The Energy Transition Is On – Just Not How We Expected

“The future is already here – it’s just not evenly distributed.” Science fiction writer William Gibson’s prescient comment from the 1990s resonates in today’s increasingly polarized conversation about the energy transition.

While headlines declare setbacks and political headwinds, the data tells a different story: the transition has not reversed, it is just taking a different path to the one we expected. Global energy investment is set to reach a record US$3.3 trillion in 2025, with clean energy technologies attracting US$2.2 trillion, twice the US$1.1 trillion flowing to fossil fuels. But the transition we thought we might have – largely policy-driven, with developed markets leading the way because they could afford to implement change first – has been turned on its head.

Original Roadmap

The original roadmap envisioned Europe and the US hitting net zero by 2050 while emerging markets followed later, with China targeting 2060 and India 2070. This made sense because developed markets had experienced decades of flat or declining energy demand and had almost universally supportive policy.

The developed world’s energy transition was modelled as a transformative one. Where previous transitions had been additive, with new forms of energy layered onto existing forms to meet new demand (biomass supplemented with coal then oil), this one would require the existing energy forms to be replaced. Hence the need for significant policy measures to effect the required change. Emerging markets, on the other hand, were expected to make a gradual additive transition to meet new energy demand, without the supportive policy.

A Different Transition

All this has changed. With surging total energy demand – particularly due to the exploding volume of data processing – and diminished policy momentum in developed markets, they are transitioning more slowly than expected, and in an additive way. The opportunities for decarbonization solution providers remain abundant: more total energy demand means more potential demand for decarbonization technologies. But these technologies are now seen in the developed world as part of an all-of-the-above energy solution.

Meanwhile, emerging markets are surprising dramatically to the upside, driven not by policy but by the simple economics of (mostly Chinese-manufactured) clean technology that has become the cheapest option available. In some sectors in emerging markets, such as electric vehicles in China, we are seeing a transformative energy transition. Most new cars, and now 10% of all cars, as well as the vast majority of two-wheelers sold in China, are electric.

Acceleration

We expect both trends to accelerate. Developed-market energy demand growth has to date been mostly a phenomenon in the US, where data centres are on course to account for almost half the growth in electricity demand between now and 2030. By the start of the next decade, the US is set to use more electricity to process data than to manufacture all energy-intensive goods combined. Alongside artificial intelligence, the increased energy demand additionally reflects industrial reshoring and diminishing returns from decades of efficiency improvements.

There are now also early indications of higher electricity demand in Europe, whose creaking electrical infrastructure will require investment and drive demand for decarbonization solutions. Fossil fuels simply cannot meet the new energy needs efficiently or economically, even with favourable policy. So, the market for decarbonization is still growing, creating opportunities for investors, and the imperative to advocate for policy that encourages it is more pressing than ever.

Second Transformation

The second transformation, the change in the trajectory of the energy transition in emerging markets, is even more significant for global emissions. China’s exports of solar, wind and electric vehicles to the Global South now account for 47% of total exports – nearly matching its developed country exports for the first time. The scale is staggering. Pakistan alone imported 19 GW of solar modules in 2024, equivalent to nearly half its grid-connected capacity. This represents the solution to what has long been the biggest challenge in climate policy: how to transition emerging markets, which constitute the majority of future emissions growth. Chinese solar panels are lighting rural Zimbabwean communities, while affordable Chinese electric vehicles are transforming city streets from Mexico to Thailand. Within China itself, clean energy contributed a record US$1.6 trillion to the economy in 2023, becoming one of the country’s primary economic drivers.

Perhaps because we are not experiencing the energy transition we expected, the valuations of companies that are positively exposed to decarbonization often do not reflect the structural growth supporting them – even though the ones we hold in our decarbonization-focused investment portfolio continue to grow at almost double the rate of the market as a whole. And for investors looking to do good as well as generate a financial return, we also see more opportunity for impact in a world where energy growth is accelerating, and decarbonization is no longer only, or even primarily, a developed world phenomenon.

As futurologist Roy Amara observed, “We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.” The energy transition may have exemplified Amara’s Law: early hype gave way to disillusionment, but now the long-term transformative effects of the energy transition are becoming undeniable.

Sources:

IEA World Energy Investment 2025, https://www.iea.org/reports/world-energy-investment-2025

IEA Energy and AI Report 2025, https://www.iea.org/reports/energy-and-ai

Centre for Research on Energy and Clean Air analysis, various reports 2024-2025

RIA Disclaimer

The views and opinions expressed in this article are solely those of the authors and do not necessarily reflect the view or position of the Responsible Investment Association (RIA). The RIA does not endorse, recommend, or guarantee any of the claims made by the authors. This article is intended as general information and not investment advice. We recommend consulting with a qualified advisor or investment professional prior to making any investment or investment-related decision.

Author

Nazmeera Moola

Chief Sustainability Officer

Ninety One

Nazmeera is the Chief Sustainability Officer at Ninety One. In this role, she oversees our firm-wide initiatives, including our commercial imperatives, investment integration, and our inhabit and advocacy work. Prior to this she was Head of SA Investments, where she worked across our public and private strategies in Africa. Before that she was co-Head of SA & Africa Fixed Income. Nazmeera has covered the macro-economy in South Africa and other emerging markets since 2000. She is passionate about making financial markets work to support development. Her remit has included the Emerging Africa Infrastructure Fund, which provides debt financing for infrastructure projects across Africa. She joined the firm in 2013 from Macquarie First South where she was Head of Macro Strategy. She began her career as an economist at Merrill Lynch in South Africa and London. Nazmeera graduated from the University of Cape Town with a Bachelor of Business Science degree and is a CFA® Charterholder.