2026 set to be a pivotal year for energy transition amid AI-driven demand and grid challenges

S&P Global Energy’s Horizons team warns that 2026 will be a transformative, and at times turbulent, year for the energy transition as rapid AI-driven electricity demand, shifting geopolitics and persistent climate risks collide with ageing grids and changing commercial models.

“In 2026, AI’s surging power demand growth will be testing grid limits, revenue models and sustainability goals,” said Eduard Sala de Vedruna, Vice President and Head of Research, Horizons, S&P Global Energy. “The pace of progress will depend on unlocking new capacity and flexibility, with grid modernization a key constraint on energy security and competitiveness.” Leanne Todd, Senior Vice President and Global Head of Horizons, added that “the interplay of AI-driven demand, grid bottlenecks, evolving procurement strategies, and rising climate risks highlights how energy expansion and sustainability are not parallel ambitions, but intertwined imperatives.”

The Horizons Top Trends report , whose executive summary and charts were released by S&P Global Energy , places datacentre-driven electricity demand at the centre of near‑term market stress. Under the report’s high‑growth scenario, datacentre power use could rise by roughly 17% to 2026 and continue expanding strongly through 2030, producing demand on the order of multiple terawatt‑hours that would rival the electricity consumption of large nations. According to the report, 38% of assessed companies with datacentre operations do not yet have net‑zero commitments, creating potential clashes between procurement needs and corporate climate pledges.

The S&P Global analysis aligns with official US outlooks. The US Energy Information Administration forecasts record‑high US power consumption for 2025 and 2026 , 4,199 billion kWh and 4,267 billion kWh respectively , driven in part by data centres and broader electrification of heating and transport, Reuters reported. That same pressure on systems is prompting regulatory and market responses: the Federal Energy Regulatory Commission has approved a PJM Interconnection fast‑track to speed new plant builds to head off shortfalls as coal and some nuclear units retire, a move that has sparked debate over whether the short‑term remedy favours gas over renewables, AP and Reuters coverage shows.

Grid bottlenecks and underinvestment are a recurring theme. S&P Global notes that decades of limited transmission and distribution spending have created a critical constraint as governments and industry race to electrify. European grids are ageing , with an estimated 40% older than 40 years , and the European Commission calculates hundreds of billions in capital expenditure will be needed by 2030 to enable the transition. In the US, investor‑owned utilities are already signalling large, targeted spending plans: PG&E unveiled a $73 billion transmission and resilience programme through 2030 aimed at accommodating roughly 10 GW of new datacentre demand and improving wildfire resilience, the company said.

Countries and grid operators are experimenting with tighter allocation and new rules for power‑hungry digital loads. Belgium’s grid operator has proposed reserving dedicated capacity classes for data centres and introducing flexible connection terms to avoid speculative projects monopolising capacity, Reuters reported. The proposal reflects wider policymaker concern that concentrated, rapid datacentre growth can crowd out industry and local demand unless connections and grid planning are reformed.

A pause , but not a reversal , in annual solar additions is another headline from the Horizons outlook. S&P Global forecasts the first year‑on‑year slowdown in global solar installations in 2026, with Chinese annual additions falling from roughly 300 GW in 2025 to about 200 GW in 2026 after Beijing shifts from guaranteed pricing to competitive bidding. Even so, cumulative PV capacity is expected to double over five years, supported by faster deployment of battery storage and uptake in emerging markets. That assessment sits alongside other views that China’s cleantech advantage is showing early signs of strain: S&P Global and media reporting note overcapacity and trade barriers are likely to reduce China’s global share of PV and battery cell manufacturing over the coming decade.

China’s industrial response is nevertheless sharpening. Climate Energy Finance estimates Chinese firms channelled about $80 billion into overseas clean technology projects in the past year, pushing cumulative outbound cleantech investment above $180 billion since early 2023. These deals , ranging from large green hydrogen and battery projects to integrated supply‑chain investments across Asia, Africa and Latin America , reflect a strategic push to export both equipment and project capacity, the report said. S&P Global’s Horizons team expects Chinese electrolyser deployment to accelerate, with green hydrogen projects and low‑cost exports of ammonia and other molecules forming a competitive front in global markets.

That dynamic produces two simultaneous forces: downward pressure on equipment prices and a geopolitical reorientation of investment flows. Oversupply has already pushed electrolyser stack prices well below early‑2024 levels, S&P Global reports, while analysts warn that sustained Chinese outward investment is reshaping regional industrial footprints. At the same time, trade frictions and proposed export curbs mean China’s manufacturing dominance may be contested, with some market share erosion forecast by independent analysts.

Commercial models for corporate clean‑power procurement are also evolving rapidly. S&P Global finds increasing use of flexible, hybrid power purchase agreements that blend technologies and include storage, shorter tenors and stronger downside protection to address extreme price volatility and negative pricing events common where renewable penetration is high. Datacentres have become a major corporate off‑taker, accounting for a substantial share of corporate procurement volumes in 2025.

Policy shifts and carbon accounting rules will further complicate corporate strategies. The EU’s Carbon Border Adjustment Mechanism takes force on 1 January 2026 and revisions to the GHG Protocol are under discussion; S&P Global warns that divergent border measures and reporting frameworks could force firms to prepare multiple, jurisdiction‑specific emissions disclosures, adding compliance complexity to global trade.

Finally, the Horizons report stresses adaptation as a central business imperative. Rather than optional resilience planning, S&P Global projects rising climate‑related costs for large publicly traded companies in the 2030s and finds adaptation planning remains uneven across sectors. For industrial decarbonisation professionals, the implication is clear: investments in generation, storage, transmission and resilient design must be coordinated with commercial contracting and climate risk management to preserve competitiveness.

Industry data and recent regulatory moves together paint a practical conclusion. Rapid digitalisation , led by AI , is reshaping load patterns and creating an urgent requirement for transmission upgrades, market design evolution and more sophisticated corporate procurement. According to the original report, the pathway to keep the energy transition on track in 2026 will depend less on a single technology and more on aligning grid modernisation, policy frameworks, cross‑border investment strategies and new contracting structures to manage both volatility and long‑term decarbonisation goals.