The disruption in the Strait of Hormuz has once again shown the consequences of relying on a single route or energy source. According to the International Energy Agency (IEA), investments in clean energy and electrification reduced fuel import bills in the EU, China, Japan, South Korea, India and Southeast Asia by about $260 billion in 2025. In this context, everyone now understands why diversification is necessary. The real question is why we still can’t move forward at the required pace.

The numbers bring this question into sharp focus. 2025 was a record year for renewable energy. Globally, approximately 693 gigawatts of new capacity were installed in a single year. According to the International Renewable Energy Agency’s (IRENA) "World Energy Transition Outlook 2026” report published in October, achieving the 1.5-degree-Celsius (2.7-degree-Fahrenheit) target will require adding an average of more than 1,300 gigawatts of capacity each year between 2026 and 2035. In other words, roughly half of the required pace was achieved in 2025, a record-breaking year. So what is slowing down this process?

Four obstacles

First, financing. The money needed for investment is available, but it isn’t reaching the right places. IRENA estimates the investment and spending needs for the 1.5-degree scenario between 2026 and 2050 at $256 trillion, an average of $10.3 trillion per year. The real problem lies in the distribution of investments. The bulk of investments goes to China and developed economies, while Africa and the least developed countries receive only a small share. According to the IEA, developing economies outside of China are home to two-thirds of the world’s population, but they receive less than 30% of total energy investment and approximately 20% of investment in the electricity sector. Yet Africa’s renewable capacity needs to increase approximately sevenfold by 2035 and approximately thirtyfold by 2050. Meanwhile, more than 565 million people in Sub-Saharan Africa still lack access to electricity.

Capital is also expensive in the countries mentioned above. The same solar power plant is financed at very different costs depending on the country where it is built. According to the IEA, the cost of capital required for a large-scale solar project is two to three times higher in some major emerging economies compared to developed countries and China. Since there are no fuel costs in renewable energy, the majority of the funds are spent during the construction of the plant and are often financed through debt. If interest rates are high, electricity becomes expensive as well. Furthermore, a significant portion of the existing risk stems from the energy sector’s own conditions: it may be uncertain whether the party purchasing the generated electricity will pay, permits can take a long time to obtain, and regulations can change frequently. Since revenues in these countries are denominated in local currency while debt is often denominated in dollars, exchange rate risk is added to the costs.

Second is the dependencies created by diversification itself. The risk of having a single supplier for fossil fuels reappears here in the raw materials for batteries and electric systems. According to the IEA’s Global Critical Minerals Outlook 2026 report, the average share of the country with the largest refining capacity, excluding rare earths, rose from 70% in 2023 to 72% in 2025. The number of mineral products subject to China’s export controls has tripled since 2023. The export quota imposed by the Democratic Republic of the Congo, which accounts for approximately 76% of global cobalt production, is also creating a new supply shortage for cobalt. Moreover, investment trends are moving in the opposite direction. Investment in critical minerals has declined by 9% in 2025, while investment in battery metals has fallen by more than 20%.

The third obstacle is the measures taken in response to crises. The first solution that comes to mind during a crisis is to turn to the most readily available resource. According to the IEA, investment in coal supply will reach $180 billion this year, marking the highest level since 2012. Some Asian countries are considering keeping their existing coal-fired power plants in operation for longer. Behind this lies a genuine dependency. According to Ember, in 2024, approximately 84% of the crude oil and 83% of the liquefied natural gas (LNG) passing through the Strait of Hormuz were destined for Asia. In Singapore, which generates 95% of its electricity from natural gas, the cost of gas-fired electricity can reach approximately $260 per megawatt-hour at current LNG prices. This is what IRENA refers to as "energy addition”: new sources are added alongside existing ones rather than replacing them.

Fourth, households and the general public. Price shocks do not affect everyone the same way. According to Ember, if high prices persist, wealthy consumers may gain an advantage when purchasing energy at spot market prices. This could widen the gap, both between rich and poor countries and within each country between wealthy and low-income households, in terms of access to energy and the ability to pay bills. The transition itself may also place a burden on families in the short term. According to IRENA, accelerating the transition benefits the economy in the long term: total gains through 2050 amount to approximately $32 trillion compared to current plans.

However, these gains do not trickle down to families in the early years. Households’ inflation-adjusted income remains lower than it would be under current plans until around 2035. It then recovers rapidly and, by 2050, exceeds current plans by approximately 1.6%. So there are gains, but families don’t feel them right away. According to IRENA, the most vulnerable period in terms of public support is between 2025 and 2035. When and by whom the costs are borne will determine whether the public continues to support this transition.

How to overcome obstacles

The four obstacles listed above – namely, expensive financing, new supply dependencies, the "coal reflex” during crises, and the burden on households – are not insurmountable. Concrete tools are available for each one. The key is to correctly identify which tool works where.

The solution for financing lies in risk-sharing. According to a previous IEA study, developing economies outside of China will need between $80 billion and $100 billion annually in concessional financing, that is, low-interest or guaranteed public funds, by the early 2030s. The purpose of this funding is to attract private capital, as approximately 60% of clean energy financing must come from the private sector. The tools available are clear. Guarantees prevent investors from incurring losses if the buyer fails to make payments. To mitigate currency risk, local-currency bond markets and currency swaps come into play. As a third tool, platforms that bundle small projects into a single package offer investors a larger and more reliable portfolio. In addition, there are areas where governments can reduce risk through their own policies. Competitive auctions and long-term power purchase agreements with reliable buyers give investors the ability to forecast their income in advance and reduce the cost of capital. Redirecting fossil fuel subsidies toward clean energy is also among the recommendations of both the IEA and IRENA in this context.

When it comes to minerals, the solution lies in acknowledging that diversification comes at a cost. The country that dominates the market for processing a particular mineral, that is, the dominant supplier, does so at the lowest cost. Setting up a refinery elsewhere can cost anywhere from 20% to over 150% more, and operating costs are also approximately 50% higher. Still, this difference is manageable.

Critical minerals account for only a small portion of a product’s total cost, such as in batteries. Therefore, processing a mineral at a higher cost raises the product’s final price only slightly. For this reason, the IEA suggests viewing the extra cost not as a loss, but as a "mineral security premium” paid to ensure uninterrupted supply.

Maintaining stockpiles is also a relatively inexpensive measure. Keeping a certain amount of the 11 highest-risk materials in storage, to be used in the event of a supply disruption, would cost countries other than the dominant supplier less than $900 million annually. This is a small figure compared to the damage that a potential supply crisis could cause.

Recycling can also be part of the solution. The rate of minerals recovered from used batteries and electronic waste is currently about 10%. The IEA says this could approach 20% by 2040.

In other words, a larger portion of the needed minerals could come from existing products rather than new mines. Government support could mitigate the risks associated with new refineries. For example, the government could cover the difference if the price of the mineral falls below a certain level. It could set a minimum price floor or guarantee to purchase the produced product in advance. This way, investors would not abandon their investments out of fear of incurring losses due to cheap imported minerals.

Relying on coal during a crisis may seem like a quick fix, but the numbers tell a different story. According to Ember’s calculations for Asia, generating the same amount of electricity costs approximately $76 with coal, $104 with natural gas, and $40 with solar plus batteries. In other words, solar is cheaper than both natural gas and coal. For this reason, Ember recommends rethinking planned new LNG investments and accelerating energy storage. The IEA, meanwhile, advocates using international support to close, repurpose, or retrofit coal-fired power plants in developing countries. In short, the crisis is a reason to accelerate, not slow down, diversification.

Protecting households is also part of the solution. Singapore is implementing a temporary price cap that kicks in if prices remain high for an extended period. Thailand has imposed a 15-day price cap on diesel fuel.

Protecting households is also part of the solution. Singapore has implemented a temporary price cap that kicks in if prices rise for an extended period. Thailand has imposed a 15-day price cap on diesel. IRENA, meanwhile, recommends that subsidies be provided not to everyone, but only to those in need; that taxes be adjusted according to income; and that price reforms be implemented in the correct order, without rushing. After all, public support is not a side issue in this transformation. It must not be forgotten that the ability for this transformation to continue over decades depends on households.

What to expect from COP31?

The obstacles and solutions we’ve outlined above directly intersect with the agenda of COP31, which began this week in Antalya. Climate finance and green industrialization are among the priorities of the COP31 presidency. These are the direct counterparts to the two major obstacles we discussed in this article: expensive capital and dependence on supply chains.

The IRENA report also points to the same conclusion: the next decade will be defined not by the announcement of new and more ambitious targets, but by the implementation of existing ones. Therefore, the most valuable contribution host country Türkiye could make in Antalya might be to shift the diversification debate from the question "how much should we do” to "how will we do it.” In other words, we will need to discuss how to make financing more affordable, how to diversify industry and supply chains, and how to fairly distribute the costs of the transition among the public.