The global energy landscape is set to undergo significant changes in 2025, driven by evolving political dynamics, technological advancements, and sustainability commitments. As the world navigates these shifts, focus will be on supply, security, and policy in the energy sector.
This article delves into seven critical aspects that decision-makers should monitor as they steer the energy transition in the upcoming year.
The New US Administration: Impact on Renewables and AI
The recent US presidential election has introduced a degree of uncertainty within the renewable energy sector. The new administration is anticipated to maintain a strong emphasis on oil and gas policies, while possibly decelerating the transition to renewables rather than stopping it altogether, according to experts. The burgeoning demand for energy, particularly due to advances in artificial intelligence (AI), ensures that sustainable energy sources like wind, solar, hydro, and nuclear will continue playing essential roles in the US energy framework beyond 2025. Analysts at Wood Mackenzie suggest that any investments boosting grid generation should be welcomed, especially if increasing power supply for AI becomes a priority.
Sustainability Goals: Central to Energy Policy
The energy and manufacturing industries are among the most significant sources of greenhouse gas emissions. Each country contributes to global emissions and has a Nationally Determined Contribution (NDC) as part of the Paris Agreement. During COP29 in November 2024, nations such as the UK and Brazil committed to ambitious NDC targets for 2035, with updates due by early 2025. The conference also highlighted technological solutions for high-emission sectors like steel and cement, which account for about 70% of industry-related emissions. Emissions reporting is expected to face increased scrutiny from governments and regulators in the coming year.
China’s Role in Global Energy Transition
China is being urged by experts, including those from the United Nations, to take a leadership role in combating the climate crisis. As the largest global emitter of greenhouse gases and a leader in renewable energy, China is expected to contribute nearly 60% of new renewable capacity worldwide by 2030. Encouragingly, China’s emissions may have peaked or stabilized, a crucial development for achieving global net zero targets. A robust NDC from China could set a strong precedent for other countries.
Artificial Intelligence: Increasing Energy Demand
AI is set to further elevate energy demand, particularly from power-intensive data centers. In the US, this is projected to push power usage to unprecedented levels by 2025. Up to 40% of AI data centers might face power shortages next year, prompting tech companies to expand their data center infrastructure and seek alternative energy sources. Additionally, with AI data processors generating significantly more heat than traditional CPUs, new cooling technologies will be crucial. AI also offers potential efficiency improvements, allowing industrial firms to enhance productivity through predictive analytics.
Nuclear Power: Poised for Growth
According to the International Energy Agency (IEA), nuclear power is set for a record-breaking year in 2025, driven by increased output from France and the reactivation of plants in Japan. Nuclear energy, being stable, reliable, and carbon-free, is vital for the decarbonization of industries and society. The COP29 conference in Azerbaijan reaffirmed commitments from COP28 to triple nuclear power output by 2050. Small Modular Reactors (SMRs) are expected to play an integral role in this expansion due to their flexibility in site selection and reduced cooling water requirements.
Geopolitical Risks and Cybersecurity in Energy
Geopolitical tensions and cybersecurity threats will likely persist in 2025, posing challenges to the energy sector. PwC describes the threat level to global energy infrastructure as ‘critical’, with espionage, cybercrime, sabotage, and hacktivism being major concerns. Companies are increasingly adopting advanced behavior detection technologies to safeguard their systems from potential cyber threats.
Energy Security: A Continued Priority
With ongoing geopolitical risks and increasing global power demand, energy security remains a critical concern for 2025. The UK government will host the IEA’s International Summit on the Future of Energy Security in London during the year’s second quarter. The summit aims to address potential disruptions and price spikes in energy supply. Different countries will adopt varied strategies for energy security, with the IEA emphasizing the importance of diverse and resilient clean energy supply chains and investments in clean technologies.
Advancing the Energy Transition in 2025
As global priorities evolve and energy needs rise in 2025, decision-makers must remain vigilant regarding energy security developments while capitalizing on AI-driven opportunities. By proactively addressing the challenges of the year, key players in the energy transition can enhance efficiencies and progress toward decarbonization.
Original Story at spectra.mhi.com