The global energy innovation landscape is at a “pivotal moment”, with emerging technologies showing potential but facing uncertainty due to shifting investment trends, according to a new report by the International Energy Agency (IEA) on Wednesday.
The report, the State of Energy Innovation, provides a global review of energy technology innovation trends drawing upon a dataset covering more than 150 innovation highlights and a survey of nearly 300 practitioners from 34 countries.
Energy technology venture capital (VC) funding soared sixfold between 2015 and 2022, fueling approximately 1,800 startups, said the Paris-based energy watchdog.
“Even if only a fraction of these firms succeed, they could have a significant impact on global energy systems by the 2030s,” it added.
“However, this investment trend reversed in 2023 and 2024, with VC funding declining by more than 20% amid tighter financial conditions.”
Artificial intelligence was the sole sector that gained VC funding during this period, the report read.
-Report calls for targeted policies to increase public energy R&D spending
According to the report, global innovation is shifting, with China surpassing Japan and the US in 2021 as the top energy patent filer, focusing over 95% on low-emissions technologies.
“Since 2000, patenting globally for low-emissions technologies has grown 4.5 times as fast as it has for fossil fuels,” it said.
Europe prioritizes large-scale engineering projects, while the US maintains a diverse energy innovation portfolio, spanning both fossil and clean technologies.
In this decade, approximately $60 billion has been allocated to large-scale energy technology demonstrations, crucial for commercialization but hindered by inflation and policy uncertainty.
“Most projects have still not reached final investment decision and 95% of demonstration funding is concentrated in North America, Europe and China,” it added.
The report calls for targeted policies to increase public energy R&D spending, support technology developers through economic cycles and strengthen international cooperation to bring clean energy demonstration projects to market.
Commenting on the report, IEA Executive Director Fatih Birol said that innovation is vital to the energy sector, particularly amid rapid shifts in the global energy mix and major trends such as electrification.
“A wide range of technologies now appears to be coming close to market, offering hope for improvements in energy security, affordability and sustainability over the long term,” Birol added. “But we require investment, both public and private, to scale up innovative solutions. The payback may not always be quick, but it will be lasting.”
By Handan Kazanci
Anadolu Agency
energy@aa.com.tr