S&P Global Energy Horizons Top Trends 2026

The US is charting its own course, driven by rapid AI growth and evolving energy priorities. Europe is working to reconcile diverse objectives, while China consolidates its cleantech leadership and seeks to draw global markets closer.

AI’s explosive power demand is testing grid limits, revenue models and sustainability goals. The pace of progress will depend on unlocking new capacity and flexibility, with grid modernization a key constraint on energy security and competitiveness.

Geopolitical alignment is reshaping the trajectories of renewables, hydrogen, sustainable aviation fuel (SAF), electric vehicles and climate policy, with supply chain and carbon accounting battles intensifying. China’s dominance in clean energy supply and technology is growing, while Europe and the US navigate policy swings and market volatility.

Mounting physical and financial climate risks are turning adaptation from optional to essential. The interplay of these trends — AI-driven demand, grid bottlenecks, evolving procurement strategies, scaling technologies for hard-to-abate sectors, disjointed carbon rules, rising costs of climate risk and the urgent need for resilience — highlights how energy expansion and sustainability are not parallel ambitions, but intertwined imperatives shaping the global energy future.

Although uncertainties around the magnitude of growth are considerable, expansion at this rate — or anything approaching it — will reverberate across the economy, influencing infrastructure planning, investment flows and national policy, as well as raising environmental concerns. The year 2026 will increasingly shine a spotlight on whether the industry can maintain rapid growth while balancing the sustainability side of the equation. Economics and speed to market will remain key determinants of data center power supply choice, particularly where there are options in supply, and those two top priorities will not always align with sustainability goals.

Data center sustainability commitments vary significantly, and net-zero ambitions are not a given. Data from the 2024 S&P Global Corporate Sustainability Assessment (CSA) shows that 38% of assessed companies with data center operations lack a net-zero commitment.

Major tech firms have made net-zero commitments, including companies leading the AI charge such as Microsoft Corp., Alphabet Inc. and Meta Platforms Inc. However, meeting those commitments is getting harder, as is being acknowledged in the most recent company sustainability reports. Data center companies have been leading clean power procurement efforts to meet their power needs and climate ambitions, and we look for these to continue, although the pace of new near-term power purchase agreement uptake has been slowing. In 2026, we could see the start of revisions to existing targets and some fracturing of policies by key players and regions.   

The end of 2025 will mark a high point for renewables installations. By this time, the global solar market will have reached an extraordinary milestone, with installations surpassing 500 GW AC — an achievement unimaginable when the industry was in single-digit gigawatts just over a decade ago. This surge has been driven largely by China, which accounts for more than half of global additions. 

Our analysts now forecast that China’s annual additions will fall from approximately 300 GW in 2025 to about 200 GW in 2026, a decline so steep that no other region will be able to compensate. A major policy shift in mid-2025 — from guaranteed pricing to competitive bidding — triggered a dramatic slowdown after an initial rush of installations. This led to a sharp drop in Chinese volumes in the second half of the year, creating intense price pressure and ultra-thin margins across the supply chain. 

In 2026, grid infrastructure moves center stage. For decades, grid investment has lagged the pace of energy decarbonization and energy innovation across many markets. This underinvestment has now become a critical bottleneck. As the world races to address expanding energy needs — electrification, decarbonization and digitalization — the grid must evolve or risk becoming the weakest link in power systems. 

Power sector decarbonization in the EU — where 40% of EU grids are over 40 years old and built for a fossil fuel era  — requires increasing investment in grid infrastructure to improve reliability and reduce dependence on gas. The European Commission estimates that €584 billion in grid capital expenditure is needed by 2030, rising to €1.2 trillion by 2040. Yet, permitting delays — averaging 12 to 17 years for new transmission lines — and the lack of dedicated investment vehicles make upgrading existing mid- and high-voltage infrastructure a more viable near-term solution.

The US faces its own grid challenges. Explosive data center growth and power needs, driven by AI and cloud computing, are straining local and obsolete grids. Without urgent investment and smarter planning, the US risks a capacity crunch and even grid instability. Across the industry, calls are mounting — from hyperscalers to utilities and policymakers — to tackle structural roadblocks to power infrastructure buildout. Proposals range from expanding tax credits to streamlining permitting and accelerating component manufacturing, signaling a shared recognition that grid modernization is now a national competitiveness issue.

Increasing renewable capacity — especially solar PV — is leading to more zero- and negatively priced settlements in wholesale markets. This volatility is forcing a rethink in commercial structures: The market is moving from plain PPAs to flexibility-backed hedges, with hybrid PPAs combining multiple technologies and storage, to manage risk and monetize flexibility. 

For now, the market is in a “brainstorming” phase: Utilities and energy companies are early adopters of structured and flexibility products, while corporates and renewable developers are still catching up and often rely on simpler structures with less-nuanced risk allocation. A shift toward shorter contract terms and stronger downside protections could follow as capture rates deteriorate. 

Extreme price swings are most visible in Europe, where Platts, part of S&P Global Energy, reports that PPA price indexes in Spain and Germany remain well below solar PV cost-based levels. Platts also notes wide spreads between buyer and seller expectations, reflecting changing perspectives amid rising risks of declining capture ratios and increasing zero and negative prices.

Hydrogen has been presented as the leading “green molecule” needed to decarbonize hard-to-abate sectors. However, even as global uptake has fallen short of ambitious expectations, China has emerged as the global leader in electrolytic (“green”) hydrogen, with domestic deployment and exports set to grow exponentially in 2026. Green hydrogen is central to China’s plan to dominate clean energy supply chains, mirroring its approach in solar and batteries.

Policy support (including mentions in the 14th and 15th Five-Year Plans), regulatory changes and supply-side engineering have laid the foundation for rapid growth. This began to materialize in 2025: Chinese projects will install about 1.5 GW of electrolyzers in the year, nearly doubling the 1.7 GW total installed globally at the end of 2024. Almost 10 GW is under construction, and deployment is projected to reach 4.5 GW in 2026 and 6.9 GW in 2027, expanding global electrolysis capacity eightfold in just three years.

Companies have piled in, creating over 50 GW per year of stated manufacturing capacity. Oversupply is driving fierce competition and steep price declines: Electrolyzer stack prices have plunged from $250/kW in early 2024 to under $100/kW, with similar system cost reductions. Chinese suppliers are also ramping up exports, with projects in Central Asia, Africa, South America and the Middle East procuring Chinese equipment over the past 18 months.

Chinese firms aim to export energy as well as technology. At least two green ammonia plants have received EU renewable fuels of nonbiological origin (RFNBO) certification, paving the way for clean molecule exports. Price indications suggest Chinese players will sell at about $600per metric ton of ammonia FOB — about double the gray ammonia but competitive in Europe’s tight market. Prices should fall as first-of-a-kind challenges ease.

Renewables oversupply creates pressure on power sector margins and utilization. Green hydrogen offers a strategic outlet: Converting excess electricity into molecules enables China to “move electrons” from northern provinces to other markets. To support this, China is investing heavily in hydrogen pipelines and port facilities for ammonia and methanol exports.

The global hydrogen revolution has, so far, not materialized. But it is clearly emerging in the world’s largest consumer of energy. 

The industry is responding to trends in SAF consumption, which has surged since the start of the decade. The year 2025 was particularly strong, with SAF mandates introduced in the EU and the UK boosting demand. S&P Global Energy estimates that SAF consumption more than doubled in 2025 to  reach 2 million metric tons (MMt). In contrast, growth in 2026 will be less pronounced as EU targets remain unchanged and policy shifts in the US make SAF production less attractive. 

Investments are accelerating in Asia, where producers benefit from lower production costs and abundant feedstock supplies, particularly used cooking oil (UCO). More than half of global SAF capacity will be concentrated in Asia in 2026, even though regional demand remains modest. Asian producers are targeting the European market, which is forecast to face a supply shortfall and where willingness to pay is high.

Beyond 2026, investments in SAF plants could accelerate sharply, with capacity potentially increasing eightfold to 42 MMt by 2030 if all announced projects materialize. Most projects are in North America (15.8 MMt), Asia (13.4 MMt) and Europe (7.2 MMt). However, only 7.3 MMt of capacity has reached a final investment decision, leaving 28.5 MMt still awaiting approval.

Today, SAF is produced mainly via the commercially mature and cost-effective hydroprocessed esters and fatty acids (HEFA) pathway. One third of announced projects by 2030 plan to use newer technologies such as alcohol-to-jet (ATJ), gasification + Fischer-Tropsch (FT), methanol-to-jet (MTJ) and others. These face structural headwinds: technical challenges with integrating early-stage processes, high capital expenditure and production costs, reliable feedstock supply chains, and demand and price uncertainty. Overcoming these hurdles will be key to scaling up capacity if SAF is to remain a critical lever for decarbonizing aviation.

What are GHG emissions? When it comes to corporate reporting, the definition can and often does differ. Early efforts to standardize emissions reporting were designed to be flexible so that they could apply across sectors. This intentional flexibility, however, has resulted in differences in how emissions are quantified and reported, limiting its utility.

There is growing consensus that inconsistencies in product-level carbon accounting  need to be addressed, and harmonization is a prerequisite for the market to differentiate products based on carbon intensity. The Sustainable Business COP, which was launched ahead of the 30th Conference of the Parties (COP30),   featured carbon accounting as a key issue, with a new industry association, Carbon Measures, looking to accelerate the rollout of more robust product-level carbon accounting. Meanwhile, major revisions are being proposed for the world’s leading emissions accounting standard — the GHG Protocol — to align reporting with current market realities. Changes in Scope 2 treatment can have wide-ranging implications for corporate choices to address power emissions. In 2026, carbon accounting is expected to heat up as a high-profile topic.

Potential proliferation of regulations like the EU Carbon Border Adjustment Mechanism (CBAM) require companies to report different emissions to different regulators, complicating trade. The CBAM will take effect on Jan. 1, 2026, requiring accountability for the carbon intensity of goods imported into Europe, even as key policy elements will only be finalized at the 11th hour. Key countries around the world are introducing their own emissions pricing systems, which would lessen the impact. Among key policy questions is: Will the EU introduce export rebates to reimburse carbon costs for EU products to boost their competitiveness on global markets? Some of the EU’s major trading partners pushed back on CBAM at COP30. Criticism made it into the final COP Presidency report, promising more debate to come.

Global financial flows in the energy sector reflect this trend. Spending in cleantech grows by nearly 30% over the next five years, while upstream spending remains roughly constant in real terms. The majority of new spending is moving East. 

Washington is adopting a more interventionist industrial strategy. Expect greater government involvement through equity stakes, price floors for critical minerals and targeted support for technologies such as nuclear and advanced geothermal. This marks a significant shift from the US’ historic model of funding early-stage innovation and letting markets pick winners and losers. A more interventionist approach provides clear signals for private capital as to which sectors and companies are favored. However, it also introduces new questions about competitive dynamics and the conditions for government backing. Meanwhile, surging AI-driven electricity demand is accelerating an energy expansion mindset, echoing China’s decades-long linkage of energy policy with national security.

Diplomatically, the contrast remains sharp. China continues to position itself as an active participant in climate negotiations, building on its role since the Paris Agreement and having recently released new emissions targets. The U.S., by comparison, has taken a more selective approach—skipping COP30 and challenging multilateral efforts such as International Maritime Organisation (IMO) shipping emissions pricing—creating space for China to expand its influence.

Extreme weather and climate hazards are creating on-ground risks for infrastructure, physical assets and the companies that operate them. The global average temperature from January to August 2025 was 1.4 degrees C above preindustrial levels — just short of the Paris Agreement’s 1.5-degree-C limit — and Horizons climate scientists estimate that there is a 50% likelihood of it exceeding 2.3 degrees C by 2040. A warmer, more volatile climate means extreme heat, drought, tropical cyclones and other hazards are likely to become more common and more severe and will incur heavy costs.

These hazards are already posing challenges to communities and industries. A historic drought in Iran has led to the prospect of water rationing in Tehran and the near depletion of hydropower capacity. Soaring summer heat across Europe — where temperatures are expected to rise faster than in many other regions — is driving rapid adoption of air conditioning, stretching electric grids in countries where per-capita electricity consumption has been much lower than in the US.

The cumulative economic effects of climate hazards — lost revenue from business interruption, repairs to physical damage and reduced employee productivity — translate into rising financial costs for companies. Given the observed trajectory of climate change, these costs will increase alongside physical risks. The Horizons Physical Risk dataset projects annual costs of about $885 billion in aggregate for large publicly traded companies in the 2030s. 

Climate risk assessments and physical risk adaptation planning are critical for resilience. Yet uptake across sectors remains patchy, according to data collected in the S&P Global CSA. Industries historically under greater climate scrutiny, and with operational exposure such as electric utilities, grid operators, and oil and gas companies, show the highest rates of risk assessment and adaptation planning. In other parts of the global economy, risk assessment and adaptation planning remain the exception rather than the rule.