Global energy investment to reach $3.4 trillion in 2026, study says

Global energy investment is projected to reach $3.4 trillion in 2026, with about $2.2 trillion going to clean energy and $1.2 trillion to fossil fuels, according to the International Energy Agency (IEA).

ISLAMABAD: Global energy investment is projected to reach $3.4 trillion in 2026, with about $2.2 trillion going to clean energy and $1.2 trillion to fossil fuels, according to the International Energy Agency (IEA).

The figures were cited in a new study by the Pakistan Institute of Development Economics (PIDE), titled Energy Transition: What It Means, What the Evidence Shows, and What It Implies for Pakistan. The report also highlights the rapid growth of renewable power worldwide and the challenges Pakistan faces in meeting future electricity demand.

Renewable power capacity additions reached 692 gigawatts (GW) globally in 2025, accounting for 85.6 percent of all new power capacity, according to the International Renewable Energy Agency (IRENA).

Pakistan’s peak electricity demand in fiscal 2035 is projected to range from 28.6 GW to 43.1 GW, depending on the demand scenario in the country’s Revised Indicative Generation Capacity Expansion Plan (IGCEP) 2025-2035.

The PIDE study describes the energy transition as a broad change involving technology, infrastructure, markets, institutions and patterns of energy use, rather than simply replacing one fuel with another.

The cost of renewable electricity has also become more competitive. In 2025, the global weighted-average cost of electricity from onshore wind was about $33 per megawatt-hour (MWh), while utility-scale solar photovoltaic power cost about $44 per MWh, IRENA reported. More than 90 percent of newly commissioned utility-scale renewable projects produced electricity at a lower cost than the cheapest new fossil-fuel alternative.

The cost of installing battery storage systems lasting four hours has also fallen to about $140 per kilowatt-hour (kWh), the study said.

Pakistan’s gross electricity demand is forecast to increase from 137,025 gigawatt-hours (GWh) in 2025 to 180,605 GWh in 2035 under the low-growth business-as-usual scenario in the revised IGCEP. These figures measure annual electricity demand, rather than peak demand.

The report says Pakistan’s energy transition will require coordinated planning across electricity generation, demand, transmission networks, markets, financing and institutions.

It warns that expanding renewable generation alone will not be enough without stronger electricity grids, financial reforms for utilities and targeted social protection to help households and communities manage the effects of the transition.