19 March 2026
The multidimensional energy future
The multidimensional energy future continues: A multispeed, multifueled and multi-technology transition with different road maps and end points for different countries.
This is a thought leadership report issued by S&P Global. This report does not constitute a rating action, neither was it discussed by a rating committee.
Highlights
Strong economic growth in emerging markets and developing economies is leading to higher-than-forecast energy demand, and this trend is expected to continue.
Data centers and their unrelenting need for power have emerged as the latest vector in energy demand growth, with natural gas as the fuel of choice.
Costs for new energy technologies are declining at varying speeds. Both electrons and molecules remain the foundations of the global energy system. Electrification is increasing, but so is oil and gas demand.
Reassessments of energy and climate policies that started in 2024 and accelerated in 2025 have resulted in oil and gas companies trimming their clean energy investments and portfolio choices.
The global energy system is charting new frontiers as it enters the era of AI. The energy landscape has seen significant shifts in the last 12 months, with power demand accelerating, global energy and climate policies shifting, and energy companies reassessing their portfolio and investment strategies. The energy transition will be continuous and everlasting.
Energy addition as well as energy transition
Projections made during the COVID-19 pandemic that demand for hydrocarbons — coal and oil specifically — was approaching a peak/plateau have proven incorrect. The pace of recovery in energy demand post-COVID-19 has varied worldwide. In 2025, demand for oil, gas and coal reached new highs. So did demand for solar photovoltaics and wind energy. Renewables continue to grow faster than hydrocarbons, but the overall share of renewables in the total energy mix remains small. There are no signs of decline in demand for hydrocarbons in the near future. In short, energy addition continues globally.
The share of hydrocarbons in China’s energy mix continues to decline with the massive deployment of renewables. China is leading the energy transition away from hydrocarbons, and the EU is following closely behind. Transition to renewables continues apace in the EU, driven by the goal of enhancing energy security through decarbonization and reducing dependence on imported oil and LNG.
Power sector emissions in the US have fallen significantly since the start of the shale gas revolution, as inexpensive and abundant gas has displaced coal for power generation. However, this trend is reversing due to the revival of coal for power generation and natural gas playing a bigger role than renewables in meeting data centers’ energy needs. This marks an unprecedented reversal of the energy transition.
Hydrocarbons continue to be the dominant energy supplier in India, with coal and oil fueling the Indian economy. Although the installed capacity of renewables in India’s power mix will continue to expand, coal and oil demand will also grow: a case of energy addition. The energy mix in most emerging markets and developing economies (EMDEs) is dominated by hydrocarbons. Oil remains the fuel of choice for transportation. Recent work by S&P Global Energy CERA Consulting indicates that energy demand in many EMDEs has been underestimated in various scenarios and forecasts. This has far-reaching consequences, including a lack of financing for energy projects and the slow development of local hydrocarbon and mineral resources.
Power demand for data centers exceeds all projections
Since the launch of ChatGPT in November 2022, hyperscalers and leading generative AI firms have committed hundreds of billions of dollars to train large language models in the hopes of gaining a first-mover advantage, garnering recognition for the “best model” and ultimately being the first to achieve artificial general intelligence. This approach is exceedingly resource-intensive: Training a top LLM can use tens of thousands of graphics processing unit chips, each of which may require five to eight times the energy used by typical chips, significantly increasing energy consumption.
According to S&P Global Energy estimates, data center power demand worldwide could grow 12%-16% annually over 2025–30. The range of forecasts across the technology and power sectors is quite broad, which fuels uncertainty. In the S&P Global Energy “power sector perspective” scenario, global data center power demand reaches 1,550 TWh by 2030, roughly equal to total power consumption across Latin America in 2030. By 2030, data centers could account for 6% of global power demand, compared to 2%-3% today. In comparison, electric vehicles account for about 1% of global electricity demand in 2026, with expectations of rising to 1.5%-2.5% by 2030.
Beyond the global picture, data center impacts on power demand will vary significantly by region. In developed economies where demand has been flat or even fallen in recent years, data centers represent a growth opportunity. In the US, the largest data center market, power demand growth averaged only 0.3% per year over the past 15 years. Now, demand growth projections have risen. In Europe, data centers offer growth in a depressed macroeconomic environment and a region where consumers are increasingly integrated into and influencing power market operations through granular pricing and demand response. In contrast, in emerging markets such as China and India, data centers are not the only drivers in the overall demand story. In China, for example, data centers are expected to account for 7%-17% of all incremental power demand during 2025–30 and to represent only 2%-5% of total electricity consumption by 2030.
Power market stakeholders worldwide face substantial challenges when preparing for data center loads.
Electrification can only go so far
Electrification — due to its superior energy conversion efficiency and cost-competitive renewables — has long been the preferred path to reduce emissions and meet net-zero emission goals. Although electrification is progressing rapidly around the world, meeting climate targets is becoming more challenging as electricity demand outpaces infrastructure, putting severe pressure on supply chains. Some of the hurdles that must be overcome include:
- a lack of transmission lines
- slow permitting
- supply chain constraints, including a scarcity of copper, lithium and rare earth minerals
- achieving long-duration storage at scale
- maintaining reliable 24x7x365 electrical infrastructure
The industrial sector is the largest global energy user. Decarbonizing and electrifying this sector would require a significant increase in fossil-free electricity use for direct thermal heating and pressure to substitute for metallurgical coke, methane, ethane and naphtha as feedstocks. At present, only 15% of industrial energy use is derived from electricity. Substituting fossil fuels with renewable power is feasible for some industrial processes, but it would be costly. There are also limitations on the effectiveness of electricity in decarbonizing industrial processes that require high-grade heat, such as steel, cement, fertilizer and chemical production. While electrochemical production of chemical compounds like ammonia is promising, it is still in the early stages of development.
Liquid fuels with high energy density are well suited to heavy-duty transport, so shifting the world’s trucks, planes and shipping fleets from oil-based to renewable electricity will take years. Electrification is progressing, but electrifying everything will require new technologies and infrastructure.
Oil and gas companies are going back to oil and gas
Shortly after the Paris Agreement on climate change was enacted, many legacy fossil fuel companies announced decarbonization targets that heralded an “age of cleantech”: They diversified away from their core business of finding, extracting and processing carbon molecules into the world of electrons. Companies pointed to natural gas as the bridge between fossil fuels and electricity and planned to use incentives, creative financing and energy trading to deliver acceptable, low-volatility equity returns from their low-carbon business. In addition, many companies invested in reducing methane emissions, scaling carbon capture and sequestration (CCS) and making green hydrogen economically viable.
The last two years have seen a reversal, with companies resetting targets and divesting assets. S&P Global Energy analysis estimates that between 2023 and 2025, the global integrated oil companies cut their aggregate 2023–28 low-carbon capital spending by 25%. Even within their low-carbon investment programs, there has been a shift in the molecules/electrons mix from 50/50 to 58/42, with more focus on bioenergy/bio-feedstocks, fewer greenhouse gas emissions from operations, CCS and offsets. While government-owned oil and gas companies' low-carbon investment programs have largely remained in place, most are on a much smaller scale.
Announcements in the first quarter of 2026 indicate that further reductions are planned, including in technologies such as CCS, which thus far has not been affected.
Energy and climate policies are uncertain and unpredictable
The global climate policy landscape has continued to evolve over the past year. Competing priorities — energy access, security and affordability — alongside geopolitical upheaval and political swings have fragmented the approach to decarbonization and future energy systems. This, in turn, has created a fragmented investment outlook. In the US, federal climate policy is undergoing significant change. This is not new for the country; federal regulations and incentives have always shifted with changes in administration. Under presidents Barack Obama and Joe Biden, the US Environmental Protection Agency developed aggressive standards targeting fossil fuel-fired power plant, vehicle and oil and gas production emissions while advancing cleantech development and deployment through supportive policy frameworks and incentives. President Donald Trump’s administration has embarked on a deregulatory agenda focused on energy dominance, advancing fossil fuel infrastructure. Given the president’s extensive use of executive power, it is unclear how durable future policies will be.
In Europe, the long-standing consensus on rapid decarbonization has fractured, and countries are resetting their energy commitments. Geopolitical tensions and affordability concerns have pushed climate and the environment down voters’ list of priorities. While the long-term political ambition to decarbonize remains, the mantra is now “do no harm.” Competitiveness is a key theme, with deindustrialization a recurrent concern for energy-intensive industries. A slower, more affordable transition is the implicit plan to protect competitiveness. Nonetheless, electrification and renewables are still viewed as critical to Europe’s energy security. Regulation of transport emissions has created tensions between the established climate agenda and the protection of Europe’s industrial base. In 2025, emissions requirements on car manufacturers were softened, and the EU is on track to scrap its plan to phase out the sale of new petrol and diesel vehicles by 2035. Concerns about the cost of sustainable aviation fuels suggest that those targets will soon be reviewed as well. The tension between cost and climate was also apparent in discussions on 2040 emissions targets. The EU approved an ambitious headline goal — a cut of 90% below 1990 emissions — but the agreement was conditional on outsourcing part of the target to non-EU countries using international credits.
As the 15th Five-Year Plan (2026–30) begins, Beijing is prioritizing a "Green Industrial Revolution" to align its 2030 carbon peaking goal with a new era of high-quality, innovation-led growth. China’s large-scale deployment of renewables aims to reduce reliance on imported fossil fuels, and the role of coal is shifting toward supporting renewables and grid resilience. In 2027, the Chinese national Emissions Trading Scheme will expand to include steel, cement and other heavy industry to create a broader price signal for carbon.
Whither the energy transition?
The energy mix is in continuous transition, and history tells us that while there are occasional surprises, abrupt and radical changes are very rare. The driving force in prior transitions was a shift to more useful energy sources, such as from wood to coal, which has a higher energy density, or to a source with better functionality (coal to gas) at a lower cost.
The idea that advances in energy technology can and should follow a trajectory like that of the semiconductor industry — a notion termed Moore’s Curse by Canadian scientist Vaclav Smil — is impractical for many reasons. Energy infrastructure is capital-intensive, with a productive life spanning many decades, and alternative technologies are more expensive, less widely accessible and do not offer the same functionalities.
S&P Global Energy’s 2025 energy and climate scenarios vividly demonstrate the multidimensional nature of the energy transition. In all scenarios, fossil fuels retain a significant share of the global primary energy mix to 2060. In 2025, political and public sentiment, including in many EMDEs, shifted strongly to prioritize economic growth over climate mitigation. The Adaptation scenario is closest to demonstrating the impact of this shift, with high economic growth fueled by strong demand for fossil fuels.
Looking forward
The global energy system continues to surprise. In the past two decades, there have been monumental supply surprises: the shale oil and gas boom in the US, the growth in solar photovoltaics enabled by a steep decline in costs, and more recently a boost in electric vehicle sales led by China. We are now seeing the biggest surprise in decades: surging electricity demand from data centers. The scale of the global energy system means that any significant change in fuel mix and emissions will take time, and continuing investment in conventional energy will be necessary. A well-functioning energy system is critical to fuel economic growth. Policymakers will prioritize affordability, energy security and energy access. The energy future will be multidimensional, proceeding at different rates with a mix of technologies and priorities around the world.