Global energy investment dropped by 8% last year.
It reached $1.8 trillion (£1.35tn), down from $2 trillion (£1.5tn) in 2014, according to the International Energy Agency (IEA).
That’s because there was a decrease in oil and gas projects, with investment in global gas-fired power generation falling by nearly 40%, it added.
However, robust investment in renewables continued with $313 billion (£234bn), which accounted for nearly a fifth of total energy spending last year.
The investment in green projects generated more than enough to cover global electricity demand growth, its report stated.
Investment in energy efficiency was also strong, rising 6% due to governments policies.
The report added investment in smart grids and energy storage also increased while grid-scale battery storage funding grew tenfold since 2010.
The IEA believes the data shows the energy system is undergoing a broad reorientation toward low carbon energy and efficiency but investment in key clean technologies needs to be further ramped up to put the world economy on track for climate stabilisation.
Executive Director Fatih Birol said: “We see a broad shift of spending toward cleaner energy, often as a result of government policies. Our report clearly shows that such government measures can work and are key to a successful energy transition but while some progress has been achieved, investors need clarity and certainty from policy makers. Governments must not only maintain but heighten their commitment to achieve energy security and climate goals.”
China was the world’s largest energy investor last year, thanks to robust efforts in building up low carbon generation and electricity networks as well as implementing energy efficiency policies. It invested a total of $315 billion (£236.2bn).
However, investment in energy supply in the US declined to $280 billion (£210bn) due to low oil prices and cost deflation.
The Middle East and Russia emerged as the most resilient regions to spending cuts as a result of lower production costs and currency movements, according to the IEA.
A report from the World Energy Council said energy systems must be “smarter, not just stronger”.