Financing the Energy Transition 2025

Conclusion Access to long-term, low-cost capital is crucial to ensuring the viability of the energy transition, with a primary focus on reducing both capital costs and the cost of capital. Despite significant progress in global investment in the energy transition since the 2015 Paris Agreement, the world continues to face substantial challenges that could lead to a major climate crisis if urgent action is not taken. While investment levels have increased and are projected to reach $2 trillion by 2024, they remain insufficient to meet ambitious climate goals. The IEA estimates that investment will need to increase to $4.5 trillion annually by the early 2030s to meet net-zero targets by 2050. Regional analysis shows that the energy transition is progressing at different rates across Asia, Africa, the Middle East, Europe, the Americas and other regions. Although the challenges are common to all regions, their impact may vary depending on local conditions. Key challenges affecting projects include technical, economic, socio-political and regulatory factors. To achieve a sustainable future, business leaders and policy-makers must urgently address the barriers to accelerating investments and scaling- up initiatives. Reducing the financial burden on the clean energy industry is imperative. This can be achieved by properly allocating risk among stakeholders, lenders, offtakers, contractors, equity sponsors and government agencies, and further alleviating financial constraints by leveraging blended financial solutions such as government support, philanthropic funds, development finance institutions (DFIs) and export-import guarantees. Access to long-term, low-cost capital is crucial to ensuring the viability of this transition, with a primary focus on reducing both capital costs and the cost of capital. Creating an attractive investment environment requires international cooperation, clear standards and robust financial support. Whole-system planning and streamlined implementation timelines will reduce grid congestion and attract investors. Encouraging the participation of small and medium- sized enterprises (SMEs) can significantly contribute to technological advancement and industry growth. Ultimately, a global effort is needed to accelerate investment in energy transition technologies, reduce financing risks and create a sustainable pathway or future energy systems. Financing the Energy Transition: Meeting a Rapidly Evolving Electricity Demand 26