Capital flow in artificial intelligence (AI) nearly tripled energy startup investments last year, totaling $84 billion, according to the International Energy Agency (IEA).
Rising costs and policy uncertainties in the energy sector deterred investors, while AI-focused projects grabbed a larger share of capital, as per the IEA’s recent World Energy Investment 2025 report.
Research and development (R&D) spending of companies showed the lowest growth since 2020, venture capital investments fell by $8 million, and high interest rates caused equity investments to attract fewer investments for innovative companies last year.
AI was the only area where growth did not slow, and it created opportunities for energy innovation, while investments in AI increased to "three times the level of energy-related venture capital (VC) funding," according to the report.
Chinese firms had the largest share of global R&D spending last year, rising from 16% to 38% over the last decade as of 2025. European companies spent the second most on R&D, accounting for 27%.
The distinctions between the Chinese public and private sectors were ambiguous, allowing for more R&D and energy spending to be coordinated, contributing to the country's competitive advantage in clean energy production chains.
In 2015, the report stated that the top 20 companies with the highest energy R&D budgets were mostly US-based and European auto, oil, and gas firms, with the exceptions of China's State Grid and PetroChina, but this trend had completely shifted as of last year.
CATL, a Chinese battery manufacturer, joined BYD, an electric vehicle (EV) manufacturer, and Tesla, an American EV company, as one of the top firms. Denso, Schneider Electric, and Robert Bosch are among the companies that supply electrification equipment.
Oil firms PetroChina, Sinopec, and Saudi Aramco remained in the top 20.
The rise of Chinese firms highlighted the growing global influence of Chinese companies in energy and their competitiveness, particularly in the clean energy sector.
Meanwhile, R&D spending on energy technologies slowed in 2024, rising only 1%, the lowest level in the last decade. The 1% growth rate, excluding the pandemic period in 2020, was the lowest on record, the report showed.
Firms in battery manufacturing, nuclear energy, renewable energy, and thermal power plant equipment decreased their R&D investments, according to the IEA.
The report stated that high costs and uncertain market conditions amid global developments dampened the appetite for long-term and risky projects, resulting in a significant drop in private sector R&D motivation at a time when the global clean energy transition needed to gain traction.
The report added that the trajectory of the energy transition depends not only on the availability of the resources but also on the direction of capital flows towards innovation.
By Humeyra Ayaz and Emir Yildirim
Anadolu Agency