Global energy investment is projected to reach a record $3.3 trillion in 2025, despite continued economic uncertainty and heightened geopolitical risks, according to the International Energy Agency (IEA).

The Paris-based organisation’s tenth World Energy Investment 2025 report highlights a growing divergence between clean energy expansion and lagging support for energy systems critical to grid stability and supply security.

Clean energy technologies – including renewables, nuclear, power grids, storage, low-emissions fuels, energy efficiency and electrification – are expected to account for $2.2 trillion of total global investment this year. This shift reflects a mix of policy incentives, cost advantages and mounting concerns over energy security. Fossil fuel investment, by contrast, is expected to remain steady at $1.1 trillion.

“The fast-evolving economic and trade picture means that some investors are adopting a wait-and-see approach to new energy project approvals,” said IEA Executive Director Fatih Birol. “But in most areas we have yet to see significant implications for existing projects.”

The report notes a major reconfiguration in the geography of energy capital. China, which in 2015 marginally outpaced the United States in energy investment, has emerged as the global green energy champion and now spends more than the EU and US combined.

“China cemented its position as the world’s single largest investor in energy, while solar PV is attracting more capital than any other technology,” the IEA report said.

Over the past decade, China’s share of global clean energy spending has risen from a quarter of the total global green energy spend to nearly a third, fuelled by large-scale investment in solar, wind, nuclear, batteries and electric vehicles.

“Today’s investment trends clearly show a new Age of Electricity is drawing nearer. A decade ago, investments in fossil fuels were 30% higher than those in electricity generation, grids and storage. This year, electricity investments are set to be some 50% higher than the total amount being spent bringing oil, natural gas and coal to market,” the IEA noted.

Globally, spending on low-emissions power generation has almost doubled over the past five years, led by solar PV. Investment in solar, both utility-scale and rooftop, is expected to reach $450bn in 2025, making it the single largest item in the global energy investment inventory.

Battery storage investment is also forecast to surpass $65bn in 2025, while nuclear capital flows have increased 50% over the past five years to a projected $75bn – again mostly lead by Chinese investment into new nuclear power generation capacity. However, despite rapid progress in generation, grid investment is falling behind. Spending on power networks, currently at $400bn annually, is not keeping pace with growing electrification demands.

Lack of investment into the grid is believed to have been the cause of the recent Iberian peninsula blackout in May. The collapse of the grid in southern Europe, overwhelmed by the fickler supply of power generated by renewables, highlighted the lagging investment into upgrading grids to cope with the nature of the new electricity supplies.

The report also highlights contrasting trends in fossil fuel sectors. Upstream oil investment is set to decline by 6% year on year – the first drop since 2020 – driven by weaker activity in the US shale sector. However, LNG projects are expanding, with new capacity under development in the US, Qatar and Canada as demand from Europe and Asia is set to rise, especially as Europe intends to reduce Russian gas imports to zero by 2027.

In coal, strong electricity demand continues to drive new supply investment, particularly in China and India. China alone began construction on nearly 100 gigawatts of new coal-fired generation, pushing global coal approvals to their highest level since 2015.

Energy investment remains uneven globally. “Africa accounts for just 2% of global clean energy investment, despite being home to 20% of the world’s population and rapidly growing energy demand,” the IEA stated.

US energy investment

The US has pivoted sharply towards clean energy technologies, bolstered by energy security priorities and rising demand from emerging sectors such as data centres (DCs) and artificial intelligence (AI), according to the IEA.

Since becoming a net energy exporter in 2019, the US has steadily expanded its international presence, driven by increased investment in LNG infrastructure targeting Asian and European markets. In 2024, the US was the world’s largest producer of oil and gas, accounting for 20% of global output and 25% of total energy investment.

“Energy investment in the United States reflects its prioritisation of energy security, with a subsequent strategic push to establish a presence in emerging value chains and to supply international markets,” the IEA said.

Between 2015 and 2024, the share of US energy investment allocated to fossil fuel supply and fossil fuel-based electricity generation declined from 60% to just under 40%, while clean energy investment grew rapidly. This shift has been fuelled by supportive policy frameworks and declining technology costs. As a result, new clean energy manufacturing investment reached $60bn in 2024.

The US has also strengthened its position in global clean technology supply chains. In 2024, it accounted for 8% of global lithium-ion battery production, while domestic solar photovoltaic module manufacturing capacity nearly tripled to 42 GW.

Corporate demand, particularly from technology firms and data centres, has intensified clean energy procurement. “With a boom in Artificial Intelligence (AI), and subsequent investment in data centres (DC), companies are racing to secure sources of clean electricity,” the IEA said. US corporate power purchase agreements (PPAs) accounted for 86 GW of renewable capacity since 2015.

This demand has extended to next-generation energy technologies. By the end of 2024, companies had reached agreements for 26 GW of capacity, mostly from small modular reactors (SMRs), and 265 MW from advanced geothermal projects. “This has been enabled by deep financial markets and a domestic venture capital ecosystem, which have helped drive early-stage growth of new technology developers,” the IEA added.

The US’s established nuclear industry and workforce experience from the oil and gas sector have positioned it to lead in the development of SMRs and geothermal. According to the IEA, “The US could emerge as a leader for these technologies with DCs creating a domestic market for innovation and commercialisation.”

However, the surge in DC investment has also exposed structural limitations in grid infrastructure. “Surging DC investment, however, has the potential to exacerbate existing challenges relating to grids, which are already experiencing bottlenecks with the electrification of transport, industry and buildings,” the IEA warned.

More than 90% of DC operators identified power availability as their top concern, with nearly half citing grid upgrades as the most critical solution. The IEA noted that “new grid infrastructure often takes between five and 15 years from planning to completion compared with three to six years for a DC.”

EU energy investment

The EU’s energy system is under mounting pressure as grid infrastructure investment struggles to keep pace with the rapid expansion of low-emissions electricity generation, according to the IEA.

The situation is contributing to persistent inefficiencies and electricity price volatility, despite stabilisation in gas markets following the 2022 Russian invasion of Ukraine.

The conflict sharply curtailed Russian gas exports to the EU, triggering a supply crisis and sending prices to record highs in 2022. In response, member states accelerated deployment of renewables and energy efficiency measures while diversifying gas imports. A key shift has been the increase in LNG shipments from the United States. “This has contributed to a stabilisation in prices, but prices remain elevated compared to pre-crisis levels,” the IEA said.

However, the expansion of clean energy technologies has outpaced the infrastructure needed to support them. Annual grid investment in the EU is expected to exceed $70bn in 2025, double the level of a decade ago. Yet this is still insufficient to meet the needs of a rapidly changing electricity landscape. “Investment has not yet matched the pace of clean energy deployment, leading to inefficiencies such as long connection queues and difficulties in transmitting cheap renewable electricity from southern parts of the European Union to high-demand areas,” the IEA noted.

The EU’s energy transition is further hindered by supply chain constraints. Component prices for grid equipment have more than doubled in the last ten years, while transformer supply is heavily dependent on imports. “Trade in transformers is dominated by China, which accounts for 60% of EU imports,” the IEA added.

A lack of market integration across member states is amplifying the effects of grid and storage shortfalls. Although the EU has made major investments in low-emissions technologies, average energy prices remain higher than in other advanced economies. Spot market disparities have emerged within the bloc, most notably in Spain, where rapid renewable deployment led to frequent near-zero and even negative electricity prices in 2024. “These fluctuations are largely attributed to the rapid expansion of renewable energy without corresponding upgrades in storage and grid infrastructure,” the IEA said.

In Ireland, the lack of system flexibility forced curtailment of renewable generation. “In April 2024, 11% of variable renewable output was curtailed in Ireland due to insufficient capacity to transport or store electricity when demand was low,” the IEA reported.

“Volatility in electricity prices underscores the need for a more integrated energy system and substantial investment in grid infrastructure and storage,” the IEA concluded.

China energy investments

China’s clean energy investment surged to over $625bn in 2024, nearly double its 2015 level, marking a decade of rapid growth since the Paris Agreement and five years after the announcement of its dual carbon goals, according to the IEA.

The country also met its 2030 wind and solar capacity target six years ahead of schedule, underlining its dominance in global renewable energy deployment.

However, investment growth is expected to slow in 2025, particularly in solar photovoltaics, where spending may decline. “While renewable installations are set to continue, investment growth is expected to slow in 2025 and, in the case of solar PV, even to fall back slightly,” the IEA said.

China’s evolving macroeconomic landscape is reshaping its energy priorities. Although the country achieved its 5% GDP growth target in 2024, it continues to face structural economic challenges, including weak domestic consumption, deflationary pressures and a worsening property crisis. “Against this backdrop, energy security and reliability have become even more critical,” the IEA stated. “After years of expanding energy supply, focus has shifted to ensuring this capacity is used effectively and stable enough to meet new and evolving demand while sustaining industrial competitiveness.”

Two major investment trends have emerged in response. The first is a substantial increase in spending on grid, storage and smart infrastructure. Transmission and distribution investment is set to reach $88bn in 2025. “Heatwaves and industrial demand spikes have exposed weaknesses in China’s grid,” the IEA said, noting that rapid growth in renewable capacity has outpaced grid development, resulting in higher curtailment and inefficient transmission to energy-intensive eastern provinces.

The second trend is renewed investment in coal. Spending on coal-related infrastructure is forecast to exceed $54bn in 2025. While coal is positioned as a backup for intermittent renewables, the scale of investment suggests a broader strategic role. “The scale of investment points to a deeper reliance on thermal power, driven by persistent concerns over electricity security,” the IEA reported.

China’s energy investment remains heavily influenced by state-owned enterprises and large-scale, government-backed infrastructure projects. However, the investment model is gradually evolving. In recent years, Beijing has promoted increased private sector participation in strategic areas of the domestic energy economy.

“As part of its evolving strategy, China has explicitly encouraged the involvement of private enterprises in the energy sector beyond the fields of export-oriented clean energy manufacturing into areas of more strategic domestic importance, such as nuclear power, new energy storage and even into upstream oil and gas and mining,” the IEA noted.

To facilitate this transition, the Chinese government supported private participation in more than 8,000 recommended energy projects in 2024.

 

Indian energy investments

India is emerging as a major force in global clean energy investment, with surging electricity demand and a sharp rise in renewables deployment reshaping the country’s energy landscape, according to the IEA. However, structural risks around grid infrastructure and payment delays from distribution companies continue to undermine investor confidence.

Driven by growth in residential and commercial construction, a boom in air conditioning and appliance ownership, and expanding industrial activity, India has seen the third-largest increase in power generation capacity globally over the past five years, behind only China and the US.

While new capacity has come from multiple sources, the investment trend has shifted decisively towards clean energy. “In 2024, 83% of power sector investment went to clean energy,” the IEA stated. Solar photovoltaics accounted for more than half of total non-fossil fuel investment in recent years.

India also became the world’s largest recipient of development finance for clean energy in 2024, securing $2.4bn in project-level interventions. This helped push the share of non-fossil power generation capacity to 44%, moving the country closer to its target of 50% by 2030.

To support this momentum, the Indian government has implemented several policy measures aimed at boosting investment in renewable generation, domestic manufacturing of critical components such as batteries and solar modules, and upgrades to transmission and distribution networks.

Foreign direct investment (FDI) in India’s power sector reached $5bn in 2023 – nearly twice pre-pandemic levels – supported by regulatory provisions allowing 100% FDI across generation (excluding nuclear) and transmission. “While a large share of the investment in India’s power generation capacity and transmission networks is met by domestic sources, foreign direct investment has been growing steadily,” the IEA said.

However, foreign portfolio investment in energy has declined over the past two years due to broader macroeconomic and sector-specific concerns, despite a longer-term trend of growth.

India maintains one of the lowest costs of capital for grid-scale renewable energy among emerging markets. Yet financing costs remain 80% higher than those in advanced economies. “Higher financing costs affect the financial viability of projects, leading to higher energy prices,” the IEA noted.

Investor confidence is further constrained by what the IEA terms “real and perceived risks.” Chief among these is off-taker risk, which stems from chronic financial distress among power distribution companies. “As of March 2025, distribution companies in India owed more than $9bn in unpaid dues,” the IEA reported. Accumulated losses for these companies stood at $75bn in 2023.

Transmission infrastructure also remains a critical bottleneck. “The inadequacy of transmission infrastructure has impeded 60 GW of renewable capacity in India,” the IEA said, limiting the flow of electricity from high-output regions to major demand centres and holding back clean energy integration.

SE Asia energy investments

Southeast Asia’s energy demand has risen sharply over the past decade alongside rapid economic development, but the region’s continued reliance on coal is heightening the financial and environmental risks associated with its energy transition, according to the IEA.

GDP per capita across the region has increased by more than 30% since 2015, with energy demand up over 35% and electricity demand rising by more than 60%. The expansion has been driven by a 12% increase in electricity access, alongside higher industrial consumption, accelerating urbanisation and rising household incomes that are fuelling demand for cooling and appliances.

“Historically, this rising energy demand has been met by fossil fuels, making up 60% of total energy investment in the past decade,” the IEA noted. Coal has been the main beneficiary, growing from 20% to 30% of Southeast Asia’s energy mix since 2015. Around $110bn has been invested in coal projects during this period, with the bulk concentrated in Indonesia and Vietnam.

However, the region is beginning to pivot towards cleaner alternatives. Fossil fuel investment is expected to decline to $50bn in 2025, down from $70bn in 2015, while clean energy investment is projected to reach $47bn – up from $30bn a decade ago.

Despite this progress, financing remains a constraint. “Given the challenges of accessing international capital markets, Southeast Asia’s capital markets have relied on domestic commercial lending,” the IEA stated. Commercial finance accounts for more than 75% of clean energy investment, and over 85% in sub-sectors such as clean power, fuels and battery storage. However, investment in grids, storage and transmission infrastructure depends heavily on public funding, which contributes around 40%.

The region’s energy profile remains uneven. While countries differ in economic maturity and energy resources, energy security is a common policy priority. Coal-fired generation continues to dominate, with investment in coal plants rising steadily over the past two decades. Installed coal capacity is expected to reach 121 GW in 2025.

“Assuming 25 years of economic lifetime, the capital yet to be recovered from coal plants in 2025 amounts to more than $130bn,” the IEA warned, highlighting the growing risk of stranded assets. Operators could face significant financial exposure if energy transitions outpace the economic viability of existing fossil assets.

“Achieving orderly and just energy transitions would require a combination of financial approaches to scale up clean energy and reduce reliance on fossil fuels, especially the managed phase-out of coal-fired power plants with transition finance,” the IEA said.