Solar power soars as energy transition solidifies
Renewable energy — and especially solar power — captured all demand growth last year and even forced fossil fuels into a slight contraction. And that was before the war in Iran.
Solar power is taking centre stage in the energy transition, surging to new heights and contributing to a slight contraction in fossil fuel power generation last year. The war in the Middle East is likely to accelerate this trend.
New generation from renewable energy and nuclear power was larger than total demand growth in 2025, forcing fossil fuel generation into decline, according to new data from the International Energy Agency. The findings mark a key milestone — contrary to recent energy industry narratives, renewables and electrification are not simply additive and complimentary, but are beginning to eat into the base of fossil fuel assets.
The IEA said the data showed that the “Age of Electricity” has arrived.
Another eye-popping milestone was reached in 2025. For the first time, renewables generated roughly as much electricity as coal on a global basis, and clean energy is now at the core of the power sector in most parts of the world.
A separate report from clean tech think tank Ember reveals similar trends. Solar and wind accounted for 99 percent of electricity demand growth last year, and fossil fuel supply fell by 0.2 percent.
“Clean energy is now scaling fast enough to absorb rising global electricity demand, keeping fossil generation flat before its inevitable decline,” said Aditya Lolla, managing director at Ember.
Fossil fuel power generation declined in both China and India in 2025 as clean power additions surpassed demand growth. It represents a sea change in energy markets. Those two economies once made up the lion’s share of robust annual increases in demand for oil, gas, and coal, and together seemed to lock in decades of demand growth for fossil fuels. But things have changed quickly. Both are now turning to clean tech.
Momentum is now clearly in favour of clean technologies — and solar in particular. The solar capacity that was added in just the past year “would be sufficient to displace gas-fired electricity equivalent to all LNG exports through the Strait of Hormuz last year, estimated at 550 TWh,” the Ember report said. And the key difference between solar and gas-fired power is that once the solar panels are installed, they generate power for decades with no additional effort or cost. Gas plants need a steady flow of fuel, a geopolitical and economic vulnerability underscored by the snarled ship traffic in the Persian Gulf.
Energy transition to accelerate
Solar is now redefining energy security, Ember noted. After the second major war in four years, each of which has caused immense havoc to oil and gas markets, many countries will increasingly prioritise domestic power production — solar and wind, paired with battery storage.
“The next step is to modernise grids and regulatory frameworks so power systems are ready to handle this new reality,” Lolla said.
One of the key trends going forward will be the pace of battery storage installations, which have begun to accelerate dramatically. Battery costs declined by 20 percent in 2024 and by 45 percent in 2025. Installations shot up by 46 percent to 250 gigawatt-hours. As batteries proliferate, they extend the hours for solar and wind, allowing for almost round-the-clock power.
The two reports from the IEA and Ember confirmed the energy transition was already kicking into a higher gear before the U.S.-led war against Iran, which has disrupted the Strait of Hormuz for nearly two months. Experts now see the transition as being on the verge of acceleration.
High prices and shortages are resulting in demand destruction around the world, with the impacts especially concentrated in South and Southeast Asia at the moment. But the pain is set to spread to Europe and other parts of the West in the coming weeks. Against a backdrop of fossil fuel scarcity, consumers and governments alike will turn to renewables.
While it is still early, signs of a shift are underway. China’s exports of solar, batteries, and EVs surged in March. Sales of EVs in Europe shot up 51 percent.
Europe announced some initial plans on April 22nd to respond to the oil and gas crisis, which include temporary measures to buffer the impacts of higher costs on consumers and businesses, European-wide coordination on gas purchasing, and a variety of proposals to speed up electrification and accelerate the rollout of renewable energy. The EU has spent an additional 34 billion euros on fossil fuel imports since the start of the war as costs have shot up.
The full impact remains to be seen, but it is notable that top European officials are starting to formulate plans to solidify the shift away from oil and gas.
“[W]e would not discount the potential for a second supply shock in four years to catalyze significant changes,” ClearView Energy Partners, a Washington-based consulting firm, said in a note to clients, referring to the EU’s plan.
Top gas industry executives also see the ground shifting beneath them. The longer the Strait of Hormuz remains shut, the more likely that the scars of demand destruction become permanent.
“If the conflict ended today, the world would recover in six months to a year. But if it lasts six months, those knee-jerk changes we are seeing could become structural,” Philip Mshelbila, secretary-general of the Gas Exporting Countries Forum, said at a recent industry conference.
(Writing by Nick Cunningham; editing by Sophie Davies)