1.       A slowdown in renewable energy power generation capacity growth

Renewable energy capacity growth is expected to slow down for the first time since the technological boom in the early 2000s. Renewable energy capacity growth reached a new record last year with the commissioning of 703 gigawatts (GW). This was largely driven by new solar photovoltaic (PV) capacity coming online in China during the first half of the year. It is estimated that the country commissioned close to 300 GW of solar capacity in 2025, representing more than half of the solar capacity installed globally. Local developers were keen on getting their projects operational before a change in China’s power pricing policy for renewables came into effect on 1 June.

The policy changes are expected to have a spillover effect into 2026 as less projects are forecast to enter operations in China, affecting global numbers. In 2026, the country is forecast to commission 235 GW of solar PV and 98 GW of wind capacity. This will take global added renewable power generation capacity from 703 GW in 2025 to 650 GW in 2026.  

2.       Renewable energy combined will overtake coal as the largest source of power supply

Despite a slowdown in global installed capacity, renewable energy generation will continue to grow at a fast pace. Generation from hydro, solar PV, wind, geothermal and other renewable sources has gone from 2,886 terawatt-hours (TWh) in 2000 to close to 10,742 TWh in 2025. Most of the growth has come from new solar PV and wind capacity.

In 2026, generation from renewable sources is expected to reach 11,900 TWh, overtaking coal as the largest source of generation. For decades, coal power has been the largest source of generation contributing to almost 40% of the energy mix in 2000. Given that practically all the new demand is being met with renewable sources, coal generation has plateaued, marking a significant milestone in power generation. 

3.       Battery capacity grows exponentially

As renewables take center stage, energy storage is becoming indispensable and could help overcome some of the challenges being encountered by variable power generation. The coming year will see an expansion in the deployment of storage technologies, particularly of batteries. Battery energy storage systems (BESS) capacity grew by 99 GW in 2025 to reach a total operational capacity of 241 GW. This year, growth is forecast to be even higher at 122 GW taking the operational capacity to 363 GW in 2026 representing a growth of 50%. The fast growth has been driven by a continued decline in BESS costs. Utility‑scale turnkey costs for four‑hour lithium‑ion systems have gone from more than $300 per kilowatt-hour (kWh) a few years back to a level of $200 per kWh in Europe and as low as $150 per kWh in China.

4.       A resurgence of nuclear power

Nuclear energy is experiencing a renaissance in 2026 , driven by concerns over energy security, decarbonization, and the limitations of renewables and storage alone. Nuclear power will add close to 14 GW of new generation capacity this year, making it the largest net addition from this technology in almost 30 years. Most of the capacity will be commissioned in China, but countries such as India, Bangladesh, Türkiye and South Korea will also contribute to the growth.

Additionally, the US might see its first restart of a nuclear plant with the comeback of the Palisades 800 megawatt (MW) power station. If successful, Palisades will be the first US nuclear plant ever to restart after being shut down and decommissioned. This could also mark the start of a trend of more reactors getting lifetime extensions in the western hemisphere as this is more economical than building new projects.

Small modular reactors (SMR) have also been gathering momentum with large investments and power purchase agreements (PPA) signed during 2025. Even when some projects are gathering momentum, it is still unlikely that we will see a final investment decision (FID) for a new SMR project during 2026.

5.       Demand growth from the commercial and transport sectors to accelerate

Global electricity demand growth in 2026 will exceed that of last year, as consumption from the commercial and transport sectors in mature markets accelerates, and industrial demand growth in emerging markets remains robust. The latest numbers suggest that global power demand reached around 29,300 TWh, representing an annual growth rate of 3.6%. Rystad Energy forecasts that global demand will reach close to 30,400 TWh in 2026 adding 1,100 TWh of new demand. The industrial sector is expected to be the sector that grows the most, adding around 470 TWh mainly due to increasing industrial activity in Asia. However, the commercial sector, mostly driven by data centers, and the transport sector will represent the largest relative growth.

Electricity demand from the commercial sector is expected to reach more than 6,900 TWh in 2026, representing a year-on-year growth of 5.1%, or 337 TWh. One third of the added demand will come from new data centers being commissioned around the world. In the US alone, demand from data centers will grow from 270 TWh in 2025 to 343 TWh in 2026.  

Finally, demand from the transport sector is forecast to reach 665 TWh. Even if this is still modest compared to total power consumption, the sector will outpace other sectors by growing 10.8% year-on-year.

2026 is set to be a transformative year for the power sector. The slowdown in renewable capacity commissioning signals a maturing industry, while the historic milestone of renewables surpassing coal in generation marks a new chapter in the energy transition. The rapid growth of energy storage and renewed interest in nuclear power reflect the sector’s drive for reliability and decarbonization. Meanwhile, the relentless rise in power demand - fueled by data centers and transport - underscores the need for continued innovation and investment in power generation and transportation infrastructure.

Author:

Carlos Torres Diaz
Head of Power Research
carlos.torres@rystadenergy.com

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