Energy Security Has Reframed the Case for the Energy Transition

The energy transition is now viewed as an infrastructure investment theme rather than an ESG theme. A run of supply shocks over the past four years, including the 2026 Strait of Hormuz crisis, has tied the energy transition firmly to energy security, and the case is now made on economics and supply resilience as much as on climate policy.

Energy Security Is No Longer Optional

Economies reliant on imported fuels remain exposed to disruptions well beyond their borders. The Strait of Hormuz crisis has highlighted the risks that arise when a significant share of energy supply depends on a small number of critical trade corridors.

Corporates and policymakers have been grappling with the implications of fuel-import dependence for years. Diversifying suppliers reduces concentration risk but leaves the underlying dependence intact. The more durable response is to reduce the volume of imported fuel needed in the first place. The same spending solves both problems: building domestic clean energy generation, the grids to move it, and efficiency measures that reduce demand can lower both emissions and imported fuel volumes at the same time.

The Investment Data Already Supports This

The IEA’s World Energy Investment 2026 report projects total energy investment of $3.4 trillion this year, of which roughly $2.2 trillion flows to clean energy systems, renewables, nuclear, grids, storage, efficiency and electrification, against $1.2 trillion for oil, gas and coal.¹ Oil capital spending is set to fall for a third consecutive year, dropping below $500 billion even with prices elevated.² Furthermore, the IEA estimates that investments made since 2015 in renewables, nuclear power, energy efficiency and electrification reduced fossil fuel import costs in major fuel-importing economies by around US$260 billion in 2025 alone, including approximately US$110 billion in China.³

Capital was already moving in this direction before the latest supply shocks, which is why the figures hold across very different policy regimes. The rationale has also broadened. Cost and supply resilience now sit alongside climate ambition as reasons to spend, which means the trajectory is supported by economics regardless of where climate policy sits at any given moment.

Opportunities Pushing The Next Cycle Of Energy Transition

We believe the next cycle of the energy transition is increasingly centred outside renewable generation, in the areas required to deliver, manage and consume clean energy. Within that broader shift, three investable themes stand out today:

• The grid has become the binding constraint. Over 2,500 GW of renewable, storage and large-load projects are stalled in connection queues worldwide,⁴ and the IEA estimates annual grid investment requires a roughly 50% increase from today’s $400 billion by 2030 to keep pace with demand.⁵ The bottleneck is physical: an IEA industry survey found procurement now takes two to three years for cables and up to four years for large power transformers, with lead times almost doubling since 2021 and transformer prices up around 75% since 2019.⁶ Until transmission and distribution catch up, value accrues to the companies making the cables, switchgear, transformers and grid technology that connect new supply to demand. Grid spending is also far less sensitive to subsidy headlines than module pricing, because it is underpinned by regulation and physical capacity limits rather than incentive cycles.
• AI has turned electricity demand into an infrastructure story. The IEA projects data centre electricity consumption roughly doubling from 485 TWh in 2025 to around 950 TWh by 2030,⁷ with AI-specific demand tripling over the same period. The capital behind it is extraordinary. The IEA notes that capital expenditure by the largest technology companies exceeded $400 billion in 2025 and is expected to increase by a further 75% in 2026.⁸ Capital spending by just five technology companies is now larger than global investment in oil and natural gas production.⁹ Meeting this new electricity demand depends on grid capacity, power equipment, high-efficiency semiconductors, thermal management and back-up power infrastructure.
• Efficiency and electrification have moved from peripheral to central. The IEA estimates that spending on efficiency and electrification needs to almost triple within the next five years to deliver the pace of energy-intensity improvements required by the end of the decade.¹⁰ That points capital towards heat pumps, building retrofits, industrial electrification, EV powertrains and water infrastructure, the parts of the economy that consume energy rather than generate it.

Most Clean Energy Funds Were Built For The Wrong Phase

Many investors still express this theme through conventional clean energy funds. Most of those funds were built for the first phase of the transition. Their universes concentrate in solar and wind hardware, renewables developers, EV-adjacent names and, in some cases, related grid exposure. However, the track record of this approach has shown major vulnerabilities. Performance has swung with subsidy cycles, interest rates and commodity pricing rather than with the underlying growth in electricity demand. Drawdowns were deep when sentiment turned in 2022 and 2023, and recoveries were slow enough to test the patience of anyone holding the position as a long-term allocation.

The structural problem is that these funds were designed when the transition meant renewable energy generation. A clean energy generation-focussed fund only captures a share of where the money is going, whereas the next phase of capital spending is increasingly in the enabling infrastructure described above: grids, storage, power equipment, efficiency and electrification.

Energy Transition Exposure For The Next Decade

Energy security has not changed the direction of the transition. It has changed where within it the capital is going. The first phase was defined by exposure to renewable generation. The second phase is increasingly rewarding exposure to the systems that deliver and use that electricity: the grids that carry the power, the equipment that manages it, and the efficiency technologies that reduce how much is needed. These are mostly industrial and electrical equipment companies rather than renewable developers, and the cash flows that drive them respond to different things: grid capex cycles, building retrofit programmes, AI infrastructure spend, rather than module pricing and subsidy headlines.

For investors, this means the opportunity set should be assessed less by whether a company is labelled “clean energy” and more by whether it is exposed to the capex bottlenecks now shaping the electrification cycle. An allocation built around generation alone captures only part of where the capital is going. The exposure that fits the next decade sits in the equipment, grids and efficiency technologies into which the next wave of capital is being directed.