their major contribution to decarbonisation of the hard-to-abate sectors such as aviation and heavy industry. Many governments consider low-carbon hydrogen to be the main fuel for decarbonising the hard-to-abate sectors. This is reflected in large public spending of about USD 30 billion allocated to hydrogen. However, uncertainty remains about whether this allocated spending will be for hydrogen produced from renewables or non-renewables.

As of October 2021, almost three quarters of public spending on clean energy was allocated in Europe, followed by the Asia Pacific region and North America. The share of renewables, including biofuels and renewable electricity, in overall clean energy spending ranged from 4% to almost 56% depending on the region. In Europe and North America, transport infrastructure and energy efficiency spending took priority over renewables. In Asia Pacific, focusing on reaching ambitious renewables targets have led to a higher renewable share in overall clean energy spending, especially in China and Korea. 

About USD 42 billion of approved public spending on renewable electricity could mobilise USD 380 billion of additional private investment if this spending attracts nine times more capital. However, the contribution of the private sector will highly depend on the effectiveness of policies and implementation measures to attract investment. This would result in the development of an additional 380 GW of renewable projects in the coming years, with solar PV providing over 90% of this upside potential. However, the IEA’s Sustainable Recovery Plan suggests an additional USD 800 billion investment in renewables is needed over 2021-2023. This requires not only increasing public spending but also mobilising additional private capital.