Solar power is set to become the world's largest energy source by 2035, driven almost entirely by economics rather than climate policy—a milestone that masks a troubling reality: artificial intelligence and data centers will lock in decades of continued fossil fuel dependence, according to a new BloombergNEF report.
The shift represents a historic energy transition, but one whose benefits will be unevenly distributed. While solar's plummeting costs make it the clear economic winner, the explosive growth of AI infrastructure threatens to undermine climate progress and concentrate energy demand—and thus energy policy influence—among a handful of technology corporations.
The Solar Victory—And Its Limits
Solar is "winning the race," according to Matthias Kimmel, head of energy economics at BloombergNEF. The technology has become too cheap to ignore, with prices expected to drop another 30% by 2035, outcompeting coal and natural gas on price alone. By 2050, solar panels are expected to generate more than twice as much electricity as natural gas.
This economic dominance reflects decades of sustained investment and industrial policy. China's strategic subsidization of solar manufacturers and the resulting mass production have driven costs down at a pace faster than historical precedent. As Kimmel noted, "costs fall with every doubling of installed capacity," adding that "in the case of solar, it has gone even faster than that."
The transition is already reshaping energy markets globally. Pakistan added 25 gigawatts of solar power in the fourth year following Russia's invasion of Ukraine, after natural gas prices spiked. The technology's abundance is also spurring innovation in energy storage: in Spain and Italy, standalone solar farms are no longer profitable due to daytime price collapse, prompting developers to build hybrid plants that pair solar with batteries to capture higher evening prices.
The Data Center Problem
Yet the report reveals a structural challenge that economic forces alone cannot solve: AI and data center expansion will ensure that fossil fuels remain central to global energy infrastructure through 2050.
BloombergNEF expects data centers to drive demand for 1 terawatt of utility-scale solar capacity, but also for 370 gigawatts of natural gas and 110 gigawatts of coal. Because gas and coal plants can operate continuously, these fossil fuels are expected to provide 51% of incremental generation for data centers by 2050—meaning that even as solar dominates the overall energy mix, the fastest-growing sector will remain dependent on carbon-intensive power.
This creates a critical accountability gap: tech companies and data center developers will have "an outsized influence over which energy sources remain viable by mid-century," according to the report. These corporations will effectively shape climate outcomes through their infrastructure choices, yet operate in a regulatory environment designed for traditional utilities, not for entities commanding such enormous energy demand.
Competition and Alternatives
The report notes that other technologies are competing for the data center market. Google's recent investment of $1 billion in 100-hour batteries from Form Energy signals corporate interest in long-duration storage. Geothermal and nuclear power have also attracted attention following recent IPOs for Fervo Energy and X-energy.
Grid-scale battery deployment is accelerating rapidly. Last year, 112 gigawatts of grid-scale batteries were installed worldwide. By 2035, BloombergNEF expects that figure to nearly triple. Companies from Redwood Materials to Ford have launched energy storage businesses to capitalize on the trend.
However, the report's forecasts remain contingent on policy choices. Under an economic transition scenario driven primarily by market forces, every country would reduce reliance on foreign energy imports. Under a net-zero regulatory scenario, every country could virtually eliminate energy import dependence. Kimmel stated, "The transition, which in many ways is cost efficient, is actually good for energy independence."
Why This Matters:
The energy transition is proceeding faster than many expected, but not uniformly. While solar's economic victory demonstrates that clean energy can compete without permanent subsidies, the continued fossil fuel demand from data centers reveals a structural problem: market forces alone will not decarbonize sectors controlled by concentrated corporate power. The report suggests that without stronger regulatory frameworks governing data center energy sourcing, the climate benefits of solar dominance could be substantially offset by AI infrastructure locked into carbon-intensive power for decades. The outcome depends on whether democratic institutions can establish binding standards for corporate energy procurement before these decisions become locked into infrastructure. The disparity between what's economically possible (near-total decarbonization) and what markets alone will deliver (51% fossil fuels for data centers) underscores why energy policy cannot be left to corporate choice.