Financing the Energy Transition 2025

Introduction Collaboration between industry executives, policy-makers, investors and financial institutions is vital to establish the right mechanisms to boost investment in the energy transition. Since the signing of the Paris Agreement in 2015, global investment in the energy transition, aimed at limiting temperature rise to 1.5°C above pre-industrial levels, has significantly increased. According to Bloomberg New Energy Finance (BNEF), investments in energy transition projects – including power grids, clean shipping, clean industry, electrified heat, transport, hydrogen, carbon capture and storage (CCS), energy storage, nuclear and renewable energy – have consistently hit record highs.1 Global spending on energy transition investments reached around $2 trillion in 2024, nearly double the amount invested in fossil fuels. However, current investment levels are still insufficient to meet climate goals. The International Energy Agency (IEA) states that global annual investment needs to increase to approximately $4.5 trillion per year by the early 2030s to align the energy sector with net-zero targets by 2050.2 Significant scaling-up of energy transition technologies is required to build a low-emission energy system, expand global energy access and meet growing electricity demand. The transition has been hindered by supply chain constraints and inflationary pressures following the Covid-19 pandemic. Since 2022, these pressures and high interest rates have increased capital costs for energy transition projects, causing many to be stalled.3 The energy transition requires support from industry executives, policy-makers, investors and financial institutions, each with their own constraints. Collaboration is needed to address the following questions: –Why is there a lack of investment in the energy transition? –What are the differences globally, regionally and locally? –What are the challenges to increasing investment in the energy transition? –How can energy transition investment be made more attractive? This paper consolidates views from the energy industry, representing utilities, grid operators and technology manufacturers worldwide. It identifies barriers to financing energy transition technologies and proposes solutions to secure investment, examining regional and global situations and exploring ways to lower financing costs and create an attractive investment environment. Financing the Energy Transition: Meeting a Rapidly Evolving Electricity Demand 8