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In 2024, the landscape for energy transition was marked by a convergence of complex global dynamics and shifting investment priorities. The rising cost of living and the emergence of populist governments are creating an uncertain political climate that could significantly influence the trajectory of energy transition efforts.
Several trends have emerged, including a renewed focus on conventional energy sources like oil and gas. International Oil Companies (IOCs), traditionally at the forefront of green energy expansion, are now reorienting towards their core operations, particularly in the US market. Meanwhile, the Middle East's growing influence signifies a strategic repositioning in response to the region's waning conventional energy investment.
Although enthusiasm for technologies like green hydrogen has tempered, emerging sectors such as waste-to-energy, biogas, and battery deployment are gaining traction, buoyed by advancements and cost reductions. Additionally, decarbonization solutions and energy efficiency initiatives are gaining momentum, offering pragmatic pathways to enhance business value and sustainability. This is particularly important against a backdrop of new big energy consumers gaining prominence, such as data centers.
As 2025 unfolds, the energy transition narrative is one of both challenge and opportunity. The evolving roles of major geopolitical players, government subsidies and stimulus, emerging technologies, and strategic investments will shape a dynamic year ahead.
Russell Reynolds Associates recently hosted the fourteenth installment of our Energy Matters series, bringing together two energy transition leaders to reflect on 2024, as well as the challenges and opportunities that lie ahead for 2025.
Hildagarde McCarville
Hildagarde McCarville is CEO of Anesco, a leader in the field of utility scale solar, storage and energy efficiency. Headquartered in the UK but with a growing presence across Europe, Anesco is on a mission to accelerate the transition to a sustainable, low carbon future.
Olivia Breese
Olivia's professional life has been wholly focused on the energy transition. Breese had been at Orsted for 13 years before her resignation earlier this year. Her final role was as executive vice president, where she held responsibility for Orsted's European business and was a member of the company's investment committee. Previous roles with the company included scaling Orsted's green hydrogen and efuels business. Olivia started her career at Linklaters, project financing renewables assets.
US politics and the Inflation Reduction Act
The new Trump administration is anticipated to increase investments in traditional energy sectors such as oil, gas, and coal. This political transition is likely to instill confidence among investors in conventional energy markets, potentially leading to a resurgence in exploration and production activities. While momentum behind green energy investments is expected to persist, the administration’s recent freeze of Inflation Reduction Act (IRA) funds and subsequent clarifications showcase the persisting uncertainty on this topic.
In the face of this evolving landscape, it’s challenging for leaders to assess which geographies and technologies to invest in. The recent freeze can create more opportunities for investment outside of the US, with Europe potentially becoming a more attractive space with new legislation being announced in the first part of 2025.
Investor appetite and the role of governments in stimulating renewable growth
Investors generally feel that there is a gap between Europe’s ambitious targets and the practical realities. Hydrogen and emerging technologies are stuck in a competitive bidding framework (e.g., CfD) that does not always work for “first-of-its-kind” or “just-barely-commercial” projects. Additionally, planning and permitting processes are terribly slow, particularly for large projects.
To address this, governments can play a role in stimulating innovative technology investments. These emerging solutions often require substantial upfront investment and carry higher risks, due to their nascent development stages. Therefore, governmental support in the form of subsidies, grants, and favorable policies is crucial to mitigate these risks and make these technologies more appealing to private investors. Additionally, clearer and stronger penalties for corporations that miss carbon targets can result in further investments from the private sector in green energy.
Lack of clear regulation hinders private capital investing in new early-stage technologies, as investors (both financial and corporates) prefer proven technologies, such as wind and solar. However, due to high interest rates, appetite for accelerated sector investment in 2025 remains uncertain.
Supply chain, manufacturing, and local content
Global supply chains have seen unprecedented strains, and the energy sector is no exception. In-shoring manufacturing offers the benefits of reduced logistical complexities, quicker response times, and enhanced quality control—all of which are crucial during disruptions. This approach also supports local economies and job creation. However, it may lead to higher production costs, due to increased labor and regulatory expenses. Additionally, the potential shortage of market skills is also challenging when localizing manufacturing efforts.
Conversely, offshore manufacturing can significantly reduce costs and tap into specialized expertise and larger labor pools. Yet it also subjects companies to risks associated with political instability, longer supply chains, and potential delays or disruptions in transportation. The US has been attempting to bring more manufacturing back to the country; it’s unclear if Europe will follow.
While there are many benefits to in-shoring, increased prices and limited governmental support make it more challenging. Leaders should ultimately assess which approach best suits their organizational needs on a medium to long-term basis.
Emerging markets and leapfrogging
Emerging economies have a unique opportunity to leapfrog directly to modern energy systems without having to retrofit the type of older infrastructure that’s endemic to Europe and the US. This advantage allows them to bypass the costly and time-consuming process of upgrading outdated systems, enabling a direct transition to advanced technologies like renewable energy sources, smart grids, and energy storage solutions. This leapfrogging can position emerging economies as leaders in renewable energy adoption.
Emerging economies could transform into export hubs for low-carbon commodities such as green ammonia and green steel, driven by abundant natural resources, lower production costs, and increasing global demand for sustainable materials. As major economies enforce stricter carbon regulations and seek carbon-neutral supply chains, emerging markets can capitalize on their competitive advantage by offering sustainably produced goods.
What energy leaders need to respond to the 2025 landscape
In the face of shifting geopolitical landscapes, companies must equip their employees with a diverse set of skills that address both the challenges and opportunities at hand. Importantly, C-suite executives must possess a robust set of skills to steer their organizations effectively, including:
- Strategic foresight that enables leaders to anticipate market trends and regulatory changes. This is particularly valid in the context of the Inflation Reduction Act and the rise of GB Energy, as well as in emerging economies gaining prominence as potential areas of growth.
- Financial acumen so as to navigate high interest rates and assess the viability of new technologies and markets.
- Innovation and resilience in the face of supply chain disruptions and technological advancements. Leaders need to drive a culture of innovation, leveraging technology to respond to challenges and capitalize on opportunities. Western economies are experiencing a shortage of technical and planning staff, so one’s positioning as an employer of choice will be a key driver in ensuring these roles are covered.
- Stakeholder management in the face of uncertain regulation. Leaders have an opportunity to be an active part of the debate about energy’s future. As such, the ability to build strong relationships, both internally and externally, is paramount.