Turning Point: Clean Energy’s Momentum in 2025

The International Energy Agency just published its latest World Energy Investment report (executive summary available here). While the details vary across regions and technologies, the broader takeaway is clear: the shift toward clean energy is holding strong. Solar, battery storage, and electric vehicles continue to lead the way, reinforcing the direction of travel for the global energy system.

Here are the insights that stood out from the report:

• Clean Energy Spending Tops $2 Trillion: Global investment in clean energy has now surpassed $2 trillion and continues to rise. The bulk of this capital is flowing into renewables, electric vehicles, and grid infrastructure. These figures align closely with what Bloomberg NEF has highlighted in their recent trends analysis.
• The Grid is the Bottleneck: While investment in generation capacity has accelerated, spending on grid infrastructure hasn’t kept pace. This imbalance is now the primary constraint on scaling and decarbonising the power sector.
• China’s Expanding Lead: Rather than a shift toward more diversified supply chains, China has only deepened its dominance, especially in critical minerals. Domestic overcapacity is a growing reality, but so is China’s influence across the value chain.
• Coal’s Persistent Role: Despite global decarbonisation goals, coal isn’t disappearing. China has dramatically increased new coal plant approvals, though many are expected to operate primarily as backup capacity. India is building less, but its coal plants are likely to run harder to meet rising demand.
• Industrial AI Can Slash Energy Use: AI-driven optimisation in industrial settings has the potential to cut over 2,000 TWh of energy consumption over the next decade. Nearly half of the U.S.’s current annual electricity usage. At today’s prices, that’s an $80 billion savings opportunity.
• Hydrogen and Carbon Capture: Gaining Momentum: Although still small in overall scale, investment in hydrogen and carbon capture technologies is beginning to pick up. China is on the verge of ramping up electrolyser deployment, and if pending CCS projects receive the green light, investment could jump 10x.

The findings align with several themes we’ve been writing about at ARK Invest. The combination of falling costs and China’s manufacturing scale continues to drive consistent growth in solar and battery adoption. This creates room for strong businesses to emerge, primarily in software that enables these markets, though select hardware plays still make sense. The key is not to compete in the core technologies where China dominates, as we saw with solar PV during the first wave of clean tech.

One of the most overlooked opportunities lies in the grid. It’s now the main constraint in getting additional power to where it’s needed, especially for hyperscale’s who are less sensitive to price and more focused on securing supply. Lastly, the convergence of AI with real-world infrastructure and industrial systems is shaping up to be a major area of innovation and investment.

Energy Generation

Spending on the global shift to cleaner energy is projected to hit $2.2 trillion this year, an increase of nearly $1 trillion compared to 5 years ago.¹

The surge in clean energy investment has been fuelled primarily by solar. Over the past 5 years, capital allocated to low-emission power sources has nearly doubled, with solar PV leading the charge. By 2025, combined spending on rooftop and utility-scale solar is projected to hit $450 billion, making it the single largest category of energy investment globally.

Meanwhile, solar and wind have become the dominant forces in power generation growth, together accounting for 98% of the increase in electricity generation investment over the last 10 years.²

Over the past decade, investment in new power generation has grown far more rapidly than spending on grid infrastructure. Back in 2016, $0.60 cents were allocated to grid development for every dollar spent on adding generation capacity. That figure has now dropped below $0.40, despite the falling costs of renewable technologies and rising prices for essential grid components like transformers and cables.

Today, clean electricity generation, energy storage and transmission networks together make up 90% of all investment flowing into the power sector.^{3, 4}

The Grid

Spending on grid infrastructure is starting to increase, with annual investment now approaching $400 billion. This renewed attention to the grid comes as energy access becomes a critical issue, particularly for data centres. More than 90% of data centre operators identify power availability as their leading concern, and nearly half view upgrading grid infrastructure as the most important way to address it.⁵

Battery Storage

Storage is another critical pillar supporting the clean energy build-out. Investment in energy storage is growing quickly and is projected to match spending on natural gas infrastructure this year.⁶

China

China remains the largest investor in clean energy, having increased its share of global clean energy investment from 25% to around 33% over the past decade.⁷

China’s rapid expansion of clean energy manufacturing is continuing to drive striking cost reductions in established technologies. Over the past 2 years, prices for Chinese solar panels and wind turbines have fallen by 60% and 50% respectively. However, a portion of this decline appears to be the result of intense, and likely unsustainable, competition stemming from significant overcapacity. A quick look at the profit margins of Chinese solar firms reveals that there are virtually no strong performers operating above break-even.⁸

China’s manufacturing overcapacity is creating new opportunities for EMs to pursue low-carbon development. In 2024, Pakistan alone imported 19 GW of Chinese solar equipment and is rapidly increasing battery adoption. Across the board, 44% of China’s solar equipment exports by value went to emerging and developing economies, up from 33% just 2 years earlier.

China is also far ahead of its own EV targets. EV sales in the country nearly doubled between 2022 and 2024. To keep this growth on track, the government has extended its vehicle trade-in policy through 2025. As a result, around 60% of new car sales in China are now expected to be electric next year. A milestone that was initially targeted for 2035 in China’s 2020 strategy.

Meanwhile, Chinese manufacturers are expanding aggressively into global markets. Over the past 5 years, Chinese EV and battery firms have announced approximately $80 billion in new investment to build or scale production in key regions such as Indonesia, Thailand, Brazil, Mexico and Türkiye. Solar manufacturers, already well-established in Southeast Asia, are now also evaluating overseas opportunities in regions like the Middle East. This growing international presence presents a significant challenge to domestic carmakers, particularly in Europe.⁹

We are nearing a pivotal moment where the expansion of low-carbon electricity generation could, for the first time, surpass the growth in overall power demand.¹⁰

Low-carbon deployment is expected to continue gaining pace from this point onwards, although some of the recent surge may reflect projects being brought forward ahead of new market reforms. These changes, which introduce market-based pricing, apply to projects commissioned after June 1st.

Critical Materials

The familiar saying in commodities that high prices tend to correct themselves has been clearly reflected in battery metals over the past few years. In addition to increased supply, improvements in battery chemistry and manufacturing have reduced the need for raw materials and led to a broad transition from nickel-manganese-cobalt (NMC) batteries to lithium iron phosphate (LFP) alternatives.¹¹

Companies developing critical minerals projects in Europe and especially the U.S. may need to depend on geopolitical support to gain commercial momentum. This is particularly true given the ample supply of refined minerals coming from China, whose dominance in this area has only grown in recent years.¹²

Food and Ammonia

Electrolyser costs in China are about 1/3^rd of those in Europe. A massive expansion of low-carbon ammonia production is now taking place in China, while the U.S. and Europe have yet to focus on it. We have seen this pattern before.¹³

Methane

In oil and gas production, 40% of methane emissions could be reduced through projects offering an IRR above 15%.¹⁴

Conclusion

Overall, the data points to strong and sustained momentum in clean energy adoption, driven by solar, battery storage, and China’s manufacturing scale. While challenges remain around grid capacity, domestic innovation outside China, and policy coordination, there is growing recognition of these bottlenecks and early signs of action. The second half of the year will be a chance to build on this progress and lay the groundwork for a more resilient and efficient energy system.