More diversified offshore wind financing and an active secondary market led to a record $16 billion being spent on new projects that came online last year, the IEA stated.
Meanwhile, investment in onshore wind dropped due to less activity in the US, China, Europe and Brazil, though one-third of this decline was because of falling investment costs.
The divergent trends for investment in the two technologies came as IEA figures revealed that spending on renewable power generation fell 7% year-on-year.
However, the $298 billion spent on renewable power worldwide in 2017 accounted for two-thirds of total power generation investments ($447 billion) last year. Meanwhile, Bloomberg New Energy Finance figures for the first half of 2018 show a 1% fall in clean energy investment year-on-year.
Spending on energy efficiency increased 3% year-on-year and investments in electricity networks and battery storage rose 1%, according to the IEA, both of which mark a slowing rate of growth.
The IEA’s executive director Fatih Birol said: "Such a decline in global investment for renewables and energy efficiency combined is worrying.
"This could threaten the expansion of clean energy needed to meet energy security, climate and clean-air goals.
"While we would need this investment to go up rapidly, it is disappointing to find that it might be falling this year."
Costs are falling for both onshore and offshore wind, according to the IEA’s annual World Energy Investment report.
The price of onshore wind has fallen by 15% between 2013 and 2017, from about $60/MWh to nearly $50/MWh, with lower prices observed in some markets last year.
These falling costs accounted for one-third of the decline in investment in onshore wind, the IEA stated.
Meanwhile, offshore wind has benefited from more diversified financing, with lower cost of debt reducing generation costs in Europe by nearly 15% between 2013 and 2017.
A "more active, increasing secondary market for financing" in offshore wind — project acquisition and refinancing — increases the number of projects a developer can finance, the IEA stated, driving further investment.
This secondary market now represents the largest source of new asset financing in offshore wind, the IEA said.
The report’s authors described this as a "stark change" from a few years ago when most investment came from developers and government-backed financing.
Private finance initiative-backed projects have become less common.
Nearly half of project financing in Europe in 2013 came from PFIs, but this proportion fell to one-fifth in 2017.
Correspondingly, banks’ appetites to finance offshore wind farms has increased with more than 50 commercial banks now providing debt for projects.
Project leverage has also increased, with debt-to-equity ratios averaging 75% in Europe, up from 60% a decade ago.
This growth of the secondary market, increased investment from banks, and more favourable debt financing has helped to reduce the levelised cost of offshore wind power generation in Europe by nearly 15% since 2013, the IEA concluded.
Both onshore and offshore wind projects are also growing in scale, aided by the global shift to auction systems, according to the IEA’s analysis.
Onshore wind farms awarded capacity at auction have increased in size by half between 2013 and 2017, while tenders have consistently supported large offshore wind projects, the agency stated.
Investments aimed at firming variable renewables have also increased, according to the report.
Fifteen per cent of grid-sale battery additions during 2016 and 2017 were paired with renewable energy projects — often being installed on the site of a new or existing wind or solar PV project.
This marked an increase from 5% in 2015.