Energy Transition Investment Trends: Where Is the Money Going?

Energy Transition Investment Trends: Where Is the Money Flowing?

Despite a tightening macroeconomic environment, global clean energy investment has shown resilience. However, geopolitical factors, policy reversals, and supply chain bottlenecks are complicating the trends. GlobalData analyst Alex Phillips points out that energy security does not automatically equal clean energy, and coal investment is also recovering. This article examines investment flows, the performance of different technology sectors, and the outlook for the second half of the 2020s.

Industry Background: Drivers Behind the Resilience

Although growth was rapid in previous years, the pace of global clean energy investment is slowing, but it continues to expand. According to GlobalData's "Energy Transition Investment Trends 2026" report, analyst Alex Phillips uses the term "resilience" to summarize investment performance over the past year. Clean energy investment is driven by electrification, energy security concerns, and growing demand from AI and data centers. Meanwhile, supporting infrastructure—including energy storage and power grids—has also attracted significant capital. However, capital commitments do not equal project delivery; supply chain bottlenecks and permitting delays pose significant risks.

Investment Distribution by Power Generation Technology

Solar: The Biggest Magnet, but Risks Are Accumulating

Solar continues to attract the most capital, but growth is uneven and increasingly faces risks from highly concentrated supply chains and policy changes. These factors are expected to slow investment growth in the late 2020s.

Nuclear: Resurgence, with Small Modular Reactors as a Catalyst

Nuclear power investment is expected to grow significantly by 2030, with the focus shifting from the Asia-Pacific region to Europe and the United States. Small modular reactors (SMRs) are becoming a key catalyst as data centers seek reliable, low-carbon baseload power.

Biomass and Geothermal: Niche but Significant

Biomass and geothermal, often overlooked in energy transition discussions, are becoming meaningful investment areas. The Asia-Pacific region will drive geothermal investment by 2030, while data center demand in North America is also generating new investment momentum.

Hydrogen: The Most Complex Outlook

Hydrogen investment faces a large gap between planned capital expenditure and actual construction, making it the most complex sector in terms of outlook.

Cost of Capital: Driver or Obstacle?

High interest rates have increased borrowing costs, and energy transition technologies are particularly affected because they are capital-intensive. New technologies face higher execution and revenue uncertainty, leading to higher financing risk premiums, which further elevate the cost of capital. This dynamic is clearly reflected in project cost expectations.

Impact on the Energy System

Investment flows directly impact the energy mix. The shares of solar and wind continue to rise, but grid modernization has become a bottleneck—without sufficient transmission capacity, cost reductions cannot translate into reliable power. The revival of nuclear and natural gas investment will change the composition of low-carbon electricity, while hydrogen needs to overcome infrastructure challenges to play a larger role.

Challenges AheadCurrent major challenges include: high concentration of the solar supply chain, delays in project permitting and approvals, insufficient grid capacity, policy uncertainty (especially in the United States and China), and slow progress in the commercialization of hydrogen. Additionally, the high-interest-rate environment continues to put pressure on capital-intensive projects.

Outlook for 2030

GlobalData predicts that the second half of the 2020s will see a clear shift: renewable energy will continue to grow but at a slower pace, natural gas investment is expected to rebound, and nuclear power investment will strengthen. Grid modernization and transmission expansion must become core investment priorities. The energy transition investment portfolio will become more diversified, but multiple obstacles must be overcome to achieve net-zero goals.