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Energy as the Core of the Transition Economy
Series 2: The Energy Transition
The Energy Transition is a series that reframes energy as the physical system underpinning the transition economy. It examines how power is generated, moved, stored, and priced- and how this energy system architecture shapes risk, return, and the durability of capital across the transition landscape.
Article 1: Energy as the Core of the Transition Economy
The global transition is a capital-intensive rebuild of the world’s physical systems. Series 1 reframes this transition as a set of investable sectors defined by assets, cash flows, and infrastructure lifecycles. This article synthesises those insights and sets up Series 2, which turns to the energy transition as the backbone of all other transition sectors. Its economics, reliability, and scalability will determine where capital compounds and where execution risk ultimately sits.
Energy as System
Over the past decade, transition investing has moved from niche allocation to a core consideration for institutional portfolios. What has changed is the feasibility of execution. Costs across renewables, storage, and electrification have fallen sharply, while demand for power continues to rise across industry, cities, and digital infrastructure. Global investment patterns affirm this shift, investment into the energy transition reached a record $2.3 trillion in 2025 (an 8 % increase from 2024)- driven by spending on electrified transport, renewables, grids, clean-tech supply chains, climate-tech equity, and transition-related debt (BloombergNEF, 2026). This broad investment base reflects a maturing sector where assets are valued for cash flows and longevity. While each transitioning sector has distinct revenue drivers, risk profiles, and points of investor entry, all ultimately depend on access to reliable, scalable, and affordable energy.
Generation to System: Where Value Accumulates
A consistent theme emerges from transition: value is created where physical assets intersect with long-duration demand. Renewable energy assets, for example, generate predictable cash flows once operational, often underpinned by long-term power purchase agreements (PPAs). A PPA is a contract, typically 10-20 years, where a buyer agrees to purchase electricity at a pre-agreed price, stabilising revenue and reducing exposure to wholesale price volatility(PwC, 2024).
At a global level, this investment momentum is evident. In 2025, clean energy investment - including renewables and enabling technologies - continued to outpace fossil fuel investment, establishing a structural preference for low-carbon power infrastructure among institutional allocators (IEA, 2025). Solar photovoltaic (PV) investment alone was estimated to be in the hundreds of billions of USD in 2025, while battery storage investment reached tens of billions, underscoring the expanded opportunity set across technologies (IEA, 2025; renewable statistics, 2025).
The economics of renewables now favour deployment on a cost basis. Levelised cost of electricity (LCOE) for solar and wind has declined markedly over the last decade due to scale deployment and technology improvements. In many regions, utility-scale solar and onshore wind now undercut new fossil generation on a per-megawatt-hour basis, attracting capital seeking stable, long-term contracted revenues (IRENA, 2025).
However, energy is not just about generation; it is a system. As renewable penetration increases, grid congestion, intermittency, and flexibility increasingly define returns. Storage and transmission assets address these bottlenecks by shifting energy across time and space rather than producing more of it. Installed battery storage capacity is expanding rapidly in key markets, with sharply risen deployments rising in 2025 and expectations for continued multi-year growth as grid operators prioritise stability (FT, 2026). Large-scale pumped hydro and other long-duration storage play a complementary role, balancing supply and demand and supporting high renewable shares.
Behind-the-meter energy systems - solar and batteries installed on homes and businesses - represent another structural shift. These assets reduce reliance on centralised grids and are expected to represent a growing share of new generation capacity through the end of the decade, expanding investment opportunities into distributed energy resource management and grid services.
Australia Snapshot
Australia’s transition progress mirrors broader trends and offers useful context. In late 2025, renewables supplied more than 50% of electricity generation in Australia’s National Electricity Market (NEM), with rooftop solar, wind, and grid-scale solar driving double-digit growth in output, battery discharges nearly tripling year-over-year (Reuters, 2026; ABC News, 2026). An estimated close to 7 GW of renewable generation capacity was added in 2025, building on record additions in prior years and maintaining momentum toward national decarbonisation goals (SolarQuarter, 2026).
Implications for Investors
Energy underpins every transition sector. Electrified transport, green buildings, AI data centres, and advanced manufacturing all require reliable, low-cost power. As demand accelerates, especially from data centres and digital infrastructure, energy assets with systematic efficiency will command premium economics.
For investors, this means focusing on where demand growth meets infrastructure constraints. Transmission, storage, and grid services are becoming as important as generation itself. Capital allocation decisions will increasingly hinge on system-level understanding rather than individual technologies.
As systems become more complex, the value of well-structured capital rises. Series 2 will unpack this complexity - explaining how grids work, why renewables outcompete fossil fuels on economics, and where long-duration cash flows are most resilient as energy demand accelerates.
éthica Capital and Green Bond Corporation Group operate at the intersection of energy systems and capital structure. Through advisory, structuring, and capital placement across renewable generation, storage, and enabling infrastructure, the group focuses on translating system-level insight into executable transactions. The Energy Transition Industry Report underpins this approach by grounding strategy in asset economics, contracted revenues, and investable pathways across global energy markets (éthica Capital, 2025).
To explore the data, economics, and asset-level implications in more depth, read éthica Capital’s Energy Transition Industry Report.
Access the full report via éthica Capital’s website or Bloomberg terminal.
Citations:
BloombergNEF (2026) BloombergNEF finds global energy transition investment reached record $2.3 trillion in 2025, up 8% from 2024. BloombergNEF, 26 January. Available at: https://about.bnef.com/insights/clean-energy/bloombergnef-finds-global-energy-transition-investment-reached-record-2-3-trillion-in-2025-up-8-from-2024/
Ember/Energy Institute (2025) Global Electricity Review 2025. Available at: https://ember-energy.org/app/uploads/2025/04/Report-Global-Electricity-Review-2025.pdf.
International Energy Agency (IEA) (2025) World Energy Investment 2025. Available at: https://www.iea.org/reports/world-energy-investment-2025.
International Energy Agency (IEA) (2025) Renewables 2025. Available at: https://www.iea.org/reports/renewables-2025.
International Renewable Energy Agency (IRENA) (2025) World Breaks Renewable Records. Available at: https://www.irena.org/News/pressreleases/2025/Oct/World-Breaks-Renewable-Records-but-Must-Move-Faster-to-Hit-2030-Tripling-Goal.
World Economic Forum (2025) Global energy in 2026: Growth, resilience and competition. Available at: https://www.weforum.org/stories/2025/12/global-energy-2026-growth-resilience-and-competition
Reuters (2026) Australia hits new renewable milestone of over 50%. https://www.reuters.com/business/energy/australia-hits-new-renewable-milestone-over-50-2026-01-29/
ABC News (2026) Australia hits power demand record as renewables pass 50%. https://www.abc.net.au/news/2026-01-29/australia-hits-power-demand-record-as-renewables-pass-50pc/106280246
PwC (2024) The Energy Transition Investment Playbook. Available at: https://www.pwc.com/my/en/assets/publications/2024/2024-energy-transition-playbook.pdf
éthica Capital (2025) Energy Transition Industry Report. Available at: https://www.ethica.capital/research-insights
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