Global energy systems face mounting pressures and rising stakes, necessitating a resilient, regional and market-driven transition.

The global energy system has steadily evolved over the past decade – but 2025 may mark an inflection point as long-building pressures converge to redefine how energy is produced, secured and valued. Technology, policy, trade and geopolitical risks are now playing a greater role in shaping future trajectories. Understanding this shift requires a clear view of the initial starting point, what’s changed since that point and what this means for the future resilience, inclusivity and competitiveness of energy systems.

Historic drivers of energy transformation – key takeaways

Today’s energy system has been shaped not by sudden disruption, but by a decade of shifting priorities in energy production, consumption and governance.

Transformation momentum began to build in the early 2010s, driven by falling renewable costs, post-2008 financial crisis climate alignment and the 2015 Paris Agreement. Technological breakthroughs in solar, wind and storage precipitated optimism for a low-carbon future.⁶⁵

As the decade progressed, however, rising geopolitical tensions and growing dependence on global supply chains revealed new vulnerabilities. Countries responded by scaling domestic clean energy value chains and emphasizing energy sovereignty, seen in policies like the EU Battery Action Plan.⁶⁶

The COVID-19 pandemic exacerbated these trends. Supply chain shocks, surging gas prices and widening equity gaps underscored the need for resilience and inclusive access. Between 2019 and 2021, gas equity scores dropped sharply – highlighting rising consumer burdens in vulnerable regions.

By 2022, climate risk, supply fragility and competitiveness concerns had converged into strategic urgency. Clean energy became central to economic and geopolitical strategies. Policy shifts in the US, EU and other regions reflected this – aiming to localize production, reduce dependencies and create green jobs. Examples include the US Strategy to Secure the Supply Chain for a Robust Clean Energy Transition (2022),⁶⁷ the EU Critical Raw Materials Act,⁶⁸ the IRA⁶⁹ and the Green Deal Industrial Plan.⁷⁰

The realization that the energy transition would require a significant rise in critical mineral and material consumption cast light on bottlenecks and dependencies in the critical minerals value chain. A rise in the frequency and impact of extreme weather events provided impetus for renewing focus on energy infrastructure resilience and tackling energy-related emissions (through strategies like tripling renewable energy capacity and doubling the rate of energy efficiency). Recent years have seen renewed interest in nuclear energy, growth in electromobility and the rapid emergence of AI – raising both electricity demand and new opportunities to optimize energy systems and improve efficiency.

Over the past decade, system performance improved modestly (+3.3%), with gains in sustainability (+5.3%) and security (+3.4%), while equity saw limited progress (+1.5%). In contrast, transition readiness rose more decisively (+12.5%), led by strong momentum in regulation and political commitment (+19.6%) and infrastructure (+15.4%). Finance and investment (+10.3%), education and human capital (+6.8%) and innovation (+3.4%) also improved, though at a slower pace – highlighting uneven capacity to scale solutions and build resilient talent ecosystems.

Table 12: Decade lookback for the energy transition

Cumulatively, these trends show that the transformation now under way (further explored in section 4.2) is built on long-term momentum – yet, its future will be shaped by structural disparities, national capacity to act and cooperation across national borders. While sustainability has gained prominence globally, many emerging economies have long prioritized energy access, affordability and industrial growth – often constrained by fiscal and infrastructure limitations. Today’s regulatory, infrastructure and equity gaps are not new, but are now intersecting with climate imperatives, reshaping the global energy agenda. Navigating diverse starting points will be key to building an inclusive, context-driven transition.

Energy systems in a new global context – key takeaways

As geopolitical tensions, economic competition and rapid technological change intensify (Figure 10), countries are recalibrating their energy strategies to prioritize security, affordability, self-sufficiency and resilience. While climate ambition remains a core pillar, for many emerging and developing economies (EMDEs), concerns around energy access, equity and reliability have long taken precedence – shaped by infrastructure gaps, fiscal constraints and development needs. Recent events, such as the widespread electricity blackout in Spain and Portugal⁷¹ in April 2025, have further underscored the critical importance of energy resilience, even in advanced economies.

Figure 10: Strategic forces reshaping global energy systems

According to the Chief Economists Survey (2024), the following factors are important contributors to current levels of global economic fragmentation – in which the geopolitical climate serves as a significant factor (Figure 11).

Figure 11: Chief Economists Survey: global economic fragmentation factors

These structural shifts are reshaping energy markets, influencing investment decisions and redefining the role of key energy sources for the future.

Energy efficiency – the world’s first fuel: Beyond the benefit of reducing the need for additional supply, energy efficiency is the most cost-effective lever to boost security, cut emissions and lower costs. Smart grids, AI analytics and demand response programmes are optimizing energy use, while behavioural incentives can drive more conscious consumption – supporting a more resilient, low-carbon system.

Natural gas – still a key transitional asset: Despite climate scrutiny, natural gas remains central to today’s energy mix. It supports power system stability, complements variable renewables and serves key industrial applications, including hydrogen production and e-fuels. When paired with carbon capture, it offers a pragmatic path towards near-term security and decarbonization – particularly in regions with established infrastructure.

LNG – from transition fuel to destination fuel: Long seen as a “bridge fuel”, LNG is becoming a more permanent feature in the global energy mix. Policy support, technological innovation (e.g. efficiency gains, CCUS) and supply diversification have redefined its role. Demand for LNG surged in 2024-2025,⁷² especially in Asia and Europe, as countries sought alternatives to Russian pipeline gas. The Asia-Pacific region remained the largest LNG importer, with China and India securing long-term contracts. The US and Qatar expanded export capacity, and, while global supply growth slowed to 2% in 2024, new projects are set to drive a rebound to nearly 6% in 2025.⁷³

The steady comeback of nuclear: Nuclear energy is regaining momentum, led by traditional designs and interest in SMRs, which offer safer, scalable and low-carbon baseload power. Their flexibility makes them an option for coal phase-outs and complements LNG in delivering stable, dispatchable energy. Global investment is rising, especially in China, which is set to surpass the US and Europe in nuclear capacity by 2030. While nuclear power today produces just under 10% of global electricity supply, capacities are increasing, with the majority of projects under construction in China.⁷⁴

Shift to next-generation fuel technologies: In many fossil-fuel-dominated sectors, e.g. the shipping industry, efforts to reduce emissions have led to international deals such as the International Maritime Organization (IMO) agreement.⁷⁵ Investment by shipping companies in next-generation fuel technologies, such as green ammonia, is needed (rather than agreements that encourage a shift to LNG, which, although lower-carbon than conventional shipping fuel, still produces substantial emissions). In the aviation sector, efforts to scale sustainable aviation fuels are under way. Although the world needs a range of cleaner fuels to scale, there are hurdles associated with costs, demand and policy that still need to be overcome.

Clean energy technologies – driving low-carbon growth, led by renewable power: Clean energy investments are outpacing fossil fuels,⁷⁶ with the power sector leading through rapid deployment of solar, wind and smart grids. As decarbonization efforts expand to harder-to-abate sectors, technologies like CCUS are gaining traction. Over 100 projects⁷⁷ are ongoing and under construction globally, supported by policy incentives and growing R&D. The success of clean technologies, however, depends on resilient supply chains and reliable access to critical resources – making supply chain security increasingly pivotal.

Energy storage solutions as the backbone of renewable integration: To manage renewable intermittency, energy storage is essential for grid stability and supply-demand balance. Global capacity is set to surpass 2 terawatt hours (TWh) by 2030, with annual installations increasing at an average rate of 21%.⁷⁸ China is projected to lead with a 43%⁷⁹ share, followed by the US (14%), Europe and India.⁸⁰ Battery systems, hydrogen and pumped hydro are among the key technologies driving flexibility in low-carbon energy systems.

Digital forces in energy – scaling intelligence, managing demand: AI is reshaping energy systems, offering efficiency gains but also driving up electricity and resource demand. Generative AI consumes 33 times more energy than traditional software,⁸¹ and data centres could drive 10% of global power demand growth by 2030 (and up to 30% in hubs like Ireland).⁸² They already account for 1% of global energy-related emissions and could use 67% of global copper by 2030.⁸³ While AI may help cut 5-10% of emissions,⁸⁴ its rising power needs risk diverting renewables from other clean uses. Quantum computing may offer yet another means of advancing innovation through its lower energy consumption.

Furthermore, electrification is emerging as a defining force in energy system transformation. It is driven not only by climate ambition but also by structural demand shifts – from industrial processes and transport to AI, cooling and digital services. Renewables, often the lowest-cost generation option, are expanding rapidly as a result. Yet, electrification also increases the capital intensity and complexity of energy systems, necessitating major investments in grids and infrastructure, and heightening risks related to cybersecurity and system stability.

In parallel, energy trade is undergoing a fundamental transition – shifting from fossil fuels to technology. As solar panels, batteries and critical components replace oil and gas tankers, new trade routes and geopolitical dynamics are taking shape. This shift reduces short-term supply risks but increases strategic dependencies on concentrated clean technology supply chains (especially in minerals and manufacturing). The transformation from “tankers to container ships” is radically altering the state of global energy interdependence.

These developments mark a clear shift away from one-size-fits-all solutions towards a more strategic and diversified energy mix – balancing dispatchable power (LNG, nuclear, storage), decentralized systems and digital innovation while improving energy security, equity and sustainability.

They also signal a departure from a purely globalized energy model – one that’s heavily reliant on cross-border trade for traditional energy resources, centralized infrastructure and concentrated supply chains – towards more localized, resilient and self-sufficient energy systems. Yet, cooperation across borders and sectors remain vital to effective delivery.

As energy systems evolve, the narrative is progressing from idealism to pragmatism: Security, economic drivers and resilience are now as influential as sustainability in shaping decisions, as energy systems are now expected to deliver not just clean power, but also reliability, affordability and strategic value.

Governments and businesses are now focusing on:

Securing energy supply chains: Governments are moving to reduce or diversify import dependencies, boost domestic production and tighten control over critical materials like lithium, cobalt and rare earths (e.g. China controls 70% of global rare earth extraction and 90% of processing).⁸⁵

Delivering economic value: Energy projects are now judged on industrial impact, job creation and competitiveness, as well as on emissions impact – e.g. US’s IRA spurred more than $200 billion in clean energy manufacturing,⁸⁶ and the EU’s Clean Industrial Deal was presented as a strategy for EU competitiveness and decarbonization.

Digitalizing for decentralization: AI, smart grids and blockchain are facilitating more localized and efficient power systems, especially in emerging markets. Global investment in digital grid technologies alone reached $81 billion in 2024,⁸⁷ highlighting the rising importance of digital and cyber resilience.

As global trade dynamics change, energy systems are moving away from heavily globalized supply chains towards more localized and decentralized models. The WTO forecasts that world merchandise trade will contract by 0.2% in 2025 – a three percentage point reversal from earlier expectations – due to rising tariffs and trade uncertainty.⁸⁸ This trend reflects the broader “peak trade” phenomenon, where protectionist policies and national resilience strategies are replacing hyper-globalization.

Energy supply chains are increasingly viewed through a national security lens, prompting countries to tighten control from extraction to manufacturing and reduce reliance on single markets. Policies such as the US’s IRA, the EU’s Critical Raw Materials Act and China’s dominance in battery and solar supply chains underscore the geopolitical dimensions of energy security. Countries are securing access to critical minerals like lithium and cobalt, while producers increasingly pursue local beneficiation to capture more value.

At the same time, digitalization is transforming energy markets. AI, blockchain and smart grids are enabling more localized and efficient energy distribution, reducing reliance on centralized power structures. Off-grid solar systems and microgrids expanded access for more than 560 million people worldwide in 2023,⁸⁹ especially in emerging markets, further strengthening decentralized energy resilience.

As this narrative broadens, national energy strategies are diverging. Countries are adapting based on their geopolitical positions, economic realities, resource endowments and technological strengths. Some prioritize energy security and selective decarbonization, while others push aggressively towards renewables and full electrification (Box 9).

As chapters 2 and 3 have illustrated, this divergence has created a fragmented global energy landscape. The transformation of energy systems is no longer linear or uniform, but deeply contextual – reinforcing the need for a differentiated, tailored approach to energy transition.

In this context, managing a multi-speed, multidimensional energy transition becomes essential to ensuring no region is left behind.

Regional perspectives on the energy transition priorities

As energy systems fragment across equity, security and sustainability dimensions, the emphasis on progress must be strengthened. Rather than relying solely on collective action bound by uniform timelines and approaches, the focus must shift towards enabling a multi-speed transition – one that accommodates diverse national capacities, priorities and starting points. Success will require a dual approach that maintains global alignment on overarching goals while facilitating differentiated, context-specific solutions on the ground that attract sufficient corporate investments (Table 13).

Table 13: Regional priorities and strategic needs for energy transformation

Delivering a sustainable, secure and equitable energy future in a multi-speed world requires more than coordination – it calls for careful navigation of complex trade-offs and a rethinking of how policies, markets and institutions interact. Key structural shifts are needed to facilitate adaptation to diverse starting points, resource endowments and transition capacities (Table 14).

Table 14: Strategic shifts for managing fragmentation

Managing a fragmented energy transition is not about enforcing uniformity but about unlocking progress through differentiation. Countries must be empowered to transition at their own speed with strategies adapted to local conditions.

The shift from uniformity to differentiation makes global coordination more essential – but in new ways. Existing mechanisms like the Conference of the Parties (COPs) and regional platforms were built for a more linear transition model. Today’s diverse energy landscape, shaped by uneven capacities and multi-speed transitions, demands more flexible, context-aware delivery. The challenge now is not to replace existing structures, but to adapt them. In short, it’s crucial to establish fit-for-purpose institutions that preserve shared goals while allowing for differentiated progress (Table 15).

Table 15: Models of cooperation for a multi-speed, multidimensional transition

Growth and competitiveness in energy systems – key takeaways

Achieving the energy transition is not only a policy challenge – it’s a capital challenge too. Attracting long-term investment requires a strong business case, including clear market signals, reduced risk, and stable policy and financial conditions. While public support and multilateral financing once helped close the gap, today’s high interest rates and rising uncertainty are making investments harder to realize.

Despite these headwinds, global investment in low-carbon energy systems reached a record $2.1 trillion in 2024 (up 11%). Yet, this marks a notable slowdown from the 24-29% annual growth seen over the previous three years.¹⁰¹ Investment continues to flow into mature technologies like solar and wind, but funding remains constrained for emerging solutions such as hydrogen, carbon capture and industrial decarbonization.¹⁰² According to the World Economic Forum’s Net-Zero Industry Tracker 2024, an estimated $30 trillion in additional capital is required by 2050 for the sectors in scope, of which 57% must come from external sources or ecosystems.¹⁰³

Yet, current investment trends fall short of what is needed, both in terms of scale and distribution. In 2025, finance and investment dimension scores slowed to just +0.2% y-o-y, reflecting a slight weakening in overall investment conditions. At the same time, a growing disconnect emerged between demand and capital flows – over 80% of global energy demand growth came from emerging economies,¹⁰⁴ yet more than 90% of the increase in clean energy investment since 2021 was concentrated in advanced economies and China.¹⁰⁵ China alone attracted $818 billion in 2024, a 20% increase from the previous year.¹⁰⁶

Without structural change, the global investment gap will widen further, especially in EMDEs, where accelerating the transition requires a dramatic scale-up in finance. To align with a net-zero pathway, global energy transition investment must reach $5.6 trillion annually by 2030, according to BloombergNEF.¹⁰⁷ Yet, developing economies alone face an annual investment gap of $2.2 trillion.¹⁰⁸ In 2024, it was projected that clean energy investment in EMDEs (excluding China) will exceed $300 billion for the first time, led by India and Brazil. This accounts for only about 15% of global clean energy investment. Africa accounted for less than 2% of global clean energy investment despite having the highest population growth and electrification needs.¹⁰⁹

Closing the gap requires more than capital – it demands financing structures that function in high-risk, underserved markets. Capital costs in EMDEs remain up to seven times higher than in advanced economies, limiting project viability despite their cost-effective mitigation potential. Clean energy must now compete on fundamentals: cost, scale and bankability. Profitability is no longer optional – it’s essential for long-term energy security and investor confidence. Emerging technologies like generative AI can accelerate this shift by lowering costs, boosting performance and improving returns across the value chain.

Scaling clean energy deployment cost-effectively at speed will depend on tackling three core investment challenges:

These challenges are addressed in the strategic playbook below (Table 16).

Table 16: Strategic levers to unlock energy investment

Without answering these questions, the capital transition will lag behind technological potential, leaving clean energy deployment stalled and economic opportunity untapped.

Yet, the mobilization of capital at scale doesn’t occur in a vacuum. The ability to unlock investment hinges on the broader policy and market environment in which decisions are made. As governments recalibrate their policy mechanisms (e.g. subsidies, incentives, regulations) and investors grow more risk-aware, the tension between policy ambition and market realism is becoming a defining feature of the energy landscape. Understanding how these forces interact is critical to turning capital strategy into real-world deployment.

The defining challenge of 2025 is the tension between policy ambitions and market realities. Governments have set ambitious targets, but financing gaps and shifting investment priorities threaten to slow progress.

Several structural challenges are shaping this landscape.

Table 17: Financing focus areas for the energy transition

To accelerate progress, policy-makers and market actors must work in concert to de-risk investment, strengthen market signals and ensure that clean energy technologies can compete on a level playing field. A well-calibrated mix of policies, pricing mechanisms and private capital will be essential to shift from a transition fuelled by ambition to one driven by economic momentum.

Only then can the full potential of energy systems be realized and scalable, secure and sustainable outcomes be delivered in a world of growing complexity.

Unlocking the full potential of energy systems will require more than a navigation of policy and market friction – it will require a repositioning of the transformation itself as a strategic lever for economic growth. What has long been seen as a climate obligation must now be reframed as an engine of job creation, innovation and competitiveness.

Governments, businesses and financial institutions need to recognize that decarbonization is not just an environmental necessity but a pathway to long-term economic competitiveness (Table 18).

Table 18: Strategic benefits of the energy transition

Failing to accelerate the energy transformation would prompt significant economic consequences. Delayed action would not only make decarbonization more expensive and disruptive later – it would also expose economies to escalating risks.

In short, the cost of inaction is not only environmental – it is economic, financial and geopolitical. The real risk lies not in moving too fast, but in moving too slowly.

To ensure that market forces drive the transition forward, three critical shifts are needed:

The energy transformation is at a crossroads, and policy ambition alone will not be enough. Economic viability must take centre stage. Governments, investors and businesses must work together to build a market-driven energy transformation that delivers strong financial returns while addressing the energy trilemma. Success will depend on one critical factor: making this transformation a profitable, scalable and self-sustaining economic opportunity.