The world's energy innovation landscape is entering a new phase shaped by energy security, industrial competitiveness and infrastructure resilience, according to the International Energy Agency's latest State of Energy Innovation report.
The second edition of the report - which will inform discussions at the 2026 IEA Energy Innovation Forum on 18 February - finds that energy technologies now represent multi-trillion dollar global markets, with the energy sector increasingly becoming an innovation powerhouse spanning batteries, transformers, turbines, motors and heat exchangers. Around one in ten patents worldwide relates to energy - more than for chemicals, pharmaceuticals or transport - underlining the sector's central role in national security, industrial strategy and economic performance.
The 2026 edition identifies over 150 major innovation highlights during the year, spanning solid-state air conditioning, perovskite solar cells, fusion energy, sodium-ion batteries and next-generation geothermal systems. These advances contributed to 50 upgrades in technology readiness levels among emerging energy technologies tracked by the IEA.
At the same time, the policy context is shifting. In a survey of experts and practitioners, energy security emerged as 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 growing emphasis on strengthening domestic technological capabilities and securing critical supply chains.
"Energy innovation has become a strategic priority for governments around the world," said IEA Executive Director Fatih Birol. "With energy security and industrial competitiveness at the top of the agenda, countries that sustain investment in research, demonstration and early deployment will be best positioned to lead the next generation of energy technologies."
The report underscores the enduring impact of public support for energy innovation. Recent examples show that early government funding laid the groundwork for floating liquefied natural gas, lithium-ion batteries and next-generation geothermal.
Energy storage has moved to the forefront of global innovation activity, highlighting its growing role in national security and power systems as the world enters the Age of Electricity. Batteries accounted for 40% of all energy patenting in 2023 - an unprecedented share for a single technology area - and the proportion is expected have risen further based on preliminary data for 2024 and 2025. China, Korea, and Japan remain leading sources of lithium-ion battery patents, with China's share rising sharply over the past decade. In solar innovation, patenting has shifted toward perovskite solar cells, which now account for over 70% of solar cell patents by material.
Comprehensive evaluations of long-running public R&D programmes indicate that economic benefits can be several times - and in some cases hundreds of times - greater than their costs, through fuel savings, lower equipment prices and stronger domestic industries.
However, funding trends are now in transition. Public energy R&D spending in 2025 was estimated at $55 billion globally, down 2% from the previous year, while corporate R&D growth eased to 1% in 2024 - slower than in any year since 2015, with the exception of 2020 when activity was disrupted by the Covid-19 pandemic. Venture capital investment in energy technology start-ups fell for the third consecutive year, to $27 billion in 2025.
The report notes that higher interest rates, macroeconomic uncertainty and strong competition from artificial intelligence ventures have weighed on energy capital flows. The share of global VC funding directed to AI rose to almost 30% in 2025, while energy's share declined.
Nevertheless, new growth areas are emerging. Funding for fusion, nuclear fission, critical minerals, geothermal, carbon dioxide removal and low-emissions industry has expanded sharply since 2021, offsetting much of the decline in electric mobility investment. The report also finds that regional approaches to energy innovation are becoming increasingly distinct. China continues to expand its footprint across corporate R&D and patenting, particularly in energy storage and industrial efficiency, with international patent applications rising sharply in recent years.
Reaching around 0.08% of GDP, Europe's public energy R&D intensity is nearing the record highs recorded in the 1980s and now exceeds that of other major advanced economies. In addition, its start-up ecosystem has become more dynamic even as patenting has softened in some major economies. The United States remains a global leader in VC activity, accounting for nearly half of energy VC in 2025, and maintains strengths across a broad range of technologies. Japan, meanwhile, remains highly specialised in batteries, while advancing in perovskite solar, hydrogen-based fuels and fusion.
Against a backdrop of shifting policy priorities and tighter financial conditions, the report stresses that sustained and well-targeted public support remains critical. Aligning energy innovation strategies with broader competitiveness and resilience goals will be essential, particularly where technologies can strengthen domestic supply chains or reduce strategic dependencies. Ensuring access to funding across all stages of development - especially as private capital becomes more selective - and reinforcing partnerships across research, industry and finance will be key to maintaining momentum.
According to the report, while priorities may shift, the case for sustained and strategic support for energy innovation remains strong. With energy innovation becoming increasingly foundational to modern economies, evidence shows it can deliver transformative economic and security benefits over decades.
The report will be presented at a livestreamed session of the 2026 IEA Energy Innovation Forum on 18 February. The Forum is taking place on the margins of the 2026 IEA Ministerial Meeting. The IEA has long supported international collaboration on energy R&D, notably through its Technology Collaboration Programme, which connects governments, industry and researchers worldwide. The IEA will also host the Mission Innovation Secretariat, supporting global efforts to accelerate innovation in advanced energy technologies.
