Energy Innovation in 2026

Earlier this year, I argued that decarbonization is the ultimate driver of energy innovation and described how Axpo approaches it. Since then, the world has shifted. Energy has moved to the center of political and economic debates. Climate politics, at the same time, have lost some momentum. Where is innovation heading? An overview.

A more pragmatic tone is spreading in public discussions, in policymaking and among well‑known voices in the climate and energy community. These shifts matter for how we think about innovation priorities in 2026.

Energy has become strategic

The rise of artificial intelligence is one of the clearest catalysts. Countries now treat reliable power as a strategic asset. AI is becoming a decisive factor for national competitiveness and security. Data centers have turned into a new form of industrial infrastructure and grid capacity and firm power supply are critical constraints in the large-scale deployment. You notice this in how the industry speaks. The size of data centers is usually not described by compute power but by their peak electricity demand: 50 MW, 200 MW, 1 GW. There is no doubt. Power is now on everyone’s mind.

At the same time, the economic optimism around AI contrasts with rising public anxiety about inflation, geopolitics, job security and migration. In this environment, climate is no longer the top priority for many. Worse, climate technologies such as heat pumps and electric vehicles increasingly end up in a cultural corner they do not belong in. Investment in climate technology has fallen by more than 60% since 2022 (see here).

Politics reflect the shift

Policy debates mirror this mood. The EU’s decision on its 2040 climate target was tense until the very end. The target was finally confirmed at a 90% reduction target in mid-December, but only after easing some rules: ETS2 (the next iteration of the European Emission Trading System) was delayed by a year to 2028, the 2035 car emissions phase‑out will likely be softened, and the Omnibus packages pushed several sustainability regulations further into the future. None of these decisions overturn the long‑term direction, but they clearly show that political headroom has narrowed.

International developments follow a similar pattern. The International Maritime Organization delayed its net‑zero framework. And COP30 in Belém concluded without any meaningful increase in ambition. Climate politics is still moving, but more slowly, and with more friction.

A new pragmatic tone emerges

Against this background, several influential figures have been advocating for a new approach. Michael Liebreich published a call for a “Pragmatic Climate Reset”. Bill Gates spoke about “Three Tough Truths”. Jeremy Oppenheim speaks of a “Shock Therapy” for sustainability.

Their messages differ in tone but converge in substance. Climate change is real and worrying. But panic does not produce good policy. The most effective strategy is to focus on areas where clean technologies can quickly and naturally outcompete fossil incumbents — through lower costs, better performance, and mass‑market appeal. This approach reduces subsidy needs, keeps household bills manageable and builds public support instead of polarization. The money saved can be directed toward welfare and into climate adaptation where it is desperately needed.

Why this pragmatism matters

This pragmatic shift is a reaction to something deeper: it has become harder to have a fact‑based discussion. Narratives are easily tilted in one direction or the other.

Take a recent example from Germany. Headlines recently claimed that the Energiewende will cost “5 trillion euros”. A frightening figure until you dig into the details. Then you find that the number includes all energy purchases between 2025 and 2049. On a per‑capita basis, that equates to around €2,500 per year per inhabitant for all energy consumed (including also industrial consumption). Without comparing this to a no‑transition scenario, this cannot be understood as the additional cost from the transition and it’s not even too frightening.

On the other side of the debate, energy transition advocates highlight the potential value‑add potential of decentral energy systems for Germany, estimated at 255 billion euros for Germany. But a closer look into the report reveals that half of this “value‑add” stems from mobilizing private capital for heat pumps and chargers. For many households, mobilizing their own capital will not be perceived as value‑add at all. For them, it is a cost.

The truth, as almost always, lies in the middle: Climate change is real, mostly human‑caused and needs to be addressed. But we are also fortunate: many climate‑friendly technologies have scaled to a point where they are available at equal or lower cost than their fossil alternatives. There is a reason why states like Texas - with abundant cheap gas - continue to build renewables at scale. Wind, solar and batteries have become cost-competitive and fast to deploy across many geographies. This is the type of energy transition that works: the one with fewer dramas and more deployment.

How this reshapes innovation priorities

Many of the technologies published in my earlier article remain relevant. But the emphasis shifts. In the current environment, cost, speed and system value matter more than theoretical future potential. Scaling what works beats dreaming of what could work.

Below is an updated view of the seven innovation fields and how their priority changes in 2026.

• New Generation Technologies: This field keeps its relevance. More [MH1] electricity will be needed — especially with AI and electrification. But affordability becomes non‑negotiable. We will focus on technologies with a realistic path to competitive levelized cost of electricity. Ambitious ideas remain welcome, but they must show a plausible cost trajectory.
• New Energy Storage: This field loses relevance. Short‑duration storage (lithium‑ion, emerging sodium‑ion) is already scaling. Long‑duration storage (days to weeks) will matter eventually, but not yet. The economics only make sense once renewables dominate and seasonal flexibility becomes a bottleneck. Today, these technologies sit at the tail end of the transition. We will monitor them, but deployment urgency is lower.
• Electrification technologies: This field keeps its relevance. The fastest decarbonization happens where electrification beats fossil fuels on cost and performance. That is increasingly true for EVs, heat pumps, and for parts of industrial heat. Innovation efforts should center on driving down system costs, making solutions easier to install, and improving reliability and user experience.
• Green Molecules: This field loses relevance. Hydrogen, e‑fuels, e‑methanol and other green molecules remain essential for hard‑to‑abate sectors — but only later in the transition. Today, most applications come with very high abatement costs and uncertain demand signals. Political support is also less predictable. We continue exploring opportunities with partners but do not expect large near‑term deployment.
• Technologies for improved operations & maintenance: This field gains relevance. AI‑based diagnostics, robotics/drones for inspections, predictive maintenance and better workforce tools will reduce outages and lower costs. These technologies deliver fast, pragmatic value — exactly the kind of impact needed in the current environment.
• New Grid Technologies: This field gains relevance. Grids are the backbone of electrification, and increasingly its bottleneck as well. Innovations that increase capacity at lower cost, speed up permitting, or enhance flexibility will be crucial.
• New Trading Technologies: This field gains relevance. Variable power production, smarter demand, and more volatility mean that trading capabilities become even more important. AI‑driven forecasting, automated bidding, flexibility optimization and new hedging tools will shape the next decade.

From green molecules to smarter grid

Some technologies that have fascinated engineers over the past years now face a tougher path to commercial scaling, e.g., seasonal storage and green molecules. Others rise in importance because they serve the core of the transition: more electrons, smarter grids, more intelligence.

Energy affordability and security have moved to the center of the public’s attention. That may feel like a slowdown in climate ambition, but it also forces us to focus on what works. Pragmatism is not a retreat. It is a way to accelerate.

In Summary: There is no better time to work in this sector.