Through 2026, the energy sector will navigate what appear to be some interesting contradictions. On one side, we've got surging demand, especially from AI-driven data centres. On the other, renewable capacity additions are slowing for the first time since the early 2000s. This is by no means a crisis. Rather, the industry is adjusting to how quickly it's been growing.
Grid infrastructure takes centre stage
The most pressing challenge (and opportunity) for 2026 is grid infrastructure. According to S&P Global's Horizons report[1], data centre power demand is projected to increase by 17% this year, with potential demand reaching over 2,200 TWh by 2030.
The issue isn't whether this demand will materialise, but whether infrastructure can keep pace. Grid modernisation has become the gating factor for energy security and economic competitiveness. The good news is that this bottleneck is driving significant investment in transmission, distribution and grid-enhancing technologies.
We're also seeing a natural gas renaissance for baseload power. Forecasts suggest that 2026 could see around 70 GW of new gas-fired generation additions, the most active year for gas development in over a decade. Rather than a step back from net zero, this should be seen as a pragmatic response to the need for firm, round-the-clock power as renewable deployment continues.
Solar's temporary pause – and what comes next
For the first time in decades, global solar additions are expected to decline year-over-year. Rystad Energy projects[2] a 7% drop, largely driven by China's policy shift away from guaranteed pricing, combined with headwinds coming out of the United States.
Look beyond the headline, and there is still plenty of cause for optimism with solar. What we're seeing is a correction after years of quickfire growth. Prices are still coming down, and solar is set to make up about 80% of new renewable capacity through to 2030.
At the same time, battery storage is reaching a significant point. BloombergNEF[3] expects annual global installations to pass 100 GW in 2026 for the first time. Equipment costs are much cheaper now, less than a third of what they were just three years ago.
Navigating the great energy divergence
Perhaps the most significant shift for 2026 is the emergence of what we might call the ‘great energy divergence’. Major economies are no longer running the same race.
The US is now prioritising AI dominance over climate leadership, looking at energy mainly as a tool for tech competitiveness. China continues to produce, at scale, cleantech products for export while it deals with too much capacity at home. Europe, meanwhile, has brought in its Carbon Border Adjustment Mechanism, which is adding new dynamics to how international trade works.
These varying approaches, rather than be viewed as bad news, can spark innovation and open up different market opportunities. But they do mean energy companies need smarter strategies that can handle the fact that different regions are playing by different rules.
From cheap oil to affordable power
Oil production looks set to surge in 2026. The IEA forecasts[4] supply will outstrip demand by 3.85 million barrels per day[5], with Brent crude expected to drop to around $55 per barrel in Q1.
While this does create pressure on producers, it also presents opportunities. Lower energy input costs can improve margins for manufacturers and logistics companies. The surplus may also accelerate strategic consolidation, as well-capitalised players look to acquire assets at attractive valuations.
In contrast, electricity affordability is emerging as a key concern. Rising power costs, partly driven by data centre growth, are becoming politically salient, particularly in the US where ‘plug prices’ may rival ‘pump prices’ as a voter concern in upcoming elections.
A balanced outlook
There is a lot going on in the energy sector this year. Grid infrastructure desperately needs investment, and that's opening up new markets for innovative solutions. Solar's taking a breather while storage is taking off. Different regions are pursuing different policy approaches, which has the potential to spur innovation.
The companies that will do well this year are the ones that can see where constraints create openings, and work out how to operate across markets that are starting to tread their own paths.
EMG works with industrial companies to make sense of these dynamics and communicate effectively through them. Whether you're talking about infrastructure investments, positioning clean energy solutions, or engaging stakeholders across diverse policy environments, we understand both the opportunities and challenges that lie ahead. Get in touch to see how we can support your strategy.
