With some experts saying that 2024 was the year in which global carbon emissions reached their peak[1], 2025 is now poised to be a pivotal year for the energy sector.
Undoubtedly, progress has been made in furthering the energy transition. However, the UN has sounded the alarm that now is not the time to let up.
While we will see countries unveiling updated emissions reduction commitments in what will be a pivotal indicator of progress in 2025, it is generally accepted that the world isn’t moving fast enough towards the Paris Agreement targets[2], and advancements across all industries and geographies are still necessary.
With that said, the road ahead is anything but straightforward. From political shifts and economic uncertainty to ensuring that a just transition is achieved, both challenges and opportunities lie ahead.
So, what’s to come? As we step into 2025, let’s take a look at some of the key energy trends that are expected to define the course of the sector over the coming months.
Geopolitical uncertainty continues
Global politics will continue to have a major bearing on the energy industry this year, with geopolitical uncertainty remaining prominent. All eyes are on the US, following its recent withdrawal from the Paris Agreement under a second Trump presidency, which is set to bring about sweeping changes to energy and climate policies in the world’s largest economy.
Looking at Trump’s previous administration and rhetoric from his latest presidential campaign, it is clear that the US will again implement several other key policy changes, such as rolling back vehicle emissions standards and relaxing methane regulations.
Across the Atlantic, changes in political leadership in both France and Germany and a new European Commission could also see major energy policy changes, with ongoing economic hardship potentially set to lead to greater scrutiny over costs.
All eyes on LNG
One of the major changes anticipated from the Trump administration is the greenlighting of pending LNG export projects in 2025. Trump's focus on deregulation has cut red tape, reversing the Biden administration’s pause on non-FTA LNG approvals. This could lead to major boosts in LNG supply globally and downward pressure on prices.
Elsewhere, markets will also be paying close attention to potential trade tensions with China, with US LNG developers being highly reliant on stable demand from Chinese buyers. If these tensions materialise as expected, the US may instead look to increase LNG exports to Europe where demand has been growing. Here, however, US-Russian relations will be under close watch.
AI and data centres will drive up electricity demand
Geopolitics aside, the transformative impact of AI will also continue to reshape the global order and have a major bearing on the energy sector. According to S&P Global Commodity Insights, power demand for data centres could grow by 10-15% annually through 2030, with data centres potentially accounting for up to 5% of total global electricity consumption by the end of the decade[3].
Such rapid growth could place a strain on electricity grids. While data centres typically go from concept to completion in roughly two to three years, new power supply projects can take four or five years to come to fruition – and that’s without transmission considerations.
Additionally, President Trump has announced the large infrastructure project "Stargate," which aims to boost AI capabilities, further increasing demand[4].
To bridge the potential supply gap that may arise, new gas-fired power plants may need to be built, or ageing coal plants might continue to be used for longer than intended. Therefore, balancing this growing demand for power with clean energy goals will be a major challenge in the years ahead.
Renewable energy will continue to flourish
Despite these challenges, low carbon markets are expected to continue to flourish through 2025. According to the IEA, global clean energy investment doubled in 2024, exceeding $3 trillion for the first time[5]. And that trajectory isn’t likely to slow down anytime soon.
Owing to increasing demand, corporate commitments and pressing climate targets, renewables are poised for further growth in the coming year.
Yes, rising interest rates have limited the ability of developers to borrow cheaply. However, reduced supply chain problems, improving technologies and lower costs for components are making clean energy an increasingly attractive and viable proposition.
A nuclear future?
As renewable energy projects continue to ramp up, their intermittent nature may also see nuclear gaining greater traction as a reliable, stable, and carbon-free addition to the energy mix that can help to balance energy needs.
In North America, nuclear is already gaining momentum, with Microsoft, Google, and Amazon all having signed power purchase agreements in 2024 to meet the growing power requirements of their data centres.
Further, big tech firms are also now looking at small modular reactors (SMRs). Albeit a nascent technology that is unlikely to gather any real momentum anytime soon, the potential of SMRs to offer scalable, flexible, and efficient nuclear power could drive up interest in 2025, and potentially set the tone for a nuclear renaissance in the future.
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