The global energy innovation landscape is entering a transformative phase, shaped by growing concerns over energy security, industrial competitiveness, and the resilience of infrastructure, according to the latest State of Energy Innovation report by the International Energy Agency (IEA). The second edition of the report, which will guide discussions at the 2026 IEA Energy Innovation Forum on 18 February, highlights that energy technologies are now part of multi-trillion-dollar global markets.

The energy sector has become a hub of innovation, spanning areas such as batteries, transformers, turbines, motors, and heat exchangers. Around one in ten patents worldwide today relates to energy, surpassing patents in chemicals, pharmaceuticals, or transportation. This underscores the sector’s critical role in national security, industrial strategy, and economic performance.

In 2026, the report identifies more than 150 notable innovation developments across the energy landscape. These include advances in solid-state air conditioning, perovskite solar cells, fusion energy, sodium-ion batteries, and next-generation geothermal systems. Collectively, these innovations contributed to 50 technology readiness level upgrades among emerging energy technologies tracked by the IEA. Policy priorities are also shifting. A survey of experts and practitioners found that energy security was the leading driver of innovation in 2025, ahead of affordability and emissions reduction. New initiatives, such as the US Genesis Mission and the EU Competitiveness Fund, reflect a growing emphasis on strengthening domestic technological capabilities and securing critical supply chains.

Fatih Birol, Executive Director of the IEA, highlighted the strategic importance of energy innovation, stating that governments worldwide are increasingly prioritizing research, demonstration, and early deployment of new technologies. Countries that sustain investment in these areas are expected to lead the next generation of energy solutions. The report emphasizes the lasting impact of public support on energy innovation. Government funding has been instrumental in enabling breakthroughs such as floating liquefied natural gas, lithium-ion batteries, and advanced geothermal technologies.

Energy storage, in particular, has emerged as a central area of innovation, reflecting its growing importance in national security and power system reliability as the world enters the Age of Electricity. In 2023, batteries accounted for 40 percent of all energy-related patents—a record share for a single technology area—and preliminary data suggests this proportion has grown further in 2024 and 2025.

China, Korea, and Japan remain leaders in lithium-ion battery patenting, with China’s contribution rising sharply over the past decade. In solar technology, innovation is shifting toward perovskite solar cells, which now represent over 70 percent of patents for solar materials. Evaluations of long-running public research and development programmes show that the economic benefits can be multiple times greater than the initial investment, through savings on fuel, reduced equipment costs, and the development of stronger domestic industries.

Despite these advances, funding trends are showing signs of transition. Global public energy R&D spending in 2025 is estimated at $55 billion, down 2 percent from the previous year, while corporate R&D growth slowed to 1 percent in 2024, marking one of the weakest rates since 2015 outside of the pandemic year. Venture capital investment in energy technology start-ups fell for the third consecutive year, reaching $27 billion in 2025. Higher interest rates, macroeconomic uncertainty, and strong competition from artificial intelligence ventures have contributed to tighter capital flows. In 2025, almost 30 percent of global venture capital funding went to AI projects, while the share directed toward energy declined.

Despite this slowdown, new growth areas are emerging. Funding for fusion, nuclear fission, critical minerals, geothermal energy, carbon dioxide removal, and low-emissions industrial technologies has grown sharply since 2021, offsetting much of the decline in electric mobility investment. Regional patterns in energy innovation are becoming increasingly distinct. China continues to expand its influence in corporate R&D and patenting, particularly in energy storage and industrial efficiency, with international patent applications rising sharply in recent years.

Europe’s public energy R&D intensity has reached around 0.08 percent of GDP, approaching record highs last seen in the 1980s and now surpassing other major advanced economies. Its start-up ecosystem has become more dynamic, even as patenting has slowed in some countries. The United States continues to lead in venture capital investment, accounting for nearly half of global energy VC funding in 2025, with strengths across a wide range of technologies. Japan remains highly specialized in batteries, while also advancing in perovskite solar, hydrogen-based fuels, and fusion.

The report stresses that sustained and well-targeted public support will remain essential, especially in a context of shifting policy priorities and tighter financial conditions. Aligning energy innovation strategies with broader goals of competitiveness and resilience is critical, particularly where technologies can strengthen domestic supply chains or reduce strategic dependencies.

Ensuring access to funding across all stages of development, as private capital becomes more selective, and fostering partnerships between research institutions, industry, and financial stakeholders will be key to maintaining progress.While priorities may change over time, the report concludes that the case for strategic and sustained support for energy innovation remains strong. Energy technologies are becoming foundational to modern economies, and evidence shows that consistent investment can deliver transformative economic, environmental, and security benefits over decades.