The Facts
The year ahead will pose a number of critical tests for the global energy transition, as demand for electricity skyrockets while political support for clean energy wavers.
2024 saw a few important milestones: Electric-vehicle and solar-power deployment broke records, a barrage of clean-tech manufacturing projects moved ahead in the US, nascent technologies like carbon removal and sustainable aviation fuel scored big new customers, and global investors raised a record $86 billion to inject into climate tech and clean energy.
At the same time, coal consumption also hit a record high, most of the biggest oil companies renewed their focus on drilling, and the impending return of US President-elect Donald Trump cast uncertainty over a long list of climate subsidies and regulations. In the year ahead, the energy transition will only get more challenging, as demand outstrips the pace of clean energy deployment, driving global emissions up.
In this article:
Tim’s view
The biggest stories I’ll be following this year will be Trump’s foray into a very different energy market than his first stint in office, the growing dominance of Big Tech in the power sector, and how Wall Street navigates the often conflicting imperatives of this phase of the energy transition.
Will Trump overturn Biden’s climate legacy?
I talk to a lot of people who say the US energy transition has become Trump-proof, and that there’s enough bipartisan backing for outgoing President Joe Biden’s Inflation Reduction Act to prevent the incoming administration from pulling the rug out on clean energy. It’s hard to pinpoint the line between genuine, fact-based optimism and magical thinking, though. Benjamin Baker, managing director at the renewables investment firm Greenbacker Development Opportunities Fund, put it well: “The Trump administration is not going to present tailwinds for us,” he told me. “But I’m of the view that the headwinds might be less significant than some folks bluster about.”
There are several important threads to follow here. The first: Trump’s first term was marked by high turnover in his cabinet. Will the people tapped for top climate and energy spots, like Energy Secretary-nominee Chris Wright or unofficial Trump whisperer Elon Musk, stick around long enough to carry off major policy shifts? Then there’s the private sector. Will legacy energy companies respond to the call to drill, baby, drill, and what new rifts will emerge between majors and independents?
Meanwhile, climate policy is intimately linked to foreign policy: How will US companies work around new tariffs on China and other trade partners? How much farther will Trump allow China to pull ahead of the US on EVs, solar, and critical minerals? How will Trump change sanctions on fossil fuel exporters like Russia or Iran, and how will that shift the market opportunities for US producers? In Congress, Republicans will be under increasing pressure to pull off a breakthrough on permitting reform — and when it comes to the IRA, may face some hard choices between demonstrating loyalty to the president and backing clean energy projects in their districts.
The load growth supercycle accelerates
Data centers, new factories, and EVs are driving the fastest expansion of the US electric grid in generations. Tech companies are quickly replacing traditional utilities as the most important players in the power market, and have shown an eagerness to make big bets on both conventional renewables and innovative energy sources like geothermal and advanced nuclear.
But those will take time to scale up — supply chain and grid connection bottlenecks, and relatively high interest rates, remain a problem for all clean energy projects — and the AI boom isn’t patient. That means natural gas will also be a big winner. Competition for scarce electrons, and the tension between energy-demand growth and emissions, will be a defining story of the year ahead. Keep an eye on how tech companies leverage their clout with the Trump administration and local governments for special treatment on energy.
Bankrolling the energy transition
Dedicated climate funds raised a record amount of capital for clean tech in 2024, but have been slow to actually invest it, a sign that while Wall Street sees a big opportunity ahead, it is still treading cautiously into the energy transition. That’s likely a combination of practicality — fossil fuels are still a huge business and climate tech is still risky in many different ways — and politics: Citi and Bank of America this week became the latest banks to drop out of a net-zero alliance that had drawn the ire of Republican lawmakers.
As more climate technologies shake off the perception of risk by making it across the “valley of death,” and demand for power rises, more of that dry powder will get invested this year. I’ll be watching where the deepest pockets see the biggest opportunities, and which key decarbonization priorities are still getting overlooked. Meanwhile, the fight over climate finance for the Global South will persist, and now that rules for a UN-backed carbon market were approved at COP29 in Baku, global carbon trading is in for a boom.
Notable
- Global demand for gasoline will peak this year, S&P Global forecasts, increasing competition between a slate of huge new refineries that have opened recently and probably force some, especially in the US and Europe, to close.