Major Shift In Energy Investment Towards Low-Carbon Sources: IEA’s 2025 Report

The global energy landscape is undergoing a profound transformation, according to the International Energy Agency’s (IEA) World Energy Investment 2025 report, released today. Marking the 10th edition of the annual publication, the report reveals a historic shift in capital flows toward low-carbon energy, with renewable power, nuclear, and clean technologies now dominating global investment.

Global energy investment is projected to reach USD 3.3 trillion in 2025, a 2% real-term increase over 2024. Of this, USD 2.2 trillion will be directed towards clean energy initiatives – including renewables, nuclear, grids, energy storage, electrification, and energy efficiency. This is twice the investment going to fossil fuels, signaling an accelerating transition to more sustainable energy sources.

IEA Executive Director Fatih Birol stated, “The era of electricity-led growth has arrived. For the first time, we’re seeing low-carbon technologies leading not just in ambition, but in capital commitment.”

Key Trends Driving the Shift:

Solar surge: Solar PV is now the single largest investment category, with spending expected to hit USD 450 billion in 2025. This growth is powered by competitive costs, technological innovation, and strong demand across emerging economies.

Electrification boom: Global electricity sector investment is set to rise to USD 1.5 trillion, reflecting soaring demand from electric vehicles, industry, cooling, and data centers – including AI-driven applications.

China and India lead the way: China’s push to reduce fossil fuel dependency and boost technological leadership accounts for a significant share of global clean energy investment. India, too, is ramping up solar spending, while Europe intensifies renewables deployment amid energy security concerns.

Nuclear resurgence: Nuclear investment is up 50% in five years, with over USD 70 billion allocated for new builds and refurbishments in 2025. Small modular reactors (SMRs) are gaining traction as a next-generation solution.

Battery storage expansion: Investment in power sector batteries will hit USD 66 billion, critical for integrating variable renewables into grids.

Fossil Fuel Investment Declines

Conversely, the report notes a 4% decline in upstream oil and gas investment, falling to just under USD 570 billion in 2025. Investment in oil refineries is also set to hit its lowest level in a decade, as global demand expectations cool and prices soften.

Despite a general decline, China and India approved nearly 115 GW of new coal-fired capacity in 2024, raising concerns about long-term emissions. However, no new coal plant turbine orders were placed in advanced economies, marking a historic first.

Grid Investment Lagging Behind

While generation capacity continues to soar, investment in electricity grids is falling short, with only USD 400 billion spent annually—well below what is needed to ensure reliable supply and integrate renewables. Bottlenecks include regulatory delays, supply chain issues, and financial struggles among utilities, particularly in developing nations.

Looking Ahead

The IEA warns that further acceleration of low-carbon investment is critical to meet climate goals, enhance energy security, and support economic development. Encouragingly, the report notes that climate policy is no longer the sole driver of clean energy growth. Economic competitiveness, technological maturity, and energy independence are now equally powerful motivators.

As Birol concluded, “What we’re seeing is not just a green transition—it’s a global realignment of energy priorities. The future of energy is cleaner, more electric, and increasingly shaped by innovation and resilience.”

The writer of this article is Dr. Seema Javed, an environmentalist & a communications professional in the field of climate and energy