Recent geopolitical tensions have sent the price of oil yo-yoing, shining a spotlight on just how dependent we still are on the black stuff.
However, at the same time it’s highlighting the need for alternatives – and there are signs that the energy mix is evolving.
Global energy investment is set to rise 2% in real terms (after inflation), with twice as much capital flowing into low-carbon energy, grids and electrification as oil, gas and coal projects.
In fact in 2024, the International Energy Agency (IEA) declared the emergence of a new Age of electricity.
Following coal’s role in industrialisation and oil’s dominance in shaping the 20th century economy, this marks the next step in our energy journey.
Key global growth rates by source, 2024
What’s driving this?
The shift is primarily being driven by the electrification of buildings, transportation, and industry, alongside rising demand for air conditioning and data centres.
Emerging and developing economies account for over 80% of global energy demand growth. Demand from India, second only to China, grew more than the increase in all advanced economies combined.
What energy sources are leading the charge?
Share of energy demand growth by source, 2024
Natural gas and renewables are by far the largest beneficiaries.
Oil, which is not widely used to generate electricity, is growing but forecast to peak around 2030 by some analysts.
The decline of coal has been slow due to its fundamental importance to heavy industry. It’s still a widely used source of reliable and relatively low-cost electricity in countries like China, India and Indonesia, where rising demand from air conditioning is continuing to strain power grids.
What will shape how the landscape evolves?
China
China accounts for a third of global power demand, meaning if China grows, so does power demand. While economic recovery from the pandemic has been slow, it remains on track to hit 2025 growth targets.
China views low-carbon power as a way to shore up energy security. Over the past two decades energy consumption from low-carbon sources has risen from around 6% to over 18%.
China is on track to double renewable electricity capacity from 2022 to 2030 and also aims to double nuclear capacity by 2040.
The developing world
As China develops low-carbon technologies, creating economies of scale, neighbouring nations could take advantage of cheap, green energy sources.
For example, Pakistan is currently undergoing one of the world’s fastest solar revolutions, taking advantage of cheap solar and battery technologies from China.
Politicisation of net zero in the west
In the US and Europe, the energy transition is tangled with politics.
The Trump administration has proposed $15bn of cuts to renewable energy and carbon capture, and $6bn from EV chargers. A similar sentiment is gaining credibility in the traditionally green strongholds of the EU and UK.
Nevertheless, both still pledge to a green transition. And with coal generation plummeting, investment in other areas will be needed to meet growing demand.
Climate change
Climate change is one of the most fundamental long-term risks facing the modern world.
Close to home, flooding, droughts and heatwaves are becoming more common. Further afield, Asia is warming at twice the pace of the rest of the world. Political pressure to avoid the cost of inaction is likely to grow.
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Which companies could benefit?
Remember, investing in an individual company isn’t right for everyone because if that company fails, you could lose your whole investment. If you cannot afford this, investing in a single company might not be right for you. You should make sure you understand the companies you’re investing in and their specific risks. You should also make sure any shares you own are part of a diversified portfolio.
Cameco – the resurgence of nuclear energy
The world’s push for cleaner energy has thrust nuclear power back into the spotlight, and Cameco, a Canadian uranium leader, is a key player to watch.
This isn’t just a mining outfit – Cameco supplies uranium for clean, reliable baseload electricity that keeps grids stable. It also processes nuclear fuel and crafts reactor components, positioning it centrally in the energy transition narrative.
Shifting attitudes are fuelling optimism.
Policymakers are warming to nuclear as a green energy pillar, with some reversing anti-nuclear policies. Demand for uranium is climbing, driven by energy security concerns, the clean energy shift, and AI’s soaring power needs.
However, uranium supply remains constrained, which could play to Cameco’s strengths.
With stakes in one of the world’s richest uranium reserves and assets in stable regions, it’s geared to meet demand – if conditions hold.
Cameco boasts a robust balance sheet, rising cash flows, and a bolstered dividend, signalling confidence.
But risks loom.
Uranium prices are volatile, political support for nuclear isn’t universal, and, although nuclear fuel has so far sidestepped tariffs, trade tensions could complicate matters.
Cameco offers exposure to a compelling trend, and high barriers to entry might limit competition.
But nuclear energy is still overcoming decades of negative sentiment, so investors should expect some ups and downs.
Read Cameco’s latest results and our longer-term view below.
Rio Tinto – balancing old and new
As the world shifts to cleaner energy, Rio Tinto is staking its claim as a key player by focusing on metals vital to the transition.
While iron ore still drives 70% of its profits, the mining giant is looking to grow its presence in ‘future-facing’ commodities like copper, lithium, and aluminium – essential for electrification, batteries, and sustainable infrastructure.
Copper is a key area, and Rio Tinto’s Oyu Tolgoi mine in Mongolia is expanding to become a global leader, poised to help meet needs that are expected to double by 2035.
Lithium, essential for EV batteries, is another focus.
The $6.7bn Arcadium acquisition marks significant progress. While the market is currently oversupplied, growing energy transition demands this decade are expected to tighten supply and support prices.
Meanwhile, aluminium gets a green makeover through the ELYSIS project, aiming to deliver carbon-free production to support decarbonisation goals.
Rio Tinto offers retail investors a promising way to ride the green metals wave, with a robust balance sheet and a clear energy-focused strategy.
That said, reliance on iron ore exposes Rio Tinto to fluctuating Chinese demand, and a recent CEO transition introduces uncertainty.
Read Rio Tinto’s latest results and our longer-term view below.
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