The Transition
Ledger

Each January, I sit down with the year's energy data and ask the same question: how is our mental map of the world holding up? It is a useful discipline. The temptation, in any sector with strong narrative momentum, is to read new data through a settled view. The 2025 data does not allow that comfort. It tells two stories simultaneously, and both are true.

At the macro level, the picture remains uncomfortable. Global CO₂ emissions have not peaked. Coal consumption is still rising, slowly but measurably. The fast-industrialising economies of Southeast Asia — Vietnam, Indonesia, the Philippines, Bangladesh — remain tightly coupled to fossil fuels as they grow. The case for adaptation and resilience as a long-duration investment theme is, if anything, stronger than twelve months ago.

And yet within the same dataset, the structural signals for the transition are more convincing than at any prior point. China's power sector emissions appear to have inflected downward for the first time. India is writing a new development playbook. Solar set a fourth consecutive record year for installations. Battery storage entered properly exponential deployment territory. Renewables surpassed coal in global electricity generation share for the first time, according to Ember's Global Electricity Review. Total global energy transition investment reached approximately $2.1 trillion in 2024, according to BloombergNEF — a new high.

The question is not whether the transition is happening — it clearly is. The question is whether it is happening fast enough, in the right places, and with durable economic drivers. That distinction is what separates the investments that work from the ones that merely look good on a slide deck.

China's power sector CO₂ emissions fell in 2025 for the first time. The critical context: this occurred against continued GDP growth of approximately 5%. The driver was genuine renewable displacement — solar and wind additions outpacing incremental electricity demand — not economic contraction. China added an estimated 330–380 GW of new solar capacity in 2025, building on the 330 GW installed in 2024. That figure alone exceeds the entire installed power generation capacity of most G20 economies.

The significance of a Chinese power sector peak is hard to overstate. China accounts for roughly 30% of global CO₂ emissions and has been the primary driver of emissions growth for two decades. A sustained plateau — even with year-to-year variability — changes the global trajectory in a way no other single data point can. The industrial and transport sectors remain harder to decarbonise, but the direction of travel in power generation is now unambiguous.

India's story is different in character but equally important. For the first time, coal use in India's power sector declined slightly (approximately −39 TWh) while renewable generation expanded (+47 TWh), per Ember's 2025 data. This in the context of 6–7% GDP growth and rapidly rising energy demand — which makes it genuinely remarkable. India appears to be executing a leapfrog: moving from biomass and energy poverty toward electrification underpinned by solar PV, bypassing the carbon-intensive industrialisation stage that defined twentieth-century development.

The economics make this rational, not merely aspirational. Utility-scale solar in India now clears auctions at approximately $0.026–0.030 per kWh — among the lowest tariffs anywhere in the world. When the cheapest new power a country can build is also the cleanest, the development model rewrites itself.

The contrast with Southeast Asia is pointed. Vietnam, Indonesia, and the Philippines remain on fossil-intensive growth trajectories — new coal-fired capacity is still being financed and built, often with Chinese development bank support. The energy transition is not a monolith. It is a patchwork, and reading the patchwork correctly is the analytical task.

Global solar PV installations hit approximately 595 GW in 2024 and are estimated to have reached 630–660 GW in 2025, setting a fourth consecutive annual record. Notably, this occurred despite turbulence in China's domestic market — Beijing restructured its feed-in tariff and auction mechanisms midway through 2025, triggering a slowdown in the second half. That global deployment still set a record tells us how broad the demand base has become: the US, India, Europe, Brazil, the Middle East, and increasingly Africa are all material contributors now.

The solar module cost curve has fallen to a point where new solar generation is cheaper than operating existing coal plants across most of the world. The argument for continued coal investment is no longer about economic competitiveness — it is about inertia, grid stability, and political economy. Those are real constraints, but they are different in kind from cost barriers, and they tend to yield to time.

Battery Energy Storage Systems are on an exponential deployment curve that mirrors solar's trajectory from a decade earlier. Global annual BESS deployments reached approximately 185 GWh in 2024 and are estimated at 320–370 GWh for 2025 — roughly doubling year-on-year. This is overwhelmingly a lithium-ion story. The industry has accumulated manufacturing scale and supply-chain depth that alternative chemistries will struggle to displace for grid-scale applications within a five-year horizon.

The investment frame has shifted accordingly. BESS is no longer an emerging technology requiring venture-stage risk tolerance. BESS is now a mainstream infrastructure asset class. The relevant questions are economic: contracted revenue versus merchant exposure, duration risk, and ancillary services versus energy arbitrage.

Africa is an emerging data point: solar imports reached approximately 20 GW in 2025, from near-zero three years prior. This does not yet move the needle on energy access at continental scale, but it signals the beginning of a distributed solar wave that could matter significantly for the estimated 600 million Africans without reliable grid electricity.

In the US, the picture is one of genuine tension. Solar capacity under construction rebounded in 2025 and battery installations continued growing rapidly. But the broader clean energy project pipeline is effectively flat — a striking contrast to a natural gas pipeline sitting at 85 GW in active development. Interconnection queues, permitting bottlenecks, and policy uncertainty under the current administration are acting as a meaningful brake. The capital wants to deploy. The system is resisting.

In Europe, solar has plateaued after the post-Ukraine surge — reflecting already-impressive penetration levels rather than declining momentum. With European power demand broadly flat, solar continues to displace fossil generation structurally even without headline growth in new installations.

Global EV sales (battery-electric and plug-in hybrid combined) reached approximately 17 million units in 2024 and continued growing in 2025, per IEA and BNEF data. China remains the dominant market, with battery-electric and PHEV vehicles accounting for a substantial and growing share of new car sales. BYD has established itself as the world's leading battery-electric vehicle manufacturer by volume, with a competitive dynamic against legacy Western automakers intensifying across every market segment.

Europe presents a more nuanced picture. After strong growth through 2022–2023, EU pure battery-electric vehicle sales softened in 2024 as consumer incentive programmes were cut in several major markets including Germany. Recovery has been underway through 2025 as tightening EU fleet CO₂ targets — which impose real financial penalties on non-compliant OEMs — took firmer hold. In December 2025, battery-electric vehicle registrations outsold petrol-engined cars across the EU in a single month for the first time. This is a meaningful milestone even accounting for year-end fleet registration patterns.

Note: European EV market performance in 2024 was softer than prior years due to the withdrawal of consumer subsidies in key markets. Monthly data can be volatile; the longer-term structural direction, driven by regulatory targets, remains upward.

China's electrification of heavy trucking is an important emerging structural story. Class 8 electric trucks are now commercially viable in China at scale — battery range, charging infrastructure, and total cost of ownership have converged for high-utilisation logistics corridors. China's fleet is large, its routes are mapped, and state-owned logistics enterprises are deploying at scale. The energy intensity implications — diesel demand destruction on one side, grid load growth on the other — are significant, and they are unfolding on a 2025–2028 timeline.

The AI infrastructure buildout accelerated markedly through 2024–2025. Hyperscaler capital expenditure across Alphabet, Microsoft, Amazon, and Meta continued its steep upward trajectory. Alphabet (Google's parent) announced approximately $75 billion in capital expenditure for 2025, disclosed in its February 2025 earnings call — a figure that would have seemed implausible as recently as 2022. The physical expression of this spending is a wave of large-scale data centre construction concentrated in northern Virginia, Texas, Georgia, Arizona, and the upper Midwest.

What makes this an unusual infrastructure cycle is the asset-life mismatch. A large share of this spend is on GPU compute clusters with effective lifespans of three to five years — unlike transmission lines, highways, or fibre, which depreciate over decades. The economic value generated per dollar of capex is genuinely uncertain in ways that long-lived physical infrastructure typically is not. AI model usage grew dramatically through 2025, with efficiency gains per model generation real but outpaced by the growth in aggregate inference demand, so net power consumption continued to rise sharply.

The grid is not keeping pace. Interconnection queues in PJM, ERCOT, and MISO are measured in years — the typical wait for a large new data centre to secure a grid connection is four to six years in competitive markets. This has driven a meaningful shift toward behind-the-meter generation: power produced on-site or in close proximity, bypassing the regulated grid interconnection queue.

The solutions being deployed are pragmatic: mobile natural gas generators, refurbished industrial turbines sourced from oil and gas applications, repurposed jet engines. Caterpillar reported record earnings in its energy segment in 2025, driven by data centre generator demand — including a reported 2 GW generator set order for a campus project in West Virginia. These are the improvised responses of an industry that cannot wait years for grid solutions.

The investment implications are layered. Grid infrastructure — transmission build-out, substation upgrades, transformer replacement, interconnection technology — is the most structurally durable beneficiary. US power grid investment reached approximately $115 billion in 2024 (up around 10% year-on-year, per BNEF) and is set to grow further. Behind-the-meter gas equipment is a real near-term opportunity for turbine OEMs, mobile power providers, and specialist contractors — a transitional story, not a structural one, but with hard demand drivers behind it.

Global solar PV manufacturing capacity is already sufficient to meet the world's installation needs for years to come. The problem is geographic concentration: the vast majority sits in China, and China's domestic industry is operating well below nameplate utilisation. Module prices have fallen to levels that make new Western manufacturing uneconomic without substantial, sustained, and credible policy support.

China is simultaneously building its manufacturing presence offshore — factories across Southeast Asia, the Middle East, and emerging markets — to cement supply chain relationships, hedge against trade barriers, and establish positions in new markets ahead of competitors. This is as much a strategic infrastructure play as a commercial one.

The US, despite the ambitions embedded in the Inflation Reduction Act, is seeing clean energy manufacturing investment falter. Policy uncertainty — IRA rollback threats, tariff instability, shifting domestic content requirements — is chilling the long-duration capital commitments that factory construction requires. Building a battery gigafactory or solar module plant is a decade-long bet on policy continuity. Without that continuity, the bet is not being made. The window to build a competitive domestic clean energy manufacturing base is not permanently open, and it may be narrowing in real time.

Waymo is crossing the threshold from "promising but unproven" to "operating commercially at meaningful scale" — a transition happening more quietly than the 2018–2021 hype cycle would have predicted. Waymo closed a $5.6 billion funding round in late 2024 at a substantial reported valuation, and has been expanding its robotaxi service to additional US cities through 2025. The unit economics of fully driverless operation — no driver labour cost, high daily vehicle utilisation, predictable routes — are compelling on a trajectory basis. Autonomous driving is the canonical technology overestimated in the short run and, in our view, now being underestimated in the medium run.

Hydrogen in Europe has been a case study in the gap between policy ambition and commercial reality. Tens of gigawatts of electrolyser capacity were announced; a fraction has been built; an even smaller fraction is operating commercially. The fundamental economics — green hydrogen costs three to five times more than fossil hydrogen on an energy-equivalent basis, and the applications where it is genuinely superior to direct electrification are narrow — were not adequately stress-tested against the policy frameworks that funded the expansion plans. This has become consensus. The investment clean-up is largely priced in.

The structural lesson applies broadly. The most durable investments in the energy transition rest on a genuine customer value proposition — better, cheaper, more reliable energy. Subsidised demand that evaporates when policy changes is not the same thing. The same logic applies to voluntary carbon markets, where integrity controversies and the collapse of buyer confidence have left the market structurally weakened. We continue to avoid both.