A new report from the International Energy Agency (IEA) has highlighted both encouraging progress and emerging risks in the global energy innovation landscape, warning that investment trends remain uneven across regions and sectors.
The State of Energy Innovation presents the first comprehensive global review of energy technology innovation, drawing on a dataset of over 150 innovation case studies and survey responses from nearly 300 experts across 34 countries. While the breadth and promise of emerging energy technologies have never been greater, the report warns that the global innovation landscape is entering a critical phase, with signs of slowing investment growth and shifting priorities threatening to derail progress.
The IEA highlights the central role that innovation has historically played in securing energy systems and bolstering economic growth. Public R&D spending following the energy crises of the 1970s helped drive the growth of nuclear energy and reduce reliance on imported fuels. More recently, advances in battery and electric vehicle technologies have cut oil imports in China, while shale innovations have enabled the United States to transition from a net importer to a net exporter of energy.
Today, governments around the world are embedding innovation at the heart of their industrial strategies, focusing on competitiveness, resilience, and sustainability. Global public and corporate energy R&D investment has grown at an average annual rate of 6% in recent years, but preliminary data for 2024 suggests a slowdown, particularly in advanced economies.
While corporate R&D has outpaced economic growth in the automotive and renewables sectors, other industries are lagging behind. The cement and steel sectors, for example, invest 20% to 70% less in R&D relative to revenue compared to leading sectors, and aviation and shipping have cut back R&D spending over the past decade.
“Innovation is the lifeblood of the energy sector, particularly in today’s fast-moving times,” said IEA Executive Director Fatih Birol. “We’re seeing a wide range of technologies nearing market readiness, offering long-term improvements in energy security, affordability, and sustainability. But greater public and private investment is urgently needed to scale them. The returns may not be immediate—but they will be lasting.”
Venture capital (VC) funding for energy technologies surged more than sixfold between 2015 and 2022, supporting some 1,800 start-ups. However, that momentum faltered in 2023 and 2024, with VC investment falling by over 20% due to tighter financial conditions. Only the artificial intelligence sector saw an increase in VC investment—an area with potential to boost energy innovation, but which may also divert capital away from core energy ventures.
The innovation drive has also become increasingly international. China surpassed both Japan and the United States in 2021 as the leading country for energy patent filings, with over 95% focused on low-emissions technologies. Since 2000, global patents for low-emissions energy have increased at 4.5 times the rate of those for fossil fuels. China has channelled nearly 90% of its VC energy funding into mass-manufactured technologies like batteries and electrolysers, while Europe prioritises large-scale engineering, and the United States maintains a balanced investment approach across clean and conventional technologies.
Yet challenges remain in scaling up breakthrough technologies. While around $60 billion has been earmarked globally for large-scale energy technology demonstration projects this decade, the vast majority are concentrated in North America, Europe, and China. Inflation and policy uncertainty are delaying progress, and only 17% of funding targets high-emissions sectors such as heavy industry and long-distance transport—areas that are essential for achieving net zero goals.
The IEA warns that current levels of public R&D spending—just over 0.04% of GDP among IEA members—remain well below the peak levels of the early 1980s, despite mounting climate and energy security challenges.
The report calls for targeted public policies to increase R&D investment, provide long-term support to technology developers, and strengthen international collaboration to bring emerging clean energy solutions to market. The future of global energy innovation, it concludes, will be a decisive factor in determining national economic resilience and the world’s ability to meet its climate targets.
