The Impact of Energy Security on the Future of Sustainable Energy Transitions

In recent years, energy security and affordability have taken center stage as vital elements in the global arena, particularly amid the ongoing energy transition, which is becoming increasingly intricate and tumultuous. A comprehensive new report by the Boston Consulting Group (BCG) highlights seven macro shifts that are reconfiguring the landscape of energy transition. As energy demands evolve and new technologies emerge, the interrelationship between energy security, affordability, and environmental sustainability is becoming ever more critical.

Emerging Shifts in Energy Transition

BCG's report indicates a profound shift in focus as countries are increasingly looking to bolster their energy security by investing in indigenous energy sources and localizing value chains for low-carbon technologies. This approach often involves implementing trade protections and strategic industrial policies. This evolving priority presents a paradigm where energy security and affordability can be aligned with decarbonization objectives. However, this relationship is not straightforward and presents unique challenges that need addressing.

Among the most pressing challenges is the skyrocketing cost of building large-scale grid infrastructure, which has surged approximately sixfold since the last major expansion in the 1960s. This increase is attributed to a combination of factors, including permitting delays, supply chain complexities, and labor constraints. As energy infrastructure relies on advanced technologies, the cost implications have led to fears that these financial pressures could hinder the pace of the energy transition.

Economic Pressures on Energy Affordability

Energy affordability, especially for economically vulnerable households, has suffered significantly over the past 25 years. Recent trends indicate a noticeable decline in public support for the energy transition, further complicating governmental efforts to meet decarbonization goals. The overarching question facing stakeholders is no longer whether the shift towards alternative energy sources will persist, but rather how these changes will unfurl and at what speed.

BCG senior partner and chair of the Center for Energy Impact, Maurice Berns, emphasized, “The evolving and complex environment we observe today does not signal a retreat from the energy transition overall. In many cases, energy security and affordability can be aligned with decarbonization goals.”

Capital Investment in Energy Infrastructure

The report introduces a new phase dubbed “build the assets,” a significant shift towards large-scale capital investment in energy. Expectations indicate that global energy capital expenditure (capex) could increase by around 50%, rising from approximately $7 trillion to nearly $10 trillion between 2024 and 2030. This represents roughly 1.5% of global GDP, with a substantial portion of the funds earmarked for grid infrastructures and renewable resources. This shift suggests a structural transformation, particularly in developed regions like the U.S. and Europe.

As the sector transitions into this capital-intensive phase, the cost of capital is anticipated to emerge as the dominant influence on the economics of energy systems. However, many companies and supply chains remain unprepared for this shift, resulting in potential delays and inefficiencies.

Rising Demand for Electricity

Electricity consumption is poised for unprecedented growth, entering a structural supercycle driven by the rise of AI data centers, demand for increased cooling, and the electrification of the transport sector, buildings, and industrial operations. Projections suggest a significant increase in demand, amounting to over 7 petawatt-hours (PWh) in the upcoming decades. Additionally, the demand for firm and dispatchable power sources like nuclear energy and natural gas is resurging, as both are viewed as essential components for balancing energy supply and demand.

The Future of Oil and Gas Supply

The demand trajectory for oil and gas is outpacing initial forecasts. Even in rapid transition scenarios, industries such as aviation and heavy transport face challenges in adopting scalable alternatives, rendering oil demand resilient. Concurrently, liquefied natural gas (LNG) expects robust expansion, with predictions estimating an 80% rise in global demand by 2040.

Diverse Cost Projections for Emerging Technologies

While technologies such as solar power, onshore wind, and batteries have significantly lowered their costs—by up to 90% since 2010—emerging solutions like green hydrogen and long-duration storage are expected to remain more expensive than initially estimated. This divergence in cost trajectories shapes how transition strategies are developed and implemented.

Conclusion and Recommendations

The report concludes with tailored actions various stakeholders, including grid operators, consumers, and energy producers, can take to support the energy transition effectively. Rich Lesser, BCG's global chair, remarked that around two-thirds of energy-related emissions can be diminished through commercially viable technologies, particularly in electricity generation and electrifying parts of end-use.

The path forward for nations must be strategic, particularly as no one-size-fits-all model exists for energy transition. Recognizing distinct starting points and the need for locally customized strategies is essential for effective and timely transitions. The interplay between energy security, affordability, and decarbonization will need careful management to ensure a balanced and responsible energy future for all stakeholders involved.