;

ENERGY

Building energy systems for shared prosperity

How can we transform the world’s power systems quickly, equitably and at the scale the moment demands?

The challenges

Fossil fuels remain deeply embedded and resistant to change
Infrastructure is falling behind: grids are underfunded, undersized and unprepared
Outdated policy and regulatory systems are constraining renewable deployment

The solutions

Set the conditions for quick and fair coal-to-clean transitions
Build the grids of the future: bigger, smarter, and more resilient
Make the energy transition work as one, not just its parts

The world now generates over 30,000 terawatt-hours of power annually, roughly 150 times more than a century ago.1 What was once a novel, elite technology now underpins almost everything we do. Yet that expansion is still not universal: 730 million people live today without electricity, a reminder that progress, while vast, has not been evenly shared.2

Electricity isn't a sector within the economy; it's the connective tissue running through it, powering human life. It's also the source of around three quarters of global greenhouse gas emissions, and the foundation on which decarbonisation depends. As the world electrifies and shifts to clean power, demand will keep growing. The challenge is not just to clean up the energy we use today, but to scale it dramatically, ensuring the associated costs and benefits are shared fairly across households, workers and regions.

Previous energy transitions shifted humanity from one finite resource to another (biomass, to coal, to oil and gas) reshaping economies, redrawing power structures and leaving no part of life untouched. The clean transition stands apart. For the first time in history, we are choosing energy sources that can power modern life without driving environmental breakdown: fuels that will not run out, can be generated almost anywhere, and are far more resilient to geopolitical disruption. In most markets, these are now also the cheapest option.

In 2025, clean energy generation exceeded growth in global electricity demand for the first time on record.3 Nine in ten new renewable projects now undercut the cheapest fossil fuel alternative on cost,4 and economies representing 92% of global GDP have decoupled growth from emissions.5 Despite all this, emissions have yet to peak, and the world is tracking for 2.3-2.5C of warming this century.6 Progress has been significant, but it is not yet enough.

The Ukraine conflict and the Middle East oil crisis has refocussed minds on the importance of accelerating progress. Three quarters of the world live in countries dependent on energy they do not produce, at prices set by markets they cannot control. Beyond climate strategy, the transition inherently marks the difference between resilience and vulnerability.

The opportunity is extraordinary: more affordable and resilient energy, cleaner air, better health, and millions of jobs, including for those transitioning out of fossil fuel industries. For the first time in history, we have the chance to power human life without destabilising the planet. The question is whether governments, investors, institutions and communities can work together to retire fossil fuels, build the infrastructure to replace them and redesign the rules as quickly as the moment demands, in a way that benefits all.

In numbers:

NOTE: This page focuses on the decarbonisation of power systems: retiring fossil fuels, modernising grids and integrating renewables. Two further areas of the Carbon Trust's energy work are interconnected but will be explored in greater depth through separate dedicated sector vision and solution pages: energy access and offshore wind. Both pages are coming soon.

"Energy has always been the foundation of human prosperity. The clean transition is the first time in history that it could be built for everyone, everywhere, without destabilising the planet."

Andrew Lever, Director, Energy Transition The Carbon Trust

THE CHALLENGES

1. Fossil fuels remain deeply embedded and resistant to change

Building the clean and retiring the dirty are connected but distinct challenges, and the world has made far more progress on the first than the second.

Electricity accounts for around three quarters of global greenhouse gas emissions, and fossil fuels are responsible for almost all of them. Coal is the single largest contributor: accounting for a third of global electricity generation, it produces 70% of power sector emissions and 15.8 gigatonnes of CO₂ every year.7 Retiring fossil fuels as quickly as possible is therefore the precondition for decarbonisation.

Yet the gap between ambition and progress is glaring. Fossil fuels still generate around 60% of the world's electricity, and countries with Net Zero pledges still generate 95% of the world's coal-fired electricity.8

Renewables are now cheaper and faster to deploy than their fossil fuel alternatives, and rollout is breaking records. But here is the paradox: even as renewables met all new demand growth for the first time in 2025, existing fossil fuel infrastructure is being retired far too slowly. Building the clean and retiring the dirty are connected but distinct challenges, and the world has made far more progress on the first than the second.

China illustrates this most vividly. The world’s great renewables builder and deployer is also the operator of almost half the world's coal plants, consuming 30% more coal than the rest of the world combined.9 China commissioned almost 80GW of new capacity in 2025 alone.10

Meanwhile, meeting Paris Agreement goals requires retiring 126GW of coal capacity each year until 2040, while simultaneously building replacement generation and upgrading grids to carry it (see challenge 2).11 Oil and gas face a parallel reckoning: both remain deeply embedded as balancing fuels, backup capacity and, in many emerging markets, primary generation where clean alternatives are not yet ready at scale. The pace of change required across all three fuels has no historical precedent.

Beyond its role as a fuel, coal remains an economic cornerstone across much of Asia, Africa and Latin America. The financial structures, contractual obligations and regional dependencies built around it make it extraordinarily difficult to unwind, even where the case for doing so is clear. In many markets, keeping coal plants online is necessary to keep the lights on.

The average coal plant in Southeast Asia is just 11 years old, compared to 41 in the United States12 with between 50% and 100% of coal capacity locked into power purchase agreements (PPAs) that still have nine to eighteen years remaining.13 As a result, utilities and asset owners are both financially and legally incentivised to keep plants running, even when renewables are cheaper.

Yet many of those same utilities are not in the position to transition: around 60% of utilities in emerging markets cannot cover their operating and debt service costs, leaving them unable to absorb early retirement losses or finance replacement capacity.14 Coal plants in Southeast Asia alone could face stranded asset losses of $85-106 billion by 2060.15

In many regions, coal also underpins local public finances through taxes and royalties. Early retirement therefore requires finance capable of doing several things at once: compensating asset owners, refinancing debt, supporting affected workers and communities, and funding replacement power and grid infrastructure. This is a complex package that few markets can assemble alone.

Retire coal without a credible plan, and the consequences are concentrated and severe. The people at highest risk, including informal or contracted workers and local suppliers, often fall outside formal transition mechanisms. Few of these regions have adequately prepared the economic diversification strategies, worker retraining programmes and community support mechanisms needed to manage the transition.

Electricity generation by source, global, 1985-2025

In 2025, total renewables exceeded coal-fired generation for the first time, and solar alone met 75% of all new electricity demand. While coal still supplies a third of the world electricity, total coal generation may have now peaked.

Source: Our World in Data

Average age of existing coal power plants in selected regions, 2020

With new capacity commissioned since 2020, Southeast Asia's coal fleet is getting younger still. These plants present the most urgent and complex retirement challenge.

Source: IEA

2. Infrastructure is falling behind: grids are underfunded, undersized and unprepared

From rolling blackouts in South Africa to frequent power outages in Vietnam, grids around the world are in desperate need of an upgrade.

Replacing fossil fuel generation with renewable energy is only one part of the puzzle. For the energy transition to succeed, infrastructure must keep up.

Grids are the backbone of energy systems. Every pylon, cable and transformer helps to prop up the system bringing electricity to homes, hospitals and factories. But they are often ageing, brittle, and under increasing strain.

In many countries, demand for electricity is growing faster than the transmission network can handle. Electricity demand from data centres alone has tripled in the past decade, and could double again by 2030, while shifts in adjacent sectors, like the move from gas boilers to heat pumps, are pushing demand up further.16 This means that transmission networks, often thought of as motorways transporting power across countries, could soon be running out of road.

The blackouts in Spain and Portugal in 2025 (Europe’s worst in 20 years) highlighted just how severe it can be when grids collapse.17 Planes and trains ground to a halt, emergency services were unreachable as phone lines cut out, and at least seven deaths were recorded. Similar issues are playing out elsewhere, from rolling blackouts in South Africa to frequent power outages in Vietnam.

Across the globe, grids are in desperate need of an upgrade. Firstly, they are not nearly extensive enough. The IEA estimates that to maintain energy security and meet national climate goals, over 80 million kilometres of new or upgraded grid infrastructure will need to be built by 2040, equivalent to rebuilding the entire global grid in little more than a decade.18 Distribution is just as important as scale here. As grids expand, in many countries they will need to support large-scale renewables as well as extend reliable electricity access to underserved and rural populations. Without careful planning, system efficiency can be prioritised over universal access to electricity, reinforcing existing inequalities.

Secondly, existing infrastructure is not always fit for purpose. Today’s grids were designed for a world powered by fossil fuels, in which a relatively consistent supply of energy is concentrated in large, centralised power plants. By contrast, renewable energy is more variable, and requires more distributed grids, as generation assets like solar panels and wind turbines are dispersed more widely around the country, often in areas with no previous grid connection infrastructure. Current grids often lack the control, automation and digital tools needed to manage high shares of renewables as well as respond dynamically to fluctuating demand.

However, in practice, there are various barriers to expanding and modernising grids. Grid investment has been plateauing globally for over a decade and even declining in many emerging economies. In order to guarantee energy access and energy security while decarbonising the economy, investment will need to increase by 50% (to over $600 billion per year) by 2030.19

Supply chain constraints are compounding the problem; procurement lead times and costs for essential grid technologies like cables and transformers nearly doubled between 2021-2025, while workforce shortages are creating additional delays.20 Beyond this, systemic issues continue to constrain progress, including limited institutional capacity, low investor confidence and slow adoption of innovative technologies, as well as the policy and regulatory failures explored in challenge 3.

Global investment in grids versus clean energy generation (2015-2025)

Investment in clean energy is ramping up, but spending on grids is lagging behind, despite grid components getting more expensive in recent years.

Source: IEA, World Energy Investment

Price index of essential grid components (2018-2024)

In real terms, cable costs have nearly doubled since 2019, while power transformer prices have risen by around 75%. Procurement wait times can be up to four years, even more for specialised components.

Source: IEA

Decarbonising a power system requires coal retirement, grid investment and renewables deployment to move together, sequenced as a collective undertaking, with consequences for workers and communities built in from the start. As it stands, they are handled separately in most cases around the world.

3. Outdated policy and regulatory systems are constraining renewable deployment

Grids are not the only piece of the energy system shaped around fossil fuels. The broader energy architecture, from markets and contracts to permitting processes and regulatory frameworks, evolved around predictable, centralised and on-demand generation. Renewables work on a different logic that these systems were never designed to accommodate. While infrastructure can be built in years, reforming the rules and institutions built around incumbent systems can take far longer, but is critical to progressing the transition.

In 2025, the IEA revised down its 5-year renewables growth forecast by 5%.21 That equals around 248GW of capacity not being built, not because the technology isn't ready or the investment isn't there, but because the systems governing deployment are holding it back. Solar projects take an average of five years to permit globally; for wind, it’s seven.22

Vietnam added over 12 GW of solar between 2019 and 2021, one of the fastest buildouts ever recorded. But weak planning left the system unable to absorb it, forcing curtailment and triggering regulatory disputes affecting 173 projects worth around $13 billion that remain unresolved today.23

Pakistan tells a different but equally instructive story. The country has imported around 50GW of solar panels, becoming the third largest market for Chinese panels globally, with an estimated 34GW now installed. Yet 10% of households still have no electricity, load shedding continues for up to 12 hours daily, and domestic tariffs have risen 155% in three years.24 The solar boom happened largely outside formal policy frameworks: most capacity is off-grid or behind-the-meter, unintegrated into the national grid and concentrated among wealthier households able to defect from the grid.

These challenges are most acute in emerging markets, where utilities are often state-owned enterprises (SOEs) operating under political and fiscal constraints that can make reform slower and more complex. Where electricity is subsidised and regulatory agencies are stretched, adaptation requires not just new policies but the technical capacity, regulatory credibility and ability to engage stakeholders across government, industry and civil society needed to implement them. Where these are weak, transitions risk stalling or producing unintended social and economic consequences that set them back further. Yet the required capabilities take time and coordination to build.

What compounds all of this is a planning problem that rarely makes headlines. Decarbonising a power system requires coal retirement, grid investment and renewables deployment to move together, sequenced as a collective undertaking, with consequences for workers and communities built in from the start. As it stands, they are handled separately in most cases around the world. Consequences are reflected in investment flows: for emerging markets with weak policy frameworks, absent competitive market structures, currency volatility and high national debt, it is much harder to attract the private capital needed to progress the transition. The result can be a vicious cycle where the enabling conditions for investment are hardest to build precisely where investment is most needed.

In South Africa, coal plants have been kept running past planned retirement dates while grid and replacement capacity struggle to keep up. In Indonesia, renewable targets have been set without the regulatory frameworks to attract the investment needed to meet them. Transitions planned in silos move slowly, and the failures they produce counteract the case for continued ambition.

Making the case for change should, theoretically, be the easy bit. Clean energy is still too often framed and experienced as a cost rather than the route to cheaper, more secure energy and new economic opportunity. Without careful tariff design and targeted support, rising system costs risk falling on those less able to pay, and when that happens, support for the transition is tested. Closing the gap requires regulatory systems, institutional coordination and political will to align to meet the moment.

Renewable energy investment by region, 2024

Poor policy keeps clean energy investment from where it is most needed. Across the developing world, clean energy investment per person is a fraction of what flows to advanced economies, with China as the clear exception. Weak policy frameworks, currency risk and sovereign debt make emerging markets harder to finance.

Source: IRENA

THE SOLUTIONS

1. Set the conditions for quick and fair coal-to-clean transitions

What often makes or breaks a coal transition is finance, specifically the absence of the right kind.

The central challenge of coal retirement isn't lacking the ambition, it's lacking the specific, locally grounded expertise to turn commitments into plans that hold. For governments, utilities and communities, the key questions are what replaces coal, when, at what cost, and what it means for those whose livelihoods depend on it. Without convincing answers, phase-out stalls.

The Carbon Trust works across Latin America, Asia and southern Africa to develop transition strategies tailored to each country's specific context: the age and role of its plants, the contracts tying utilities to coal, the political conditions for change, and the alternatives available. For the Asian Development Bank, this has meant detailed fleet-level analysis across Indonesia, the Philippines, Vietnam, Pakistan and Kazakhstan, identifying which plants are best placed for retirement, repurposing or retrofitting, and in which sequence. In South Africa and Colombia, it has meant working directly with governments on the policy reforms and contract renegotiations that make retirement legally and financially possible.

What often makes or breaks a coal transition is finance, specifically the absence of the right kind. A coal plant in the Philippines with fifteen years left on its power purchase agreement will not close early without a credible plan to compensate the asset owner, refinance the debt and fund replacement capacity. The Carbon Trust works with development banks, philanthropies and private investors to explore the right strategies to support the phase-out or phase down of coal, such as structuring blended finance instruments that make the arithmetic work. This has included direct support for the Asian Development Bank's Energy Transition Mechanism (ETM), which has mobilised billions to purchase coal plants across Southeast Asia, bring forward their retirement and replace them with renewables.

In 2021, the Carbon Trust co-created the Coal Asset Transition Accelerator (CATA) at COP26, alongside RMI and Climate Smart Ventures, and in partnership with the IKEA Foundation, the Growald Climate Fund and the European Climate Foundation. CATA was the first global platform of its kind bringing together utilities, governments, development banks and investors to do the practical and much-needed work: sharing analysis, aligning strategies, deploying technical assistance. CATA has since supported governments and plant owners in the Philippines, Colombia, Chile, Indonesia and South Africa. In 2025, it established an independent project office and secured new philanthropic funding with the ambition to support up to 100 coal transition projects by 2030. As it evolves into an independent entity, the Carbon Trust remains a core delivery partner.

None of this works without taking the human dimension as seriously as the technical one. In the coal-dependent communities of Mpumalanga in South Africa or Kalimantan in Indonesia, generations of families have built their lives around coal. This is where the credibility of any transition plan is ultimately judged. Alongside every retirement strategy, the Carbon Trust designs frameworks for what happens in parallel: mapping livelihood impacts, understanding economic diversification opportunities, developing retraining pathways for formal and contract workers, supply chain actors and informal economic activities that depend on coal assets, ensuring that transition planning reflects the full range of affected stakeholders.

Who CATA brings together, and what each stakeholder gains

Where the Carbon Trust has supported coal-to-clean transitions

Support has included ETM pre-feasibility analysis, CATA technical assistance, coal transition frameworks and broader coal-to-clean advisory support.

"When the value of flexibility is explicit, investment follows. When it isn’t, it remains invisible in planning processes which default to conventional infrastructure."

Masaō Ashtine, Senior Manager, Energy Transition The Carbon Trust

2. Build the grids of the future: bigger, smarter, and more resilient

Modernising grids requires progress across many areas, including grid flexibility, technology innovation and grid finance.

Flexibility allows grids to balance supply and demand. Rather than a single technology, it is a suite of solutions. Energy storage, such as large-scale batteries, captures surplus renewable power and releases it when demand peaks. Interconnections between countries or regions allow electricity to flow when it is needed most. Flexible forms of generation, including green hydrogen which can be stored for months at a time, provide backup during long periods without sun or wind.

Demand-side flexibility involves shifting when and how consumers use electricity. For instance, smart electric vehicle charging automatically draws power from the grid overnight, when electricity is cheaper and more abundant, and can even feed electricity back to the grid when needed. Realising these benefits not only requires new infrastructure (such as technology and infrastructure that can handle power flowing in both directions) but market reforms that reward consumers for these behaviours, and overall in a system that is more equitable for all users.

Done right, flexibility can enable the grid to do more with less. Countries that quantify and integrate it early can reduce costs (both for the system overall and for individual households), strengthen energy security and reliability, and limit how much they need to expand the grid. In Great Britain, the Carbon Trust estimated that a fully flexible energy system could deliver net savings of up to £16.7 billion per year in 2050.25

Innovative technologies can enable flexibility, as well as making grids more resilient and efficient. Smart grids use digital monitoring, advanced sensors and automated control systems to keep power flowing efficiently and respond to disruptions in real time. Where a conventional grid operator might take hours to reroute power around a fault, a smart grid can do so in seconds, protecting supply and reducing outage costs. AI-driven forecasting, meanwhile, allows system operators to anticipate demand shifts and renewable output with increasing precision, enabling more efficient dispatch decisions across networks.

The good news is that these solutions are technically feasible. But deploying them at scale both commercially and effectively requires a suite of policy reforms and improved planning processes coupled with coordinated delivery across energy ministries, regulators, utilities and system operators. Consumers also need to be firmly onboard to maximise the opportunities that a flexible and dynamic grid brings. A large piece of the puzzle is investment, particularly in emerging economies which currently receive 18% of global clean energy investment, despite housing over half of the world’s population.26

This often starts with having the right insights. For instance, diagnosing the operational barriers can reveal the most suitable combination of grid modernisation solutions for that particular market, from grid stability to network monitoring and digitalisation, and the policies needed to deploy them. Clear evidence of how flexibility reduces costs and improves energy security, under what conditions it delivers greatest value, and which types of flexibility are suitable for that market, can build the case for action among policymakers, investors and consumers. Meanwhile, a clear picture of grid financing needs and persistent barriers can help to unlock funds by illuminating which stakeholders need to be involved and how to bring them together (including policymakers, financial institutions and system network operators) and what kinds of finance are needed (such as private investment, public-private partnerships and special investment mechanisms).

In numbers:

$1.8 trillion

Global grid investment deferred by 2050 from deploying demand-side flexibility Source: IEA

£3 billion

Flexibility is projected to deliver savings of £3 billion for billpayers in Great Britain between 2024-2027 Source: Energy Networks Association

Done right, flexibility can enable the grid to do more with less. Countries that quantify and integrate it early can reduce costs (both for the system overall and for individual households), strengthen energy security and reliability, and limit how much they need to expand the grid.

3. Make the energy transition work as one, not just its parts

Most countries now have climate targets; far fewer have plans coordinated enough to deliver them. Retiring fossil fuels, deploying renewables and modernising grids are each formidable undertakings in isolation, and moving separately, they can actively undermine each other.

The Carbon Trust and TransitionZero developed Greenprint to close that gap, with practicality in mind. It starts with a clear-eyed assessment of a country’s existing power system: what is already working, where plans fall short, and which barriers are most likely to slow delivery. From that foundation, open-source power system modelling is used to identify least-cost pathways, and, crucially, to sequence coal retirement, grid investment and renewable deployment together.

That analysis becomes an implementation plan and investment pipeline, translating system design into bankable projects that financiers can act on and governments can deliver. Alongside this, it builds the capacity of national institutions to plan, finance and deliver the transition over time. Plans need to do a lot more than get clean power up and running efficiently. Every decision a government makes about how to finance and regulate the transition determines who benefits first, who bears the costs, and which regions and groups are most impacted by the change. For the transition to be economically and socially sustainable, plans must take into account impacts on employment, affordability, and access to electricity. In countries where fossil fuels are a significant source of income, plans will need to spell out where funding for public services will come from instead.

This is still only half the story; a plan that looks credible on paper but cannot withstand its first political test may not be delivered. Greenprint builds the economic and political case alongside the technical one, showing what the transition means for bills, jobs and energy security, especially for low income households, and how those benefits can be realised early enough to sustain support.

No two countries are the same, and therefore every transition, and every Greenprint, will be different. Bangladesh's grid cannot yet absorb large volumes of solar generation, while Pakistan's utility sector is financially fragile, navigating intense pressure on its energy supply. But learning from the experience of others will help countries move faster and avoid repeating mistakes, and Greenprint will provide a platform for sharing these lessons, especially in emerging economies where integrated planning is most urgently needed.

Greenprint: How it works

Lack of coordination leads to inefficiencies, delays and higher costs. Greenprint drives coordination by addressing technological, policy and socioeconomic considerations.

Technological:

What is the best use of flexibility to optimise cost and efficiency?
How much needs to be built, and when?
What are the best technological options for a secure and affordable power system?

Socioeconomic:

What investment is required for the pace of change?
What jobs would be at risk/created by the transition?
What are the broader socioeconomic costs and benefits, including health impacts?

Policy and regulatory:

What policies are needed to incentivise grid and renewables build-out?
How can policy and regulation support new modes of system operation, and workers and communities currently sustainined by fossil fuels?