Énergie
Solar Rising, Grid Struggling: J.P. Morgan’s 2025 Energy Outlook
Looking At The Whole Picture
Every year, J.P. Morgan publishes its Annual Energy Paper, with the 15th edition released in March 2025 titled “Heliocentrism“. It analyzes the US and global energy landscape and discusses extensively the status of the energy transition.
As a major investment bank and a trusted advisor to investors, it can be expected that this report is going to shape the investing community’s views on the energy sector.
A comprehensive overview of the report is needed, as cherry-picking data can lead to both biased arguments claiming renewables are taking over our energy system or that the energy transition is stalling, depending on one’s preference.
The overall picture is more complex, with a clear growth of solar energy as the future of energy, but also significant limits to all-solar-powered economies for decades to come.
Solar Dominance
Maybe the most important data point discussed in this report is how rapid is the rise in solar electricity generation. Not only has the growth rate in total capacity strongly accelerated in 2023, but almost 4/5th of the new power generation installed is now solar energy.
Source: J.P. Morgan
This also comes in total contradiction to the systematically wrong forecast of the IEA (International Energy Agency), which can honestly put into question the relevance of what was once a respected organization.
Source: J.P. Morgan
This also demonstrates that when we talk of a rapid rise in “solar+wind” power capacity, or renewables including hydropower, we are actually mostly talking of solar growth alone, catching quickly to the early head start of wind power.
Source: J.P. Morgan
Electrification and decarbonization are global, but progress is unequal depending on the regions, with Europe and China leading, while the USA and Asia, excluding China, lag behind.
Source: J.P. Morgan
Solar Limitations
This picture of solar energy dominance should not make investors ignore a few caveats.
The first one is that solar energy capacity factors are 15%-20%, meaning that actual energy production is lower than nominal capacity numbers.
The other important fact is that electricity production covers only 1/3rd of total energy consumption, with cooling, heating, transportation, and industrial production still massively relying on fossil fuels. So while solar energy is rising quickly as a percentage of total electricity production, it is only getting started as a percentage of total energy consumption.
Source: J.P. Morgan
As a result, oil, gas, and coal are still the immense majority of humankind’s energy consumption. This is especially true in industrial production, where only 24% of energy is used in the form of electricity. Fossil-fuel-hungry production of chemicals (including ammonia), steel, and cement represents 62% of the sector’s energy consumption.
Source: J.P. Morgan
This is why it is so important for new technologies to help electrify industrial production, for example, making cement production carbon-negative, or using green energy for iron ore refining.
“Until an energy use is electrified, it’s hard to decarbonize it using green grid electrons. And while grid decarbonization is continuing at a steady pace, the US has made little progress in increasing the electricity share of final energy consumption”.
However, electricity still needs to drop in prices, or carbon taxes to increase the cost of gas, for it to be a truly competitive option against fossil fuels, especially when accounting for the capital costs of retrofitting existing foundries and factories for electrification.
Source: J.P. Morgan
Misleading Narratives
Solar Is Not There Yet
J.P. Morgan analysts also rightfully lambasted misleading claims made about the energy transition. For example, when claiming that occasional moments where renewables cover most of the energy demand are representative of the overall year.
Source: J.P. Morgan
“Renewables plus storage met 75%+ of the load in California, but only in 26% of all hours in the year. So, while renewables do meet substantial shares of the load in California from time to time, in most hours of the year, California’s power demand is still highly reliant on fossil fuels, nuclear power, and electricity imports.”
At the core, this is a problem of all renewables, as their production is inherently intermittent. So claims made on the topic are indeed outright misleading and dishonest.
What about Stanford’s Mark Jacobson and his claim on LinkedIn that in California, “wind-water-solar electricity exceeded 100% of demand for a record 98 out of 116 days” from March to June 2024?
Jacobson includes in his count of 98 days any day when wind-water-solar accounted for 100% of demand for as little as 5 minutes (!!!) during that day.”
Batteries & Power Reserve
The analysts are also skeptical that the current scale of battery installation can be enough, even with another 38 GW by 2027 on top of 22.5 GW already in place.
To support this, they notice that grid operators like MISO (Midcontinent Independent System Operator) are warning of serious challenges to grid reliability due to increased exposure to wind/solar intermittency.
As it retires fossil fuel plants powered by coal and gas, the grid might see less and less production capacity reserves, to the point of endangering its reliability.
Source: J.P. Morgan
Alternatives like burning green hydrogen during peak demand and low solar production are also facing “cost and technological readiness issues as major constraints” according to MISO.
Grid Infrastructure
As solar generation scales up and the electrification of fossil-fuel-based consumption happens, more power transmission will be needed. This might be an issue in the US, where local and global industrial capacities are severely constraining infrastructure expansion.
For example, transformer equipment has seen delivery times extended from 4-6 weeks in 2019 to 2-3 years in 2025. And this was before supply chain disruption from trade wars and tariffs. Not helping is the fact that half of all US transformers are near the end of their useful lives and will need replacing, along with replacements in areas affected by hurricanes, floods, and wildfires.
Source: ChinaTalk
Transformers are made with grain-oriented electrical steel (GOES),2 but there is only one domestic manufacturer, who is unable to meet domestic demand. Contributing factors include the destruction of the Azovstal steel plant in Mariupol and sanctions against Russian steel producers.
Rising demand for non-oriented electrical steel, a key ingredient in EVs that comes from the same manufacturing facilities, will also increase supply tension.
