In this article, we aim to help you make sense of the current climate – pun intended. This isn’t another list of trends to watch for in 2025, it’s an analysis of the forces behind them: geopolitical realignments, surging electricity demand (and AI’s role in it), and new technological priorities redrawing the climate tech landscape. The question for investors is not if the clean energy transition will continue but how and where it will accelerate.

Key takeaways: 

  • Geopolitics is reshaping climate tech: Energy independence is now a national security priority, driving government policies and investments in clean energy across the U.S., Europe, and China. But regional energy strategies are diverging. 
  • AI’s energy demand is both a challenge and an opportunity: AI’s soaring electricity demand risks prolonging fossil fuel reliance if renewables and low-carbon baseload can’t scale fast enough. However, efficiency breakthroughs and big tech’s eagerness to adopt clean energy offer a counterbalance. Plus, AI drives scientific breakthroughs, making it a double-edged sword.
  • Baseload and decentralized clean energy solutions are accelerating: The next wave of climate tech is being shaped by rising electricity demand. Geothermal and nuclear are gaining investment due to their 24/7 reliability, while solar microgrids can provide a fast, scalable alternative.
  • Climate tech momentum is unstoppable: Shifting politics may alter the narrative behind climate tech growth —whether you call it sustainability or energy independence— but not its trajectory. Clean energy investment hit $2 trillion in 2024, nearly double fossil fuel investment, with solar and battery technologies leading the transition forward. There’s no going back.

Geopolitical shifts and energy independence

The conversation around climate tech has clearly shifted. Energy independence is now at the top of the agenda, with critical mineral access and supply chain independence. It is driving government policies, investment flows, and technological priorities. In 2025, climate tech is both a competitive edge and a global necessity. 

Nations are navigating a tricky balance between cooperating on shared goals and competing to control industries like clean energy. They are racing to secure access to critical minerals, battery supply chains, and expand local clean energy manufacturing.

This new era of strategic competition is reshaping the clean energy industry across the U.S, Europe and China. Climate tech is no longer just a climate story, it’s a power play in the global economy. 

Divergent Strategies in Energy Security

While all regions agree that energy security is crucial, their strategies vary. 

United States: Baseload power and domestic production

With the new administration placing greater emphasis on baseload power, U.S. energy policy in 2025 will be heading towards a mix of increased fossil fuel extraction (though this ultimately depends on market prices and dynamics will ultimately dictate how much) and a stronger push for geothermal and nuclear energy. A second Trump term will likely streamline approvals for critical energy infrastructure, according to the new DOE agenda. Think transmission lines and grid upgrades. As the new Secretary of Energy, Chris Wright, puts it: “The Department will identify and exercise all lawful authorities to strengthen the nation’s grid, including the backbone of the grid, our transmission system.”

With cautious optimism, and if permitting hurdles are eased later down the line, this could stimulate the deployment of renewables in the U.S.. Especially because in many regions they are already more cost-competitive than oil and natural gas. The U.S. Inflation Reduction Act’s (IRA) tax incentives are still in play, and despite political turbulence, the momentum behind climate tech isn’t changing its course. 

For more on climate tech under Trump, read our article: https://www.carbonequity.com/blog/survival-of-the-greenest-investing-in-climate-tech-under-trump 

The EU: Accelerating renewable energy and industrial competitiveness

On the other side of the Atlantic, the EU is also enhancing its energy security. Predominantly through a rapid rollout of renewable energy resources with more wind and solar generation. Last year, there was more power generation from renewable energy than fossil fuels in the EU, making a historic shift. 

The rapid rollout of renewables also means that the EU is strengthening its business case for clean flexibility, with battery deployment expected to continue growing rapidly in 2025. In fact, a combination of grid-scale battery and utility solar can now produce electricity more cheaply than existing coal or gas power plants in many places in Europe.  

2024 has been a challenging year for Europe, with war on the continent raging on, sluggish economic growth (especially in Western Europe), and criticisms of over-regulation fuelling perceptions of “Museum Europe” falling behind the US and China. However, signs of resilience and renewed momentum are emerging:

  • The Draghi report on European competitiveness has been a wake-up call, emphasizing Europe’s potential and need to catch up in climate technology and innovation.
  • The upcoming Clean Industrial Act, expected later this month, is designed to improve Europe’s competitiveness by supporting clean tech manufacturing and ensuring continued decarbonization progress.
  • The push for a single pan-European startup entity could create a unified platform for helping scale climate-focused startups across the continent

With the U.S. exiting the Paris Agreement again and uncertainty about the future of the IRA, Europe's time to act is now. For economic growth, innovation, and true energy independence.

This global power play is already shaping where investments go and which technologies scale, and will continue to do so through 2025. But energy security isn’t the only driving force: AI is emerging as another battleground. With its soaring energy demands, AI will have implications on electricity, infrastructure, and the economics of clean power. At a time when countries are scrambling to build local energy supply, AI increases the pressure on load growth.

AI’s growing influence on energy and climate tech 

As AI’s rapid rise is transforming industries, it’s also having an impact on both energy demand and climate tech investments. AI’s boom may be pulling investor focus away from climate tech. In 2023, AI companies raised nearly $100B in equity funding, while climate tech venture funding dropped by $20B to $32B, according to Bloomberg. As capital shifts and energy demand spikes, AI’s role in the clean energy transition is becoming impossible to ignore.

Before the surge in AI development, data centers consumed approximately 1% of global electricity. However, with the rapid expansion of AI technologies, projections now estimate that data centers could account for up to 11.7% of U.S. power demand by 2030. But after recent breakthroughs from DeepSeek, which has an approach believed to be 95% more efficient (although that is an initial estimation) than previous AI training methods, this expected spike might be already slowing. Never underestimate the power of energy efficiency.

To put the impact of efficiency into perspective: According to RMI, by reducing the total energy required, efficiency in general (across sectors, not just AI) can accelerate the transition to a carbon-free energy system by a decade or more. However, the Washington Post argues more efficient and cheaper AI will boost AI adoption, which in turn will lead data centers to still use a lot more electricity. If you’ve seen lots of chitchat about Jevons paradox lately, that’s basically what this boils down to. This phenomenon is by no means a guarantee however and is still a very open question. 

How do we look at it then? The ideal scenario is that AI demand scales slowly enough that nuclear, geothermal, storage and renewables scale with it. The least hopeful scenario is that immediate, exponential growth in AI demand leads to a similar expansion of natural gas, locking in new fossil infrastructure for decades to come. 

The upside of AI for climate tech 

AI will definitely continue making headlines in 2025. It isn’t just an energy glutton, it’s also a powerhouse in scientific breakthroughs: it offers great potential in supercharging climate tech innovation in critical areas. One area AI will likely continue making waves? Biotechnology and materials science. Materials science is, of course, crucial for developing alternatives to plastics and other chemicals. Given that plastics alone could consume half of the remaining 1.5°C emissions budget by 2050, the importance of innovation in this field cannot be overstated.

In the coming year, these advancements are expected to attract more investments, particularly in:

  • Alternative materials: Scaling bio-based chemicals to replace petrochemical-derived products, developing next-gen battery materials, and refining carbon capture technologies.
  • Sustainable agriculture: Identifying and developing effective bio-based fertilizers and biological pesticides that are less harmful to the environment.

But it’s not just AI 

For all the talk about AI lately, it’s important to re-center the debate around rising electricity demand here. It’s not just AI: load growth is an inherent feature of the energy transition. The whole point of it is to shift cars, buildings, and industrial processes off fossil fuels and onto electricity, increasing energy efficiency and cutting carbon pollution in the process. So the predicament is that while we know load growth is coming, we don’t yet know how much or how fast.

The role of geothermal and nuclear in meeting energy demand

So, with an increased need for reliable power, geothermal and nuclear energy are getting serious attention… and serious funding! Both sectors have been heating up and expected permitting reforms should accelerate projects. Geothermal had a breakout year in 2024, and despite the new administration pausing some renewable energy initiatives, geothermal remains an exception, receiving continued support.

Investment in enhanced geothermal technologies, still in their early days, tripled to $558M and projects like Fervo Energy’s 400 MW Utah plant will start delivering electricity by 2026 and will be fully built by 2028. But scaling geothermal to the 30+ GW of capacity needed in the U.S. by 2030 remains a challenge. 

At the same time, nuclear is making a comeback. Last year, Microsoft re-opened Three Mile Island: an emblematic sign of the nuclear renaissance in the U.S. Funding for small modular reactors (SMRs) and large-scale nuclear projects nearly doubled to $1.9B in 2024. We’ll see if advanced reactors finally move into construction this year. 

Here another example of the nuclear renaissance: Texas has recently introduced the Nuclear Renaissance Bill. The new bill aims to speed up nuclear energy development by cutting through federal red tape, streamlining approvals, and pumping state money into next-gen reactors. Texas is betting on nuclear in a way no other U.S state has. If it works, the state could become a nuclear powerhouse. Not just in energy production, but in technology development, job creation, and industrial growth too.

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In the end, both geothermal and nuclear power hold great promises for providing reliable, clean baseload power. Pragmatically speaking, though, neither will likely scale quickly enough to meet the near-term energy crunch. So what do we do in the meantime? 

Solar microgrids as a near-term opportunity

Right now, to meet the electricity demand surge, the U.S is on track to build 80 new gas-fired power plants by 2030 – an obviously massive emissions problem. But there is one dark horse that could be big enough, fast enough, sustainable enough and cheap enough to be a compelling near-term alternative: solar microgrids and storage.   

In some locations, solar microgrids are already at cost-parity with gas and can be deployed much faster. This could be a game-changer for AI data centers, for example. If every new AI data center was built using 90% solar, they could prevent 0.4 to 4.1B tons of COâ‚‚ emissions. At $50 per ton of COâ‚‚ reduced, replacing gas-powered data centers with off-grid solar microgrids represents a cost-effective emissions mitigation strategy.

Final thoughts: Why optimism is justified in 2025

Despite recent headwinds and pessimistic headlines, the trajectory of climate tech is unmistakably forward. The world now invests almost twice as much in clean energy as it does in fossil fuels. VC and growth equity investments in climate tech totaled $30bn in 2024, a slight decrease from 2023 but not by much. Overall, energy investment exceeded $3 trillion for the first time in 2024, with $2 trillion going to clean energy technologies and infrastructure.

The momentum is real, and we’re just getting started. The energy transition has passed the point of no return and is being driven by significant market momentum.  The core technologies driving the energy transition—solar power and batteries—have become 90% cheaper over the last decade, making them more cost-effective and efficient than fossil fuels. This isn’t just about cheaper renewables; affordable solar and batteries mean cheaper 24/7 electricity, which in turn lowers the cost of electrifying everything (from transportation to industry), accelerating the entire clean energy shift.

The conversation around climate tech has simply evolved from an environmental imperative to a geopolitical and economic necessity.  Shifting politics may alter the narrative behind climate tech growth —whether you call it sustainability or energy independence— but not its trajectory.