Outlook 2026: Contributors examine how grid constraints, rising electricity demand from AI and divergent regulatory and market approaches are reshaping investment, infrastructure and policy priorities in the global energy transition.
In part one of a two part feature, Forward Law Review asked leading practitioners to assess how grids, storage and transmission are emerging as the critical bottlenecks of the transition, with governments, investors and corporates navigating regulatory divergence, infrastructure constraints and shifting capital allocation strategies worldwide.
Here are their predictions for 2026.
Matthias Hirschmann, partner and head of German energy and renewable resources at Hogan Lovells, Hamburg; and Yannic Venus, senior associate, Hamburg:
Grid, Baby, Grid.
As the energy transition moves decisively from molecules to electrons – replacing oil, gas and coal with electricity as the dominant energy carrier – the focus from 2026 onwards will shift to the build-out of grids and storage. The constraint is no longer renewable generation itself, but the ability of networks to absorb, transport and stabilise rising electricity demand. According to the World Economic Forum, nearly three terawatts of renewable energy projects are currently delayed due to grid constraints.
Bringing additional renewables online remains essential to meet rising power demand while continuing the shift to clean energy.
According to estimates by the International Energy Agency, global electricity consumption from data centres, AI and digitalisation could approach 1,000 TWh by 2030. At the same time, electrification of transport, heating and industry continues to lift baseline demand across major economies.
In Europe, this reality is reflected in the EU Grids Package. The European Commission estimates that investment needs in electricity, hydrogen and CO2 networks will reach around €1.5 trillion by 2040, with electricity grids accounting for the largest share. Accelerated permitting, expanded cross-border interconnection and a stronger role for private capital are now explicit policy priorities.
Comparable dynamics are visible globally. In the United States, utilities are prioritising transmission upgrades in response to concentrated load growth from data centres and electrification. In parts of Asia, particularly Southeast Asia and Singapore, rapid data-centre expansion is driving parallel investment in grid resilience, battery storage and demand-management solutions.
From 2026 onwards, grids and battery energy storage systems will form the backbone of the energy transition – and a central focus of infrastructure investment and M&A worldwide.
Rhys Davies, partner at Kirkland & Ellis, London; and Mary Beth Houlihan, partner in New York:
The global energy transition continues its momentum, with the IEA forecasting a doubling of renewable capacity between 2025 and 2030. However, unprecedented energy demand resulting from the AI boom is having ripple effects throughout energy markets and investment strategies. This demand surge, coupled with a change in administrations in the US, has broadened the divergence in approaches on either side of the Atlantic.
In the US, with the roll back of the IRA, the energy transition will be primarily market-driven with an ‘all of the above’ approach currently being taken to meet energy demand. We are seeing this reflected in US fund managers broadening the scope of their energy transition mandates and by the fact that a significant driver of renewables are corporates and hyperscalers using Power Purchase Agreements to underwrite renewable infrastructure in order to achieve their emissions reduction goals.
Conversely, in the EU, regulation will continue to be a key driver. Solar requirements under the Energy Performance of Buildings Directive, proposed revisions to the EU Taxonomy, a “transition” category in the revised Sustainable Finance Disclosure Regulation and the proposed Data Centre Energy Efficiency Package will contribute push and pull factors driving capital towards renewable and energy efficient assets.
Silke Goldberg, partner and global head of ESG/sustainability at Herbert Smith Freehills Kramer, London:
ESG is here to stay but will be less performative and move into business as usual. ESG considerations will continue to be a core part of corporate strategy, but emphasis will shift from symbolic gestures and marketing. ESG will be embedded in operational decision-making, risk management, and long-term value creation – reflecting a maturing approach that prioritises substance over optics.
As Europe accelerates its energy transition, significant investment in electricity transmission infrastructure will be essential to support grid stability and cross-border energy flows. This will likely open up new commercial and regulatory opportunities, especially as discussions intensify around the future of the unbundling regime – potentially reshaping how transmission and generation assets are structured and governed.
Energy markets will continue to be shaped by geopolitical dynamics, with supply chains, trade routes, and strategic alliances playing an increasingly central role. Potentially expect heightened volatility and policy shifts as governments seek to secure energy independence, diversify sources, and respond to global tensions – particularly in relation to critical minerals, cross-border electricity supply, LNG, and renewables.
Ruth Knox, partner and chair of ESG & sustainable finance at Paul Hastings, London:
In financial services, we are beginning to see the development of transition-focused financial products, with early leadership from Japanese institutions. Transition-focused alternative investment funds have existed for several years and are expected to evolve further under the forthcoming SFDR 2.0 framework.
At the same time, demand for renewables investments from sponsors is showing some signs of decline, reflecting a market that is becoming increasingly saturated. This does not signal a retreat from the energy transition, but a shift towards more selective capital deployment and a greater focus on transition finance beyond pure renewables.