Electrification’s Next Frontier: Unprecedented Opportunity Created by a Generational Shift

Rethinking Energy: From Fossil Dependence to Electric Opportunity

Over the past 25 years, the world has undergone a remarkable transformation in how energy is produced and consumed. At the turn of the millennium, most buildings, industries, and modes of transportation were still heavily dependent on burning fossil fuels. Electrifying these sectors was neither technically nor economically feasible, and electricity generation itself largely relied on fossil fuels. Since then, however, major technological barriers have been overcome. Today’s electric vehicles deliver the range and performance drivers expect from combustion engines, and modern heat pumps operate efficiently even in harsh weather conditions. At the same time, the economics have shifted dramatically: in an increasing number of countries, electric alternatives are now at, or rapidly approaching, price parity with fossil-fuel-based systems. A visual comparison of electrification potential in 2000 and 2025 (Ember, 2025 ) supports the International Energy Agency’s conclusion that technologies capable of decarbonizing more than 60% of global energy demand are already commercially available (IEA WEO 2023).

Powering Up with Renewables

The climate mitigation potential of electrification has been greatly amplified by a parallel revolution in power generation. Over the past few decades, renewable energy, led by wind and solar, has come to dominate new nameplate capacity additions, marking a decisive shift away from fossil fuels. In fact, wind and solar photovoltaic (PV) technologies accounted for roughly 85% of global nameplate capacity (GW) additions in 2024, compared to just around 6% in 2001. (Note that wind and solar power generators have higher nameplate capacities because their effective utilization rates are lower than those of conventional power plants.) However, because energy infrastructure assets operate for decades, fully decarbonizing the installed base through new annual capacity additions remains a long-term endeavor. In 2024, clean sources were estimated to produce about 41% of global electricity (Ember). Yet, wind and solar together still accounted for only about 8% of final energy consumption in 2023 (REN21), underscoring the vast remaining potential, unmet need, and necessity for electrification across all sectors.

Source: Ember Electricity Data Explorer

Efficient Growth, Not Runaway Demand

While electrification is set to expand across buildings, industry, and transport sectors, global electricity demand is projected to grow by only 3% per year through 2050, which is consistent with historic trends (Ember, 2025). This modest growth reflects the superior efficiency of electric alternatives such as EVs and heat pumps, which require far less energy than their fossil fuel-based counterparts. These systems not only minimize waste heat and pollution generated by their use but also eliminate the need for the entire fossil fuel supply chain of annually recurring extraction, refining, and distribution, along with its geopolitical dependence on an uninterrupted supply from petrostates. As electrification technologies continue to gain market share and fossil assets are being phased out in favor of electric alternatives, the average carbon intensity of energy consumption in buildings, industry, and transport will steadily decline.

Why it matters

The electrification revolution is being propelled by falling costs, continuous innovation, and the rapid expansion of clean power. For climate impact investors, this transition presents a compelling opportunity to drive large-scale decarbonization by accelerating the shift towards mature, high-efficiency electrification technologies across sectors with the highest climate mitigation potential. However, realizing the full climate impact potential of electrification will require stronger and more effective policy support to accelerate the expansion of clean energy and the replacement of fossil fuel assets, for instance through the electrification of industrial process heat.

Sources:

International Energy Agency (IEA) – World Energy Outlook 2023.

International Renewable Energy Agency (IRENA) – Renewable Capacity Statistics 2024.

Ember – The Long March of Electrification (2025).

Ember – Global Electricity Review 2025.

REN21 – Renewables Global Status Report 2024.

Rosenow, J., Arpagaus, C., Lechtenboehmer, S. and Pusceddu, E. – The heat is on: Policy solutions for industrial electrification (2025)