The energy transition at a crossroads

October 2026  |  MARKET PULSE | SECTOR ANALYSIS

Financier Worldwide Magazine

October 2026 Issue

In the global energy sector, governments, investors and businesses are attempting to reconcile a series of pressures that increasingly appear to be pulling in different directions. Climate commitments remain in place across much of the world, yet electricity demand is rising sharply. Energy security concerns have intensified since Russia’s invasion of Ukraine, supply chains remain vulnerable to geopolitical disruption and the investment required to modernise energy infrastructure is unprecedented. At the same time, extreme weather events, cyber threats and growing resource scarcity are exposing vulnerabilities that many developed economies have long taken for granted.

For the US, these pressures have become especially acute. According to Clint Vince, a partner at Dentons, while the circumstances differ from the energy crisis of the 1970s, there are clear parallels in the sense of urgency surrounding energy security, affordability and economic competitiveness. The challenge today is arguably more complex because it involves not merely fuel supply but also grid resilience, digital infrastructure, climate adaptation, water security and regulatory uncertainty.

According to the International Energy Agency’s (IEA’s) ‘Electricity 2025’ report, global electricity consumption is entering what it describes as a “new Age of Electricity”, driven by electrification, air conditioning demand, industrial growth and the rapid expansion of data centres supporting artificial intelligence (AI) applications. The agency forecasts continued strong growth in power demand through at least 2027.

The rise of AI is particularly significant. A 2025 IEA report on energy and AI highlights that advanced AI systems require substantial computing capacity and, consequently, growing amounts of electricity. While AI may improve efficiency across energy systems, it is simultaneously becoming one of the fastest-growing sources of power demand in major economies.

This demand surge is arriving at a time when many electricity networks are already strained. Ageing transmission infrastructure, transformer shortages and lengthy permitting processes are creating bottlenecks across developed markets. In the US, policymakers and regulators are increasingly focused on how to connect large industrial facilities and data centres without imposing unreasonable costs on existing consumers or undermining grid reliability. Federal initiatives promoting transmission upgrades and reconductoring technologies reflect growing recognition that faster deployment of grid capacity may be as important as building new generation assets.

These pressures extend well beyond generation capacity alone. Industry participants increasingly face an interconnected set of challenges spanning infrastructure, regulation, cyber security, climate resilience and resource availability. These overlapping risks are contributing to a more complex investment environment at precisely the moment when unprecedented levels of capital are required across the energy sector.

“The scale of power demand from AI growth and electrification is unfolding against the backdrop of a new and dramatic energy crisis, the likes of which have not been seen since the 1970s,” says Mr Vince. “We are simultaneously grappling with an ageing grid in urgent need of modernisation and widespread concerns about affordability, sustainability and resilience. Meanwhile, the sector continues to face extraordinary cyber security threats, frequent extreme weather events, water scarcity at emergency levels in some locations, and the dismantling of nearly a century of Supreme Court jurisprudence impacting the regulatory agencies tasked with oversight of our energy sector while federal and state jurisdictional confusion intensifies.

“This all contributes to uncertainty for investors, which is further intensified by tectonic geopolitical shifts, global energy warfare, supply chain disruptions, and increasing unavailability of critical minerals on which the sector depends,” he adds.

The concerns highlighted above align with analysis from the IEA, the World Bank and the World Economic Forum (WEF) regarding rising electricity demand, infrastructure constraints and increasing competition for critical resources throughout the global energy system.

Energy security returns to the forefront

The energy transition was once framed primarily as a decarbonisation challenge. Today, it is equally a security challenge.

Russia’s weaponisation of energy exports, instability in parts of the Middle East and growing strategic competition between the US and China have altered policy priorities across many jurisdictions. Energy security has re-emerged as a primary consideration in national decision making, often carrying the same weight as emissions reduction.

Historical experience offers useful guidance for policymakers seeking to balance security, affordability and long-term investment confidence.

Mr Vince believes we can learn some lessons from the energy crisis of the 1970s. “Some responses were successful – for example the development of the strategic petroleum reserve, the creation of the Department of Energy, and CAFE standards,” he suggests. “But others were disastrous, such as price controls on oil and gas and the Fuel Use Act, which banned the use of natural gas or petroleum as the primary energy source for new power or major industrial plants. History has demonstrated that legislation that is technology neutral tends to fare better.”

The broader lesson is that policies encouraging resilience, diversification and innovation have generally delivered more durable outcomes than those that seek to favour or exclude particular technologies.

Current policy discussions increasingly reflect those lessons. Rather than relying on a single energy pathway, many governments are embracing what is commonly described as an ‘all of the above’ strategy. This approach recognises that achieving reliability, affordability and decarbonisation simultaneously will likely require continued use of natural gas alongside renewables, energy storage, nuclear power, demand-side flexibility and efficiency measures.

Increasingly, investors are focused less on ideological debates about particular technologies and more on whether sufficient generation can be deployed quickly and reliably to meet accelerating demand.

“The scale of our current energy demand simply cannot be met if we exclude whole categories of energy resources,” notes Jennifer Morrissey, counsel at Dentons. “Project developers and investors recognise this reality. Even as fossil fuels curry favour with the current administration and renewable energy tax credits face an uncertain future, solar continues to be the fastest-growing source of generation in the US.

“We also are seeing hybrid projects, such as natural gas peaking units or renewable projects paired with large scale storage, as well as increased interest in microgrids and efficiency measures. A diverse portfolio also mitigates regulatory and supply chain risks,” she adds.

This emphasis on diversification is reflected in energy strategies across multiple jurisdictions, where policymakers are increasingly seeking to combine renewables, storage, nuclear power and flexible generation assets to strengthen system resilience.

The renewed interest in nuclear power illustrates this pragmatic shift. According to the IEA’s 2025 report ‘The Path to a New Era for Nuclear Energy’, nuclear generation is expected to reach an all-time high in 2025, with more than 40 countries actively supporting new nuclear development. The agency notes that rising electricity demand from data centres, electrification and industrial growth is strengthening the case for stable, low-emissions baseload generation.

Small modular reactors are attracting particular attention from investors and policymakers. While significant commercial and financing challenges remain, advocates view them as a potential means of providing reliable, carbon-free power near industrial facilities and large data centres. The growing number of commercial partnerships between technology companies and nuclear developers suggests that capital markets increasingly regard nuclear power as an important component of future energy systems.

Climate risks, water scarcity and supply chain pressures

The energy transition is not taking place in isolation from broader environmental pressures. Extreme weather events are becoming more disruptive to infrastructure planning and operations. Flooding, hurricanes, droughts and wildfires are affecting energy assets, transmission corridors and water supplies with increasing frequency.

Water scarcity is emerging as a particularly significant concern. Many energy technologies, including conventional thermal generation, hydrogen production and certain mineral-processing activities, depend heavily on reliable water access. In several regions, growing competition between agriculture, industry and urban populations is creating new resource constraints that must be incorporated into long-term energy planning.

Meanwhile, the demand for critical minerals continues to accelerate. Lithium, copper, nickel, graphite and rare earth elements are essential for batteries, transmission infrastructure, electric vehicles and renewable energy technologies. However, supply chains for many of these minerals remain geographically concentrated, creating geopolitical and economic risks.

The World Bank estimates that demand for key minerals such as copper, lithium, graphite, nickel and rare earth elements is expected to nearly double by 2040. Meeting projected requirements will require hundreds of billions of dollars in new mining investment alongside significant spending on processing and supporting infrastructure.

Similarly, the WEF notes that critical mineral demand could increase threefold by 2030 and fourfold by 2040 under net-zero scenarios, while geopolitical concentration in production and refining continues to create vulnerabilities.

These realities have triggered strategic responses across North America, Europe and Asia. Governments are supporting domestic mining, encouraging ally-based supply chains and introducing policies aimed at reducing dependence on concentrated sources of supply. Yet balancing environmental protection, community concerns and resource development remains a complex challenge that will require careful policy design.

Regulatory uncertainty and the search for investment certainty

Another significant development in the US is the changing regulatory landscape following the Supreme Court’s 2024 decision in Loper Bright Enterprises v. Raimondo, which overturned the longstanding Chevron doctrine, and this year’s decision in Trump v. Slaughter. For nearly four decades, courts often deferred to agency interpretations of ambiguous statutes. The Loper Bright ruling shifts greater responsibility for statutory interpretation to the judiciary and may have profound implications for energy regulation. Slaughter overturned nearly a century of precedent by holding that the US president may remove commissioners of independent regulatory agencies at will, without needing to show cause, which could lead to greater swings in policy direction from one administration to the next.

For the energy sector, the consequences could be far-reaching. Federal agencies, including those overseeing electricity markets, environmental compliance and infrastructure approvals, may face increased legal challenges and greater scrutiny regarding the scope of their authority. Legal analysts have suggested that the result could be increased uncertainty as courts, rather than specialised regulators, become more influential in resolving technical and policy disputes.

At the same time, questions regarding federal, state and regional jurisdiction continue to evolve. Growing electricity demand from data centres and advanced manufacturing facilities has highlighted the need for clearer frameworks governing grid interconnections, transmission planning and cost allocation. Policymakers increasingly recognise that investment certainty is critical if private capital is to finance the scale of infrastructure required over coming decades.

Regulatory complexity is not the only challenge affecting project delivery. Community acceptance and local political considerations are becoming increasingly influential determinants of whether major infrastructure projects proceed as planned.

“At the microeconomic level, local opposition and social licence have emerged as a significant risk that major infrastructure project developers must address upfront,” warns Ms Morrissey. “In a challenging environment where rising costs already make capital expense recovery difficult, the rapidly changing regulatory constructs at state and local levels are impacting not only siting decisions but also available financing options.

“Last year’s ‘speed to power’ efforts are now clashing with project timelines that are lengthened by regulatory pauses on permitting and development, even in places traditionally viewed as favourable to the energy industry,” she continues. “Even as project developers shift their focus to more welcoming jurisdictions, lenders are now reflecting risk of local opposition into funding conditions and structures.”

The growing importance of social licence reflects a broader trend in which financing decisions are increasingly shaped by local stakeholder engagement, permitting certainty and perceptions of long-term project viability.

This is where bipartisan cooperation becomes particularly important. Investors generally place a premium on predictability and stability. Frequent policy reversals, regulatory disputes or overlapping jurisdictional requirements increase project risk and ultimately raise costs for consumers.

There are encouraging signs that common ground may be emerging around several priorities. Affordability has become a shared concern across political divides. Grid reliability commands broad support. The economic risks associated with prolonged supply shortages are widely recognised, as are the consequences of increasingly severe weather events. These issues create opportunities for pragmatic policymaking that transcends traditional ideological boundaries.

Many observers argue that enhanced policy coordination and greater regulatory predictability will be essential if the scale of required investment is to be mobilised effectively.

“Issues will need to be framed in terms of solutions that unify federal, regional, state and local policymakers and that create a climate of investment certainty and trust,” says Ms Morrissey. “Common ground on issues such as affordability, critical shortages and depletion of natural assets, and the risks associated with increasingly extreme weather should serve as motivators to address the issues with greater urgency and focus.”

“Bipartisan cooperation on permitting reform, together with greater federal financial support for nuclear and a much higher level of support for demand-side measures, including efficiency and conservation, would make a significant impact in terms of enhancing reliability and resilience while maintaining affordability,” observes Mr Vince.

These themes reinforce a growing consensus that long-term success will depend not only on new technologies but also on policy stability, streamlined permitting and broad-based stakeholder support.

The emerging consensus appears to favour technology-neutral frameworks that encourage innovation while allowing markets to identify the most effective solutions. Such an approach can accommodate renewables, natural gas, nuclear energy, storage technologies, efficiency measures and flexible demand resources without prematurely excluding potentially valuable options.

The coming decade will likely determine whether energy systems can successfully adapt to a world characterised by rising demand, greater electrification and heightened geopolitical competition. The scale of the challenge is considerable, but so too is the scale of the opportunity. Grid modernisation, nuclear development, advanced transmission technologies, critical minerals supply chains, resilience investments and digital infrastructure all represent significant areas for long-term capital deployment.

The lesson from previous energy crises is that durable solutions rarely emerge from narrow ideological positions. They emerge from policies that encourage resilience, reward innovation and create confidence among investors, consumers and policymakers alike. As governments around the world confront competing priorities around climate, security and affordability, the ability to build broad coalitions around practical solutions may ultimately prove the most valuable energy resource of all.

CONTRIBUTORS:

Clint Vince is a partner at Dentons. He can be contacted on +1 (202) 408 8004 or by email: clinton.vince@dentons.com.

Jennifer Morrissey is counsel at Dentons. She can be contacted on +1 (202) 408 9112 or by email: jennifer.morrissey@dentons.com.

© Financier Worldwide

WITH

Clint Vince

Jennifer Morrissey

Dentons