Global investment in energy transition hit another record high in 2025, reaching $2.3trn. But despite the long-term drivers underpinning this durable and transformative trend, it has in recent years faced numerous headwinds, namely the increasing cost of capital, supply chain dislocations, and the highly uncertain nature of US clean energy policy.
However, with growing clarity around policy, and a realisation that the US administration’s bark is often louder than the severity of its bite, investors have started to step away from the sidelines, according to Dublin-based KBI Global Investors (KBIGI).
KBIGI, which specialises in natural resources and is celebrating its 25th year managing energy transition assets, says it sees a range of potential opportunities for long-term investors to view this transformation as turning the dislocation of recent years into a potential opportunity.
“The key structural drivers underpinning our Global Energy Transition Strategy were first articulated 25 years ago, but the energy transition, as we know it today, will we believe continue to accelerate”, says Andros Florides (pictured), senior portfolio manager at KBIGI.
“This is not out of altruism, but due to the increasing and unprecedented demand for energy, the falling cost of renewables, a greater appreciation of the need for energy security, and the need to decarbonise if the world is to meet pressing climate targets and mitigate the frequency and extreme nature of global climate events.”
Surging electricity demand
Florides said the ‘age of electricity’ is upon us, driven by industrial growth, the electrification of transport and heating (note the increasing use of air conditioning and heat pumps), and the explosive rise of data centres and AI.
Global electricity demand rose by 4.3% in 2024, with the ICF forecasting continued growth at close to 4% out to 20273. Over the next three years, global electricity consumption is forecast to rise by an unprecedented 3,500 TWh, which to add some perspective, corresponds to adding more than the equivalent of Japan’s annual usage to the world’s electricity consumption.
At the same time, he said that grid investment is lagging, creating both challenges and avenues for capital deployment. The IEA estimate that we will need to add or replace 80m kilometres of power lines by 2040 – an amount equal to the entire existing global grid – in order to achieve all national climate and energy goals.
Falling cost of renewables
According to IRENA, 91% of new renewable projects are cheaper than new fossil fuel alternatives, with solar and wind today the most cost-competitive and scalable sources of energy. With 92.5% of new capacity additions in 2024 coming from renewables, and 74% of electricity generation growth, wind and solar have, KBIGI believes, crossed a tipping point and entered a virtuous cycle of cost decline and widespread adoption, underpinned by ongoing technological innovation.
Energy security
74% of the global population live in countries that are net importers of coal, oil, and gas⁴, with growing vulnerability to volatile prices, supply disruptions, and geopolitical turmoil underscoring the risks of import dependence. The shift to domestic renewables offers greater resilience and reliability as extreme weather and ageing grids test current systems.
Decarbonisation
The global commitment to achieving net zero carbon emissions by 2050 remains a key driver of the energy transition, with the EU, China and the private sector driving unprecedented investment in clean energy, and technology giants leading the charge despite the growing demand for energy from the growth of AI and data centres.
Technological innovation is accelerating to provide the solutions required, with renewables such as solar, wind, hydro and geothermal rapidly scaling to deliver reliable and sustainable power. Battery technology is one of the standout technologies in the energy transition, with more powerful, faster and cheaper batteries enabling the integration of renewables.
To put the technological advances in context, a standard 20-foot storage unit, which once provided 3-4 megawatt hours (MWh), now typically delivers 5-6MWh, with several suppliers developing 10MWh containers, enough to power around 30,000 homes for an hour.
“These technological advances offer a broad and varied landscape, creating a diverse universe of potential investment themes for those looking for exposure to this long-term theme and willing to seize the opportunity”, says Florides.
“Investors typically gravitate towards thematic investing because they believe the long-term drivers of the markets and/or their competitive structural nature, may support the potential for improved outcomes overtime.
“We have managed clean energy related strategies for over 25 years and are committed to seeing how the journey to 2050 plays out in this evolving market, rich with companies delivering some of the most innovative solutions, towards satisfying the world’s insatiable demand for energy.”
Watch Florides here.
