The global clean energy transition is rapidly gathering pace, driven by a renewed focus on energy security and trillions of dollars of investment that could still put the world on course to limit average temperature increases to well below 2C by the end of the century.
That is the conclusion of Bloomberg New Energy Finance’s (BNEF) latest annual New Energy Outlook 2026, which explores how three fossil fuel price shocks in the past six years have led to a surge in clean energy investment driven as much by energy security concerns as the pursuit of climate goals.
The Covid-19 pandemic in 2020, Russia’s full-scale invasion of Ukraine in 2022, and this year’s Iran War have all led to spikes in energy and fuel costs, which have exposed the huge risks associated with a continued reliance on fossil fuel supplies.
BNEF said a growing number of markets have responded by ramping up investment in ever-more cost-effective renewable energy generation capacity and clean technologies, such as electric vehicles (EVs), heat pumps, and battery storage, that are now eating into fossil fuel demand.
The influential analyst firm said that if countries continue to accelerate their clean energy transition in line with current trends – which resulted in a record $2.3tr of global energy transition investment in 2025 – economies should be able to drastically reduce their reliance on imported fossil fuels and strengthen their energy security, while also triggering a reduction in global greenhouse gas emissions.
“We’re living in another moment of crisis, but unlike in past decades, today there are real options for countries to react,” said David Hostert, chief economist at BloombergNEF. “We now have viable technologies that can be deployed at scale and fast, at an overall lower cost to the system than the fossil fuel technologies that used to be the primary choice. Through clean power and electrification we can strengthen energy security and reduce harmful emissions along the way.”
However, the report warns that while a global transition towards clean technologies is now all but inevitable, its base case scenario is still “collectively nowhere near sufficient to adequately address climate change”.
The report concludes limiting global average temperature increases to the 1.5C by goal set out in the Paris Agreement is “no longer feasible due to persistently high emissions and continued investment in emissions-intensive assets”.
But it emphasises that limiting global warming to the separate Paris Agreement target of ‘well below 2C’ is still possible, setting out an ambitious but credible ‘net zero scenario’ that it claims would be consistent with temperature increases peaking at 1.81C by 2049 before dropping to 1.73C of warming above pre-industrial levels by 2100.
However, the report calculates that while global energy transition investment reached a record $2.3tr in 2025, far more investment will be needed to deliver on a net zero scenario that is estimated to require $235tr through to 2050.
BNEF said such a scenario would deliver a “fundamentally different” global energy system in the long term, “where renewables and storage carry a greater share of abatement, compensating for slower progress in other technologies”.
The report’s less ambitious, base-case scenario – which BNEF views as presently the most likely outcome over the coming decades – would still herald the “start of an electricity-led era” where electrification accounts for two-thirds of new energy demand through to 2050.
But such a scenario would still see fossil gas supplies account for around 25 per cent of energy demand over the same period, while coal would be expected to slip to half its current levels of power generation by 2050 as it will struggle to compete on cost with new renewables projects.
In the near-term, the report expects solar to become the world’s largest single generator of electricity by as early as 2032, driven by “massive” overcapacity across the sector that is expected to result in further cost reductions.
BNEF has also increased its expectations for battery storage in this year’s report, with global capacity now expected to jump 17-fold from 223GW in 2025 to 3.8TW by 2035.
At the same time, the use of flexible grid technologies that can shift demand for electricity to different periods of the day, boost grid stability, and pave the way for wider adoption of renewables is also expected to increase rapidly over the next decade and beyond. The report projects that around 11 per cent of global megawatt hours (MWhs) of electricity generation worldwide could be shifted to a different time of the day by 2035, up from just three per cent today.
These trends are prompting countries and regions to rapidly electrifying their economies, led by China where electricity has been the dominant final energy carrier for three years already, with coal’s share set to fall from a third last year to 19 per cent by 2035 and just seven per cent by 2050, BNEF said.
The report’s base case scenario also shows electricity overtaking oil and coal as the dominant final energy carrier by 2041 in India, by 2043 in Europe, and by 2047 in the US.
As such, global demand for electricity continues to rapidly increase under the base case scenario, having already more than doubled over the past 25 years, with a further 29 per cent increase expected by 2035 and a 69 per cent rise expected by 2050, according to the report.
Surging power demand is being driven by a combination of electrification technologies such as EVs and heat pumps, cooling technologies, and the growing adoption of artificial intelligence (AI) that has led to a rapid rollout of power-hungry data centres worldwide.
The report estimates data centre capacity reached 84GW in 2025, consuming 500TWh of power and marking a 20 per cent year on year increase. The report expects power demand from data centres will more than double to 1,114TWh by 2050, which would represent a tenth of all power consumed worldwide.
Matthias Kimmel, head of energy economics at BNEF, said the report underscored how “clean technologies are increasingly critical to energy security, system flexibility and meeting the world’s growing power needs”.
“As EVs, data centres, population growth and industrial activity spur electricity demand, the world is in a race to meet rising energy demand with the most efficient, least-cost technologies,” he said.
