By Namith DP | June 18, 2025
The global energy crisis stems from surging demand, volatile fossil fuel markets, and geopolitical instability. The power sector now stands at the crossroads of accelerating low‑carbon adoption and persistent reliance on coal and gas. Let’s dissect supply/demand dynamics, security risks, financing trends, and viable transition pathways, and see how it offers policymakers, investors, and energy experts a comprehensive, fact‑driven outlook on what comes next.
1. Introduction: Setting the Stage
The year 2024 brought record highs in energy demand, fueled by extreme weather, economic expansion, and rapid electrification. The IEA Global Energy Review 2025 reports a 2.2 % increase—twice the average growth of the previous decade. Electricity demand surged 4.3 %, driven by cooling, industry, EV charging, data centers, and AI.
Demand spiked across all sectors: renewables rose 38 %, gas 28 %, coal 15 %, oil 11 %, and nuclear 8 %. CO₂ emissions climbed by 0.8 %, despite energy‑efficiency improvements and clean energy gains.
This energy ascent exposed vulnerabilities: high fossil‑fuel prices, supply shocks, underinvestment in energy resilience, and adverse socio‑economic effects on vulnerable populations.
2. Root Causes of the Crisis
2.1 Epic Demand Surge
- Global energy demand rose 2.2 % in 2024, led by emerging economies and driven by electrification.
- Electricity demand grew 4.3 %, due to record heat and digitalization.
2.2 Supply Tightness & Price Volatility
- All fossil fuel prices reached multi‑year highs starting in 2021, exacerbated by Russia’s invasion of Ukraine.
- Gas spikes disrupted supply across Europe and Asia; oil hit its highest level since 2008.
2.3 Geopolitics & Market Fragmentation
- Conflicts in the Middle East and Ukraine remain critical risk factors .
- Trade restrictions on clean energy tech surged from 40 to nearly 200 measures since 2020.
- Dependency on concentrated supply chains weakened clean energy resilience.
3. Fossil Fuels: Current Status & Trends
3.1 Coal
- Global coal demand grew 1 % in 2024, driven by heat-wave-induced electricity use in China and India.
- China consumed 58 % of global coal; consumption rose to a record in 2023, with a projected plateau by 2027.
- Financial backing remains robust: major banks increased fossil-fuel funding by 23 % in 2024 (~US $869 billion).
- Nations continue coal projects: Indonesia recorded record output in 2024 (+8 %) amid declining exports .
3.2 Oil
- Oil demand rose 0.8 % in 2024; this remains below pre‑pandemic levels .
- Road transport demand declined in advanced economies (–0.3 %) and China (–1.8 %), offset by petrochemical demand.
- IEA projects global oil demand could peak by 2029 at 105.6 mb/d.
- China’s EV momentum (50 % market share in 2024, rising to 80 % by 2030) contributes to oil demand peak .
3.3 Natural Gas
- Gas saw the strongest fossil fuel growth in 2024 (2.7 %, +115 bcm).
- Growth concentrated in China (+7 %, 30 bcm) and the US (+2 %, 20 bcm) .
- Europe reduced gas generation but still faces price and supply risks.
4. Low‑Carbon Energy: Momentum and Limits
4.1 Rapid Renewables Surge
- Renewables supplied 80 % of additional power in 2024; they reached 40 % of global electricity generation.
- Solar additions hit ~700 GW—the 22nd consecutive record year.
- Clean energy avails avoided ~2.6 Gt CO₂ annually—7 % of global emissions.
4.2 Nuclear Contribution
- Nuclear capacity increased by 33 % in 2024 (+7 GW); generation rose 100 TWh.
- Nuclear additions hit the fifth‑highest mark in three decades.
4.3 Energy Storage Scaling
- Saudi Arabia and UAE deploy Chinese battery systems: Saudi targets 11 GWh storage by 2025, UAE adds 19 GWh in Abu Dhabi.
- Battery prices dropped to ~$50/kWh; total installed cost fell below $200/kWh.
4.4 Repurposing Coal Sites
- Converting closed coal mines into solar farms offers 300 GW capacity by 2030, providing job creation and environmental safeguards.
- It could create ~577,200 jobs—temporary and permanent—offsetting coal sector losses.
5. Energy Security & Geopolitics
- Major European efforts (like REPowerEU) reduced Russian gas imports from 45 % to 15 % by 2023.
- Global clean-tech trade restrictions surged to nearly 200 since 2020.
- The IEA emphasizes that energy security now includes clean tech resilience.
6. Financial Flows & Investment Trends
6.1 Fossil‑Fuel Financing
- Global banks upped fossil funding by 23 % to $869 b in 2024.
- Despite private slowdown, state-owned oil/gas companies rose to 40 % of sector investment.
- Oil sector investment is set to fall 6 % in 2025—the first decline since COVID‑19.
6.2 Green Finance Initiatives
- The Inter‑American Development Bank launched a green‑loan guarantee mechanism to unlock private investment—$500 m to $1 b portfolio toward $1.3 t climate finance goal.
- Major banks exited the Net‑Zero Banking Alliance under political pressure.
7. Transition Barriers: Why It’s Tough
- Economic reliance on coal: China and India hold 58 % of global coal use; Indonesia increased production by 8 % despite falling exports .
- Supply-chain mismatch: Clean tech trade barriers threaten stability .
- Medical dependence on fossil fuels: Petrochemicals and aviation maintain steady oil demand .
- Financial inertia: Banks financed $869 b for fossil fuels in 2024 .
- Slow permitting: Bureaucratic delays impede renewables deployment—COP28 leaders call for reform .
8. Case Studies & Best Practices
8.1 China’s Dual Role
- In 2024, China installed 373 GW of renewables (total 1,878 GW capacity).
- Coal’s share of electricity fell to 53 % in May 2024; solar rose to 12 %, wind 11 %, hydro 15 %, nuclear 5 %.
- EVs hit nearly 50 % of auto sales in 2024, aimed at 80 % by 2030.
8.2 Gulf States & Storage
- Saudi Arabia and UAE integrate cheap Chinese batteries to support their renewable goals.
- Saudi installed the largest single grid storage: 2.6 GWh Bisha system.
8.3 Coal-to-Solar Transitions
- GEM promotes reuse of closed coal sites for solar, offering 300 GW capacity and job creation.
- This model suits major coal economies (US, India, Indonesia) and fulfills calls for just transitions.
9. What Comes Next: Strategic Pathways
9.1 Peak Fossil Fuel Demand
- Oil is expected to peak by 2029 at ~105 mb/d.
- Coal demand likely plateaus around 2027 (~8.87 b tonnes).
- Gas demand remains variable; it may peak later depending on policy .
9.2 Clean Energy Scaling
- Renewables will reach ~35 % of global electricity by 2025.
- By 2050, wind and solar could supply 37–74 % of global electricity.
9.3 Energy Security Reinvented
- Diversify fuel supply and build resilient clean‑tech chains.
- Strengthen trade frameworks and secure critical minerals.
- Deploy storage and grid modernization to manage intermittent renewables.
9.4 Finance & Policy Actions
- Divert finance from fossil fuels—banks must return to net‑zero commitments.
- Scale green bond frameworks, loan guarantees, and blending with public funds.
- Simplify permitting—align national targets with urgent renewables deployment.
9.5 Just Transition for Communities
- Channel coal‑sector jobs into renewable recovery zones.
- Invest in skills training and economic inclusion in affected regions (e.g., coal‑to‑solar projects) .
10. Conclusions: Energy Transition Choices
- Global energy use surged in 2024 by 2.2 %; electricity demand grew 4.3 %.
- Fossil-fuel demand climbed, but renewables and nuclear supplied 80 % of additional electricity.
- Coal and oil demand are nearing peaks in the late 2020s.
- The ongoing crisis highlights entrenched energy-security risks, market fragmentation, and finance-pattern inertia.
- Transition success depends on accelerating clean energy, ensuring resilience, redirecting capital, enabling just transitions, and overhauling policy.
About the author
References
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Good insight.