From Watts Up With That?

Lars Schernikau: Energy Economist, Commodity Trader, Author (recent book “The Unpopular Truth… about Electricity and the Future of Energy”)

Details inc Blog at www.unpopular-truth.com

The International Energy Agency (IEA) just published its 2025 World Energy Investment (WEI) report. It marks the 10th anniversary of this major annual review. And after spending time reading the full 255-page document, it’s clear to me that global energy investment trends are raising serious questions about future energy security, affordability, and return on investment.

In this article, I want to zoom in on two of the issues I identified from the report that deserve more public debate: the growing imbalance in energy investment and the troubling decline in the return on that investment. The consequences of these trends could weigh heavily on taxpayers and consumers.

Wind and solar…more money, less return

Today, global investment in wind and solar is about 7 times higher (per unit of energy generated) than investment in dispatchable power like coal, gas, nuclear, and hydro combined. That alone should make us pause and take a second look…more on this in my latest blog IEA 2025 World Energy Investment a Review

Even more concerning is the IEA’s own data that shows that wind and solar, as industries, are just not profitable. Solar manufacturers, especially in China, are losing billions as competition drives prices below production costs. Utilities in many markets are also struggling to earn stable returns from variable wind and solar generation.

Meanwhile, investment into traditional fuels that still supply about 80% of our primary energy needs has fallen dramatically. A decade ago, coal, oil, and gas received 55% of global energy investment. Today, they receive just 33%, in absolute terms, about 25% less than 10 years ago.

We have to recognize an unpopular truth: the energy return on investment (EROI) for coal, oil, and gas remains far higher than for wind and solar. A dollar invested in coal or gas delivers much more usable energy than a dollar invested in solar panels or wind farms… especially after accounting for intermittency, backup systems, grid upgrades, and storage.

Less investment overall

It’s not just about where the money is going. Worryingly, total global energy investment as a share of GDP is declining. In 2015, it was about 3.6% of global GDP. This year, it will drop to just 2.9%.

At a time when we face surging energy demand (think AI data centers, electrification, cooling needs), the world is spending less, relative to its wealth, on the infrastructure that keeps the lights on. That is a recipe for future shortages and volatility.

Who will pay the bill?

Taxpayers already are. The wind and solar boom is fueled by massive subsidies and incentives, mostly funded through public money. As investment in dispatchable energy lags, grid instability risks increase, forcing governments to spend even more to “patch” the system with expensive emergency measures.

How long will money flow into low yielding investments like wind and solar, before the red flags are raised?

Is it then a surprise that in many developing countries, particularly in Asia, governments are quietly turning back to coal and gas to meet rising energy demand? China approved nearly 100 GW of new coal plants in 2024 alone. India added another 15 GW.

Why you ask?…they do this because these investments reliably produce affordable energy, something no country can live without.

A call for balance

This is not an anti-wind, anti-solar argument. Wind and solar can play a role in a diverse energy system. But I do see the need for a more balanced investment approach, one rooted in realism and return.

Prioritizing these low-return investments while starving high-EROI energy sources will only drive costs higher for taxpayers, slow economic growth, and compromise grid reliability. If we continue down this path, the long-term cost to society could far outweigh any of the benefits.

For anyone serious about energy security and economic stability, it is time to reassess where and how we invest in the future of energy.

For sources and further reading, see my complete article on the IEA World Energy Investment 2025 report and if you are interested to remain updated on my writing, please sigh up there.