#133-AI/IOT led Digital Transformation in Energy: Why Clean Energy is the only way forward?

5 min read5 days ago

Global Energy CapEx Is Entering a Supercycle — But Headwinds Loom

The global energy system is about to experience one of the largest capital build-outs in modern history.

According to BCG’s The Energy Transition’s Next Chapter (2025), total energy capital expenditure (CapEx) is projected to surge from $5 trillion in 2023 to nearly $19 trillion by 2030 — a compound annual growth rate (CAGR) of ~22% year-on-year.

This signals not just a cyclical rebound, but a structural transformation in how the world invests in energy.

What’s Driving the CapEx Boom

Two macro trends are behind the steep climb:

Global Demographic Growth
As populations expand — particularly across the Global South — energy demand continues to rise. Electricity consumption is growing fastest in Asia and Africa, where access to modern energy is still limited.
The Clean Energy Transition
The pivot toward renewables, grid modernization, and electrification requires massive upfront capital. Solar, wind, and storage projects have lower operating costs but far higher installation and infrastructure expenses. This is shifting the system from a “sweat the assets” era to a “build the assets” era.

Who’s Spending the Money

The BCG data shows a broadening base of investors:

Corporate investment dominates, growing to roughly $13 trillion by 2030 — the backbone of the transition.
Government spending accounts for around $4 trillion, reflecting continued policy support and public infrastructure funding.
Private equity and venture capital are emerging contributors at about $2 trillion, catalyzing innovation in clean tech and advanced energy systems.

This widening participation suggests the energy sector is no longer the domain of legacy utilities — it’s now an ecosystem blending traditional power players with tech innovators and financiers.

According to BCG’s The Energy Transition’s Next Chapter (2025), energy companies currently invest about 1–2% of their revenue in digital technologies, a number that’s rising roughly 10% per year and is expected to reach 1.5–3% by 2026.

This steady growth shows how digital transformation is becoming central to the energy sector’s mission: enhancing efficiency, unlocking new opportunities, and maximizing the ROI of large-scale CapEx projects.

Seven Tech Trends Powering Digital Investment

AI, Generative & Agentic AI — From predicting future energy trends to designing optimal system layouts and automating documentation, AI is the brain of the modern energy enterprise.
AR and VR — Used for safety inspections, remote training, and real-time field collaboration, immersive tech is redefining operations in hazardous environments.
Blockchain — Enables transparent energy transactions, smart contracts for trading renewable certificates, and secure data management.
Cloud and Quantum Computing — Provides scalable infrastructure and computational power for complex modeling, simulations, and cryptographic protection.
Robotics and Automation — Brings precision and safety to manufacturing, inspection, and maintenance — think UAVs for pipeline monitoring or collaborative robots in refineries.
IoT and 5G Connectivity — Drives predictive maintenance and process optimization through connected assets and real-time data analytics.
Digital Twin and BIM (Building Information Modeling) — Creates virtual replicas of energy assets, enabling lifecycle management, clash detection, and digital validation of large projects.

Renewables matter more than ever: The Fastest Energy Transition in Human History — and Why It Still Might Not Be Fast Enough

Society has gone through energy transitions before — from wood to coal, from coal to oil — but nothing compares to what’s now required.

The coal revolution took roughly five decades. The rise of oil displaced coal over more than thirty years. But to limit global warming to 1.5°C above preindustrial levels, the world must deploy renewables and low-carbon technologies three times faster than any prior energy transition in history.

In the International Energy Agency’s (IEA) Net Zero Emissions scenario, renewables would need to supply up to 70% of all primary energy by 2050, matching the historical dominance of coal (55%) and oil (41%) in record time.

That’s an unprecedented industrial mobilization — and we’re not yet on track. Current policies would still allow global temperatures to rise by around +2.7°C by 2100, and progress in hard-to-abate sectors like manufacturing and buildings remains painfully slow.

This chart powerfully summarizes how the world can cut two-thirds of energy-related greenhouse gas (GHG) emissions by 2050 — and, importantly, how much of that transition already makes economic sense today.

The Big Message- Clean Energy is the way forward

Two-thirds of the emission cuts needed to stay on track for 1.5°C are already cost-competitive or soon will be.
In other words, most of the required technologies — like solar, wind, electric vehicles, and efficiency upgrades — can make financial sense now, even before counting climate benefits.

Breakdown by Industry/Sector

1. Power (47% of total abatement potential)

Solar and wind (37%) dominate the picture. These are now the cheapest forms of new electricity in many regions.
Smaller shares come from hydropower (3%), nuclear (2%), and geothermal/solar thermal (2%).
CCUS (carbon capture, utilization, and storage), bioenergy, hydrogen, and ammonia (3%) add further decarbonization options for hard-to-electrify power sources.

👉 Takeaway: Renewable power is the foundation — nearly half of global decarbonization depends on expanding clean electricity.

2. Transport (24%)

Light-duty electric vehicles (12%) and battery/fuel-cell trucks (7%) are key.
Low-carbon fuels for aviation and shipping (5%) fill the rest — these sectors are harder to electrify.

👉 Takeaway: Road transport electrification is already cost-effective. Heavy transport and aviation need innovation and policy support.

3. Industry (23%)

Major levers include energy and material efficiency (6%), heat electrification (6%), bioenergy (4%), hydrogen (2%), and CCUS (5%).
Many industrial solutions are technically ready but face cost or scaling barriers.

👉 Takeaway: Industrial decarbonization is crucial but slower due to high capital intensity and energy costs.

4. Buildings (6%)

Energy efficiency and renovation (4%) and heat pumps (<1%) offer big emission cuts with strong ROI.
These technologies are especially impactful in cold climates or older building stock.

👉 Takeaway: Building upgrades may seem small in percentage but are among the easiest, most profitable changes to implement.

💰 Cost Competitiveness Breakdown

🟩 ~65% of solutions are already or soon to be cost-competitive.
🟨 ~20% have a minor cost disadvantage.
⬛ ~15% have a major cost disadvantage (e.g., CCUS or hydrogen in some applications).

👉 This means most of the world’s needed emission cuts could be achieved profitably — if investments and policy support align.

Regards,

Sidhartha Sharma

https://www.linkedin.com/in/sidharthasharmaaidigitalstrategy/