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Central to the health of the domestic and global economy, business executives have a responsibility to understand the dynamic energy landscape both in the U.S. and globally. 2025 will bring tensions of oversupply, price increases, deregulation, and restructured incentives for renewables. This will lay on top of an already complex web of geopolitical conflict, tariffs, trade restrictions, export bans, and more. With the climate crisis intensifying, an increased focus for all corporates should be on decarbonization, energy security, and system resilience. Perhaps most succinctly put, the headline on energy in 2025 is that there is no easy headline.
Key Takeaways:
- Regardless of Trump’s potential dismantling of the IRA and incentives, renewable energy production will continue scale rapidly alongside energy storage technologies
- Geopolitical conflict and tensions may be disruptive to energy markets, 2025 will see both potential for oversupply and price increase
- Global energy demand will continue to increase in 2025, largely due to growth in electricity demand from AI data centers, corporate decarbonization, EV proliferation, and increased consumption in China
- The accelerating climate crisis will put an increased focus on energy security and system resilience
Key and emerging energy trends for 2025:
In a landscape full of potholes and blind turns, we’ve identified the most salient trends for business leaders to monitor going into 2025.
- Trump 2.0 will emphasize fossil fuel production, gas exports, and U.S. energy independence. Trump has pledged to expand fossil fuel exploration and production along with other protectionist policies that may alter energy markets and prices. It is also expected that his administration will approve export permits for new liquefied natural gas (LNG) projects and increased oil drilling off the U.S. coast and on federal lands. However, Trump’s promise to “drill, baby, drill” isn’t likely to catch on for U.S. shale oil producers. These producers are less likely to boost budgets towards drilling, especially as a potential oversupply of oil looms over the market and well productivity stagnates
Why it matters → Companies in extractive and resource-intensive industries (e.g., industrials, transportation & logistics, food, CPG, real estate) who have benefited from the $1.045 trillion worth of climate and energy provisions in the Inflation Reduction Act (IRA) and Bi-Partisan Infrastructure Deal incentives may risk program cessation and financial clawbacks. Corporations will have to re-evaluate incentive planning and financial models to ensure readiness for the discontinuation of government support.
- Geopolitical uncertainty will increase in 2025. The conflict in Gaza added a new layer of uncertainty to an already tense global energy market, which was strained by the Russian invasion of Ukraine. The Middle East region, which boasts up to 48% of the world’s oil reserves and 40% of gas, faces a new test of resilience. Although Israel and Gaza do not significantly contribute to the production, the instability generated in the region may indirectly affect the commodity flow and price. The price increase to gas and oil had countless downstream effects on things like costs for fertilizer, food, consumer products, packaging, transportation, and more. In 2022, spiking oil and gas prices caused an estimated 88% of food price inflation.
Why it matters → Trump has indicated a hawkish position towards China, skepticism towards the U.S.’s most important defense alliances, and is fundamentally restructuring trade flows with allies. Companies will have to establish hedges towards political risks to their business by expanding the lense of their enterprise risk management system and plotting a number of potential scenarios of geopolitical realignment and increased conflict. Restructuring supply chains and anticipation of tariffs (on imports from China, Mexico, and Canada) will also be necessary to increase both agility, profitability, and resilience
- Renewable energy capacity and generation will grow in the U.S. and globally. The International Energy Agency (IEA) predicts that in 2025, more than a third of the world’s electricity will come from renewables. The demand is outpacing the supply. Moreover, the push for greater cost efficiency and modularity will be even more important with policy uncertainty in the coming year. China will account for close to half of the additional renewable generation in 2025, followed by the European Union with 15%
Why it matters → As corporates advance their decarbonization strategy, the greening of the grid in the U.S. will support the reduction of their Scope II (indirect operational) emissions. This means some of the work to lower overall greenhouse gas emissions will be done for corporates
- Climate crisis puts focus on energy security. Both the supply and demand of electricity are becoming more affected by the accelerating climate crisis. For example, current fires raging in LA speak to the challenges to critical energy and water infrastructure as well as the unusual snowfall in the mid-Atlantic. In 2022, Europe saw its worst drought in 500 years, China and India were hit by severe heatwaves, and the U.S. experienced crippling winter storms. The impact of weather events on electricity demand will intensify due to the increased electrification of heating, while the share of weather-dependent renewables will continue to grow in the generation mix.
Why it matters → As energy infrastructure ages and electrification spreads, systems will have to manage additional load and weather intensifying climate shocks (e.g., floods, fires, hurricanes, etc.). System resilience should be reviewed for all enterprises, as well as risks to their supply chains (both logistic and energy) to ensure business continuity risks are minimized
- The AI data center boom, EV proliferation, and corporate decarbonization have become a major demand driver for electricity. The energy required to run data centers for generative AI has resulted in a 4% increase in energy demand, which is similar to the increase from the 20 million new electric vehicles (EVs) expected in 2025
Why it matters → Corporate emissions targets mean a reduction of fossil fuel-based energy consumption with the proliferation of green tariffs, Renewable Energy Credits (RECs), and more. With the EU’s CSRD and California disclosure requirements in-place regardless of Trump’s decision on the SEC Climate Rule, corporations will continue to advance their decarbonization agendas
- U.S. potential for leadership in hydrogen production in question under Trump 2.0. Clean hydrogen can play a role in decarbonizing 25% of global energy-related CO2 emissions. The future of U.S. clean hydrogen under Trump’s second administration is uncertain, although undoing the IRA may be politically fraught. The IRA has allocated ~$400 billion at boosting low-emission energy technologies, including hydrogen. This allocation is in Trump’s cost-cutting priority list. However, the anticipated hydrogen production tax credit (PTC) from the Department of Energy (DOE) will now be in question as will efforts to define a standard for green hydrogen. The final rules on PTCs were released in early January 2025 by the U.S. Department of Treasury, with flexibility and changes necessary to grow the industry. Expect pushback from Trump’s new policy platform
Why it matters → A potential scaling of U.S. hydrogen production will put downward pressure on energy prices in 2025 and permanently alter the U.S.’s domestic energy mix. More to come as Trump’s policy positions emerge, for now corporate leaders will have to be in “wait and see” mode
- Energy prices will likely rise. The IEA predicts that global energy prices will increase in 2025 due to a range of variables: growing demand, high wholesale prices, rising production costs, cold weather, declining gas inventories, and prolonged conflict in Ukraine and the Middle East. This is true even with significant capacity additions in both fossil fuels and renewables
Why it matters → Resource- and energy-intensive industries will have to be ready to take on an increased cost burden and operational complexity in 2025. Corporate leaders will have to ensure political, supply chain, and financial risks are seamlessly integrated into their enterprise risk management system and monitor geopolitical and operational energy risks more closely than past years
- Potential for significant expansion of the U.S. Liquefied natural gas (LNG) market. Trump’s push for deregulation and energy dominance may accelerate the U.S. LNG exports by fast-tracking permitting. The potential for oversupply in global markets could destabilize prices, especially if trade tensions with China reignite, which would then create challenges for U.S. producers and LNG developers. U.S. LNG projects will rely on securing consistent demand from China. Before leaving office, however, Biden has taken executive action to protect more than 625 million acres of the American ocean from offshore oil and gas drilling. This poses a challenge to Trump’s call for American “energy dominance,” which LNG will be a key pillar
Why it matters → With less restrictions, material increases in LNG production and export would downwardly push energy prices and further confound the accuracy of cost projections. Expect bi-partisan conflict on domestic energy production strategy and policy, which may impede progress on other policy areas of note for U.S. businesses
Actions executive teams can take:
- Call for an evaluation of energy demand projections and create additional scenarios for increased prices and system challenges due to climate shocks
- Based on geographical footprint, identify and re-prioritize energy access risks due to ongoing geopolitical conflict, climate shocks, tariffs, and export/import bans. Develop contingencies and strategies to enhance operational agility in highest priority operational zones
- Aggressively identify supplier concentration risks and operational vulnerabilities for energy and upstream inputs (that are highly energy-dependent), mitigate with redundancy strategy
- Integrate geopolitical and energy access risks into enterprise risk management system on an ongoing basis (quarterly) given increasing geopolitical instability and restructuring of trade flows
Additional Telesto resources:
- Takeaways for management teams – Apple’s playbook on how to beat China tariffs and export restrictions
- China’s intensifying response to Trump 2.0 tariffs and what it means for U.S. companies
- How CSOs can navigate the “Gray” in CSRD implementation
- Atlas, our sustainability and ESG training for boards, equips corporate directors and leaders with the insights and knowledge necessary to stay up to date, mitigate risks, and seize business opportunities associated with sustainability, climate, and ESG
Prism, our ESG benchmarking tool, helps your organization to rapidly strengthen its sustainability, climate, and ESG performance and disclosures through in-depth benchmarking of industry peers and identification of gaps and areas of distinction
