Muhammad Hammad

Energy innovation is gaining momentum, driven by energy security, supply chain resilience, and climate change concerns. Governments are prioritizing domestic leadership in AI, industrial production, and affordability, creating new opportunities for innovative energy technologies like solar PV, batteries, and advanced nuclear.

The IEA’s survey reveals a tempered outlook on progress, with experts citing political instability, shifting government priorities, and economic slowdowns as challenges. However, areas like batteries, power grids, nuclear, and geothermal energy show promise, with AI expected to transform innovation in these fields.

The IEA’s Energy Innovation Forum highlighted the importance of policy support, international collaboration, and addressing financing gaps for first-of-a-kind projects. Breakout sessions focused on AI’s potential to accelerate innovation, diversifying battery mineral supplies, and reducing carbon dioxide removal costs.

Recommendations include co-operation between trading partners, facilitation of partnerships, and government support for innovators. With sustained investment and cooperation, energy innovation can drive economic growth, improve energy security, and reduce emissions.

Recent Developments

The 2025 State of Energy Innovation report highlights significant advances in energy tech, from fusion energy to grid-secured products. Key areas include:

Research & Prototyping: Stellarators, perovskite solar cells, elastocaloric cooling, and lithium-ion batteries with manganese-rich cathodes.

Demo & Commercialization: Industrial heat batteries, underground hydrogen storage, carbon capture, biomass-to-bio-oil, and wind-assisted shipping.

Investment Commitments: Small modular reactors, synthetic liquid fuels, and blended wing body aircraft.

Market Launches: Megawatt fast-charging, super capacitor grid stabilization.

Tracking Spending

Energy innovation funding is on the rise, with 9% of global R&D spent on energy in 2024. Public energy R&D reached $55 billion, up 70% since 2015, but growth paused in 2024-2025. Corporate energy R&D hit $160 billion, growing slower than before. The US dominates energy venture capital (VC), but Europe is closing the gap. VC funding for energy start-ups fell 10% to $27 billion in 2025, partly due to AI investments.

The decline in energy VC funding is linked to various factors, including higher interest rates, uncertain markets, and investors shifting focus to AI. Excluding electric mobility, energy VC activity has plateaued since 2021, showing resilience in non-EV areas. Governments can help smooth funding fluctuations and guide private investment to priority areas. Energy efficiency and grids received more public R&D funding in 2024, reflecting growing technical needs.

Patenting

Energy tech patenting is on the rise, representing 10% of all tech patents from 2020-2024. China leads the charge, overtaking the US in 2021, with a focus on low-emissions tech (97% of energy patents). Energy storage dominates, driven by batteries (40% of energy patents). The US and Europe saw declines in 2023.

Patenting trends reveal insights into innovation:

Solar PV: Early R&D led to patent peak in 2011; now focused on perovskites.

Batteries: Lithium-ion leads; China, Korea, and Japan drive innovation.

Emerging areas: Nuclear (fission & fusion), grids (inverter controls, AI), and critical minerals (exploration, refining).

Policy Progress

Energy innovation policy is shifting to prioritize industrial competitiveness, supply chain resilience, and energy security. Governments are adjusting policies to support emerging tech like hydrogen, carbon capture, fusion energy, and AI-driven innovation. Examples include the UK’s Clean Energy Superpower Mission, Canada’s Climate Competitiveness Strategy, and the EU’s Competitiveness Fund.

Public funding is crucial for bridging the investment gap in energy innovation. Grants, equity investments, debt financing, and tax incentives are being used to support R&D, prototyping, and commercialization. International collaboration is also key, with initiatives like ITER, the EU’s Clean Energy Transition Partnership, and the G7 Critical Minerals Action Plan driving progress in energy tech development and deployment.

Innovation for Competitiveness

The 2025 Nobel Prize in Economics highlights the crucial role of innovation in driving economic growth. Energy innovation has the potential to boost competitiveness, reduce costs, and create new industries. Governments can play a key role in supporting energy innovation through public investment in R&D, demonstration projects, and early-stage technology validation.

To maximize the impact of energy innovation on competitiveness, governments should prioritize entrepreneurship, anticipate future needs, and share first-mover risks. This can involve creating favourable fiscal regimes for entrepreneurs, fostering innovative ecosystems, and collaborating with the private sector to develop and deploy new technologies. By doing so, countries can unlock new opportunities for economic growth, improve energy security, and reduce environmental impacts.

Technology Innovation for Electricity Grid Resilience

Preventing disruptions and ensuring rapid restoration of power is a key challenge for electricity network operators. Technologies like grid-forming inverters, synchronous condensers, and advanced conductors can address these challenges.

However, regulatory and market barriers slow their adoption. Governments can help by implementing performance-based regulations, establishing regulatory sandboxes, and developing standards for digital controls and data exchange. Investing in grid modernization can unlock economic benefits, improve energy security, and support a low-carbon transition.      

Innovation to make Gigawatts of Grid-Connected Fusion Energy a Reality

Fusion energy has made significant advancements recently, with multiple countries achieving record-breaking plasma confinement times and net energy output. Governments are committing billions to commercialize fusion energy, with the UK, Japan, China, the US, Germany, and Korea announcing ambitious plans.

The private sector is also investing heavily, with over 80 fusion start-ups raising $10 billion since 2020. Companies like Commonwealth Fusion Systems, Tokamak Energy, and Helion Energy are developing innovative approaches, including high-temperature superconducting magnets and compact reactors.

Despite progress, significant technical challenges remain, including achieving Q=10 where Q is the ratio of fusion power produced to the power required to maintain the plasma. It is a critical milestone, representing a scientific breakeven point where 500 MW of fusion power is produced from 50 MW of input power.

Other challenges include breeding tritium fuel, developing materials that can withstand extreme conditions, and efficient heat removal. Governments and investors should prioritize demonstrating engineering breakeven, finalizing pilot reactor designs, and international collaboration.

Institutions like IAEA, ITER, and IEA TCPs can facilitate knowledge sharing and burden-sharing. With sustained investment and cooperation, fusion energy could revolutionize the energy system, providing high and constant power output, minimal waste, and no CO₂ emissions.