The International Energy Agency (IEA) has released a new report highlighting the growing uncertainty surrounding a broad range of emerging energy technologies currently under development.
Titled ‘The State of Energy Innovation’, the report indicates that the progress of these technologies is slowing due to changes in financing and shifting priorities.
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The report offers a comprehensive global analysis of energy technology innovation trends based on a new dataset featuring more than 150 innovation highlights and a survey of nearly 300 experts from 34 countries.
The findings of the report indicate that innovation remains a crucial element for advancing national energy strategies, with key opportunities to sustain momentum.
Despite substantial economic and security benefits from past energy innovations, the IEA warns that the current energy innovation landscape is at a turning point.
The report highlights the significant disparities in investment across regions and sectors.
Public and corporate investment in research and development (R&D) has increased steadily in recent years, growing by an average of 6% annually. However, initial estimates for 2024 suggest that growth may be slowing in some advanced economies.
While energy R&D investment has outpaced broader economic growth, sectors such as cement and steel still invest significantly less in R&D compared to automotive and renewable energy industries.
The rise in venture capital (VC) funding for energy technologies has been noteworthy, increasing by over six times from 2015 to 2022, according to the IEA report.
This influx has supported approximately 1,800 energy start-ups, with the potential to drive significant change in global energy systems by the 2030s.
However, this growth reversed in 2023 and 2024, with VC funding falling by more than 20% due to tighter financial conditions.
The only sector to see growth during this period was AI, which may draw investment away from energy-related innovations.
IEA executive director Fatih Birol said: “Innovation is the lifeblood of the energy sector, particularly in today’s fast-moving times with the global energy mix shifting and major trends such as electrification having far-reaching effects.
“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. 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.”
Energy innovation efforts are becoming increasingly global, with China surpassing the US and Japan in energy-related patent filings since 2021.
Over 95% of Chinese patents focus on low-emission technologies, and globally, patents for low-emission technologies have grown 4.5 times faster than those for fossil fuels since 2000.
Investment trends are also shifting, with China and Europe concentrating on mass-manufactured technologies such as batteries and electrolysers, while the US maintains a diverse portfolio of energy innovations.
Public and private investments in large-scale energy technology demonstration projects have reached approximately $60bn this decade, but inflation and policy uncertainties have led to delays.
To expedite innovation, the report calls for targeted policies to increase public R&D spending, support developers through economic cycles, and strengthen international cooperation for clean energy projects.
The evolution of global energy innovation will play a critical role in determining long-term economic stability and meeting climate targets, according to the report.
