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The global energy transition has long been framed as a necessary shift toward sustainability, but emerging economic and geopolitical challenges suggest it may be time to rethink how we approach this transformation. While efforts to reduce carbon emissions remain a priority, new concerns about affordability and energy security are reshaping the debate, raising questions about the feasibility of current strategies.
The challenge lies in balancing long-term sustainability goals with short-term economic and political realities. The energy system operates on long investment cycles, and transitioning away from fossil fuels requires substantial infrastructure changes, capital investment, and regulatory support. The momentum of legacy energy systems, built over decades, cannot be reversed overnight.
The reality of the energy transition
The energy transition was supposed to be a story of innovation and falling costs. For years, the price of renewable energy plummeted, driven by economies of scale, technological breakthroughs, and globalised supply chains. But now, as governments push for on-shoring and economic nationalism, a new reality is setting in—clean energy is getting more expensive.
Steven Knell, Professor in Practice at the Centre for Global Energy and Climate Policy at SOAS University of London, doesn’t mince words when it comes to this growing dilemma. “If the energy transition is made in the UK or made in the US, it takes twice as long and costs twice as much,” he explains. “And it basically means that, even by the most optimistic projections, we fall short of our climate goals.”
Over the past decade, China has emerged as the dominant force in solar, wind, and battery manufacturing, controlling more than 75% of global production capacity for key clean energy technologies. By prioritising scale and cost efficiency, China made renewables affordable, accelerating global adoption. Now, governments in the U.S. and Europe are scrambling to reclaim market share—but at a high price. “This energy transition,” Knell argues, “was always a question of cost. And we’re now making it more expensive than it needs to be.”
The rising cost of the energy transition
One of the most significant challenges to the energy transition has been cost volatility. While the initial narrative focused on the declining cost of renewables, the post-pandemic era has seen substantial inflation in technology and infrastructure costs. The price of essential components like solar panels and wind turbines has surged due to supply chain constraints, increased raw material costs, and heightened competition for resources.
According to Knell, industry data showed an increase in solar photovoltaic (PV) commodity costs of nearly 25% from 2022 to 2023, challenging previous assumptions about the affordability of the transition. While costs have declined somewhat from the peak of the supply chain pinch, the price for select commodities and technologies remain relatively high.
Additionally, policy decisions have inadvertently driven costs higher as the increasing politicisation of energy policy has led to a surge in economic nationalism. Protectionist measures in the United States and Europe, aimed at reducing dependence on Chinese supply chains, have increased manufacturing expenses, making the transition more expensive than initially projected. That’s a challenge that’s extending across the supply chain. While the intent behind these policies—ensuring domestic job creation and energy security—is understandable, they may ultimately slow progress by limiting access to the most cost-effective technologies.
Governments across the globe are prioritising local manufacturing and supply chains, often at the expense of efficiency and cost-effectiveness. While these policies aim to bolster national energy security, they also risk fragmenting the global market and hindering the deployment of critical renewable energy technologies.
Protectionism vs. affordability: the hidden trade-offs
Such protectionist policies are driving up costs for consumers and slowing the transition. “Solar panels made in the U.S. cost 40 to 50 percent more than those imported from China,” Knell points out. “Wind turbines in Europe are already 20 to 30 percent more expensive. These price increases are being passed down the chain, which means that for everyday people, the transition is no longer as affordable as it once was.”
The irony is that many of the same governments that once championed low-cost renewables are now deliberately making them more expensive by restricting imports and subsidising inefficient domestic production. The result? Fewer projects, longer delays, and higher prices—all at a time when energy costs are already a major economic concern.
“We’re living through a moment of cost inflation,” Knell explains. “Everything is more expensive, and now policymakers are choosing to make the energy transition more expensive too. The problem is, the more costly it gets, the harder it becomes to sell to voters.”
The global south pays the price
Beyond wealthy nations, protectionist energy policies are having an even greater impact in emerging markets, where affordability is the single most important factor in energy policy.
“The fastest-growing energy demand is in the Global South,” Knell emphasises. “These countries need low-cost renewables, and right now, the cheapest way to get them is from China. But if the U.S. and Europe keep pushing for tariffs and local content rules, they make clean energy less accessible to the countries that need it most.”
For decades, fossil fuels remained dominant in developing nations because they were cheap and accessible. Renewables only began to challenge them when costs fell dramatically. Now, as global supply chains fragment, the fear is that higher prices will slow adoption and prolong fossil fuel dependence.
“The people making these policies assume that governments will keep paying, that companies will keep investing,” Knell says. “But when the cost of the transition rises, support starts to erode. You start to lose the audience.”
A losing bet on nationalism
The case for on-shoring clean energy manufacturing is often framed around energy security and job creation. But history suggests that governments often overestimate how quickly and effectively domestic industries can scale.
“Look at the U.S. solar industry,” Knell points out. “Despite billions in incentives, American-made panels still can’t compete with Chinese prices. In Europe, offshore wind projects are stalled because they’re too expensive. Governments are trying to build a new supply chain overnight, but these things take years.”
At the same time, the demand for clean energy is only growing. The world will need to double electricity production by 2050 to keep pace with electrification and decarbonisation. Slower and costlier domestic production puts that target at risk.
“This isn’t just a political problem—it’s an economic one,” Knell warns. “If we keep making energy more expensive, people will start to push back. And when that happens, the whole transition slows down.”
What’s the alternative?
Knell believes that a pragmatic approach to global supply chains is the only way to keep costs under control. Instead of outright protectionism, he argues, policymakers should focus on diversifying suppliers rather than cutting China out completely.
“The U.S. and Europe don’t need to make everything in-house,” he says. “They just need to make sure they’re not reliant on a single country. That means investing in production in places like India, Southeast Asia, and Latin America. It’s not about isolation—it’s about balance.”
At the same time, he emphasises the need for better market structures and infrastructure reform. “Right now, we’ve got offshore wind farms in the UK that aren’t even plugged into the grid,” Knell points out. “We’re paying for energy that isn’t being used. That’s a market failure, and fixing it would do more to lower costs than slapping tariffs on Chinese batteries.”
In the end, the choice is simple: a cost-effective energy transition, or a politically driven one. “The energy transition is the single most important economic shift of our lifetime,” Knell says. “We can’t afford to make it more expensive than it needs to be.”
This is the economic reality of the green transition—and a warning for policymakers betting on isolationism to secure their clean energy future. The world needs a low-cost, high-speed transition, not an expensive, protectionist one. The question now is whether politics will allow economics to do its job.
This article is also available on Forbes. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.
