4. Global trends of energy investment and innovation funding

4. Global trends of energy investment and innovation funding

The IEA tracks annual investment in technology innovation activity in its World Energy Investment and TCEP analyses. In 2017, global R&D spending in energy reached around USD 115 billion – an increase of 2.5% in real terms. More than three-quarters of this spending came from the private sector. Overall, there is a clear but sluggish trend towards higher spending on low-carbon energy R&D across the public and private sources of funding that are tracked. While public R&D on energy technologies in total grew at an average rate of only 2% per year over the five years to 2017, it jumped by 8% last year. The general trend in the private sector is also upwards, though at a slower rate. On a sectoral basis, growth is concentrated in the transport sector, where technologies related to electrification of vehicles, powertrains and related products are seeing the biggest increases in spending. Among the leading economies, Japan remains the largest spender on energy R&D, as measured by the share of GDP, ahead of the People’s Republic of China (hereafter, “China”) and Europe. In absolute terms, the United States spends more on energy R&D than any other country. These and further trends can be explored through the IEA innovation portal, www.iea.org/innovation

Figure 9. Energy R&D expenditure in the public sector

transition. Innovation potential is high for heavy-duty transport, industrial energy use and seasonal electricity storage.

Reported RD&D spending on clean energy by IEA member governments doubled between 2000 and 2010 to around USD 15 billion – around 0.15% of their total budget expenses. This growth represents a fourfold increase if nuclear is excluded. Aggregated data from MI submissions and national budgets and reports show that clean energy RD&D expenditure by non-IEA G20 economies was around USD 4.5 billion in 2015, putting G20 public funding at USD 19 billion. This includes spending by major state-owned enterprises, which is a dominant source of publicly funded clean-energy RD&D in China.

The private sector as a whole spends much larger amounts on innovation in energy – albeit focusing in different stages of the innovation process, and emphasising different technologies (Figure 10). In fact, the energy sector itself is complementing funding from other sectors, increasing innovation activity.

Figure 10. Private-sector investment in energy R&D, by subsector of investing company

Source: IEA 2019. All rights reserved.

However, spending on energy RD&D has stagnated since 2010, an observation that has underpinned the timely launch of MI. This landmark intergovernmental initiative groups together 22 countries (17 of which are G20 members) and the European Commission to accelerate innovation for clean energy technologies, in part through doubling public funding for clean energy R&D over five years. Seven Innovation Challenges have been launched with the aim of catalysing research efforts to meet MI goals of reducing greenhouse gas emissions, increasing energy security and creating new opportunities for clean economic growth.