The energy transition was once driven primarily by falling technology costs and emissions targets. Over the past year, that landscape has shifted, becoming more fragmented, security-driven and infrastructure-constrained. Energy systems are increasingly shaped by geopolitics, trade and financial conditions. In 2025, geoeconomic confrontation ranked as the most severe short-term global risk.² Trade restrictions expanded sharply, affecting $2.6 trillion of global commerce, three times the 2024 levels, while export controls now cover more than half of critical transition minerals.

Events in early 2026 reinforced these pressures. Disruptions to flows through the Strait of Hormuz, which carries roughly a quarter of global seaborne oil trade and a significant share of liquefied natural gas (LNG),³ triggered one of the most significant energy security shocks. Brent crude oil prices rose, LNG flows were curtailed and gas prices surged, particularly in Europe. The effects extended beyond fuels, exposing vulnerabilities across supply chains, infrastructure and system reliability. The impact was most acute in emerging economies, where higher import dependence, limited emergency stocks of crude oil and refined products, and limited fiscal space meant that affordability, reliable access and investment in the transition could not all be pursued.

At the same time, critical mineral supply chains, which are important for several energy technologies, are tightening. For copper, lithium, nickel, cobalt, graphite and rare earth elements, the top three producers account for around 86% of supply, with over half of key materials subject to export controls.⁴ As a result, security concerns now extend beyond fuels to encompass grids, minerals and system resilience.

Demand is growing faster than the systems built to deliver it can keep up. Global primary energy demand grew by 1.3% in 2025, down from 2.2% in 2024, but electricity demand grew much faster, increasing by 4.4% in 2024 and a further 3.0% in 2025. Growth is increasingly driven by electrification, cooling, digital infrastructure and artificial intelligence (AI). Global AI investment reached $1.5 trillion in 2025, while data centre electricity consumption was around 486 terawatthours (TWh). The latter is projected to reach approximately 945 TWh by 2030 and could exceed 1,700 TWh in the high case by 2035.⁵ Around 80% of electricity demand growth comes from emerging and developing economies, although advanced economies are also seeing rising loads from data centres, electric vehicles (EVs) and heat pumps.

This surge in demand is colliding with system constraints. More than 2,500 gigawatts (GW) of projects, spanning renewables, storage and large new loads such as data centres, are waiting in grid connection queues. This highlights a structural shift: the challenge has shifted from building capacity to integrating it into increasingly complex systems. Addressing this will require major upgrades to grids, increased system flexibility, expanded storage and continued emission-reduction measures applied to existing energy systems through carbon capture, cleaner fuels and fuel switching.

Clean energy deployment continues to accelerate, but emissions have yet to decline. Renewables and nuclear accounted for 42% of global electricity generation in 2025, up from 40% in 2024. However, energy-related carbon dioxide (CO2) emissions remained broadly flat at around 38 gigatonnes (Gt), while total greenhouse gas (GHG) emissions rose slightly to a record 60.6 Gt CO2 equivalent (CO2e). Rising demand and continued reliance on fossil fuels are offsetting gains from clean energy expansion. This reflects a structural condition, not a temporary lag; the global energy system is currently undergoing addition rather than substitution, with fossil fuel demand remaining at or near record levels even as clean capacity scales.⁶ Addressing the resulting emissions gap requires not just expanding renewables, but also carbon management technologies – carbon capture, utilization and sequestration (CCUS), methane abatement and low-carbon fuels – to be treated as integral components of the transition architecture, not as secondary instruments deployed only where clean alternatives are unavailable.

Investment has reached record levels but remains uneven. Global energy investment exceeded $3.3 trillion in 2025,⁷ with $2.3 trillion directed to clean energy.⁸ However, around 75% of this investment is concentrated in a small number of markets. Emerging and developing economies, where most future demand growth will occur, continue to attract only a fraction of the capital required, facing financing costs two to three times higher than those in advanced economies.

The Energy Transition Index 2026 reflects these dynamics. Overall progress has nearly stalled, with total scores increasing by just 0.03%. Gains in system performance (+0.43%), the greater in weight of the two sub-indices, were offset by the first decline in transition readiness in over a decade (-0.76%), signalling a weakening of the enabling conditions needed to sustain progress. This divergence points to a growing gap between short-term system improvements and long-term preparedness.

Country performance highlights a multi-speed transition. Advanced economies dominate the top rankings, with Sweden, Finland and Denmark maintaining leading positions. At the same time, countries such as China, Brazil and India continue to shape global system dynamics, while others, including Singapore, Saudi Arabia, India and Kenya recorded strong year-on-year (YoY) gains. Overall, 56% of countries improved their Energy Transition Index (ETI) scores, but only 24% advanced across all performance dimensions, underscoring the increasing difficulty of balancing sustainability, security and equity simultaneously.

Three priorities will define the next phase of the transition. The first is strengthening security, affordability and resilience as foundations of progress, extending across fuels, grids and supply chains. The second is unblocking delivery by streamlining permitting and closing the gap between deployment and system integration. The third is increasing investability through stable policy, credible regulation and better risk-sharing to direct capital where it is most needed.

Sustaining progress will depend as much on strengthening enabling conditions as on scaling technology. Stable policy frameworks, credible delivery pathways and stronger institutions will be critical to mobilize capital, accelerate infrastructure development and support innovation. Execution, including grid access, permitting, supply chains and affordability, is becoming as important as technology and capital. Countries that can align policy, investment and system capability, while embedding resilience and maintaining affordability, will be best positioned to sustain momentum.