On 17 February, the International Energy Agency (IEA) released the second edition of its State of Energy Innovation analysis. The report, which assesses recent progress and challenges in energy technology innovation across more than 40 countries, paints a contrasted picture. On the one hand, it identifies a dynamic energy innovation ecosystem, noting that one in ten patents globally relates to energy. On the other, it warns of a potential slowdown, shifting priorities and fragmentation.

In this context, the report highlights the crucial role of public support for energy innovation, which has recently propelled sectors such as floating liquefied natural gas (FLNG), lithium-ion battery research and geothermal developments. Such support continues to prove highly valuable, with economic benefits evaluated far greater than the costs. Nevertheless, global public energy R&D spending fell in 2024 compared with 2023 and is expected to decrease by a further 2% in 2025, to $55 billion. Overall, public energy R&D spending in IEA member countries represents around 0.05% of GDP.

Meanwhile, growth in private funding has also slowed, reaching just 1%, the lowest level since 2015, pandemic notwithstanding. Yet the private sector remains somewhat dynamic, with 320 new energy start-ups securing their first funding in 2025. Private energy innovation continues to face strong competition for venture capital, particularly from AI firms, and there has been a notable decline in investment in electric vehicles. However, technology areas such as carbon dioxide removal, critical minerals, geothermal energy, industrial decarbonisation and nuclear fission and fusion have grown significantly, rising from 5% of total energy VC funding ten years ago to over 30% today.

Reflecting the broad scope of energy innovation, the IEA identified 150 significant technology areas in 2025, including solid-state air conditioning, perovskite solar cells, fusion energy, sodium-ion batteries and next-generation geothermal, of which 50 benefitted from improvements in technology readiness levels. In parallel, experts’ focus has increasingly turned to energy security, cited by 80% of respondents as a top driver of energy innovation, ahead of affordability, greenhouse gas emissions and national economic performance.

The growing uncertainty and shifting priorities in energy innovation funding are particularly visible in the low-emissions hydrogen sector, where delays and cancellations have multiplied. Similar trends are evident in renewable deployment forecasts for 2030, which the IEA downgraded by 5% in 2025. The shift has been especially pronounced in the United States, where the federal energy R&D budget fell by 8% in 2025. Nevertheless, the US remains a strong energy innovation contender, benefiting from a balanced ecosystem with significant corporate and venture capital investment across multiple technology areas.

According to the report, China accounts for the majority of global growth in corporate energy R&D over the past decade, representing 60% of corporate R&D in energy supply and infrastructure. In terms of public spending, China’s investment remains comparable to Europe’s—$19 billion in 2024—but its higher rate of patenting highlights Europe’s ongoing challenges in scaling up and deploying innovations. Encouragingly, Europe has steadily increased its energy R&D spending towards 0.1% of GDP, while European start-ups accounted for 25% of global energy VC in 2025, up from 15% five years earlier. More than 40% of energy start-ups raising their first funding round were based in Europe.

Against this backdrop, the IEA, which recorded 80 new energy innovation policies introduced in 2025 and 60 initiatives under existing policies across 32 countries, calls on governments to sustain continuous policy action. It identifies three priority areas: creating synergies between competitiveness, resilience and energy technology; tailoring funding; and strengthening partnerships, networks and matchmaking to develop a robust innovation ecosystem. These recommendations match EERA’s recent work calling to recognise the role of research and innovation in fostering competitiveness, and resilience, and to create a more integrated innovation value chain.