The global energy system is undergoing one of the most significant transformations in modern history. Electricity currently accounts for around 20% of final energy consumption globally, but that figure is expected to approach 60% by 2050 as economies electrify and demand for power accelerates.
In this discussion, Thiemo Lang explores the key forces driving this shift. From power semiconductors and grid infrastructure to industrial automation and humanoid robotics, Thiemo highlights why the smart energy opportunity extends well beyond renewable power generation.
Global electricity demand is set to double by 2050. What are the main drivers of this shift?
The scale of the electricity transition is genuinely unprecedented and that growth is being driven by a convergence of structural forces that are simultaneously reshaping transport, industry, buildings, and technology.
The electrification of road transport alone has profound implications. By 2035, the global electric vehicle fleet is expected to displace roughly 20 million barrels of oil equivalent per day in avoided fossil fuel consumption; by 2045, that figure rises to over 40% of today's total global oil demand. The pace of commercial vehicle electrification in China, where buses are already around 80% electrified nationally and truck electrification is scaling rapidly gives a strong indication of where the rest of the world is heading.
Buildings represent another major demand driver. The transition from gas boilers to electric heat pumps across Europe and Asia will add substantially to grid load, and the electrification of industrial processes, from manufacturing to materials production, will compound that further. Looking further ahead, humanoid robotics is an emerging demand driver that is difficult to size precisely today, but one we are watching closely. We anticipate annual market growth of 80% between 2025 and 2035 and as these systems move from industrial settings into services and households, their aggregate energy requirements will become increasingly significant - eventually comparable in scale to data centres or EVs.
What makes this compelling from an investment perspective is that electricity's share of total final energy use is set to rise from around 20% today to over 57% by 2050, with 65% of total demand growth coming from entirely new end markets compared to 2020. This is not simply a substitution of one energy source for another - it is a structural expansion of the role electricity plays in the global economy.
How is AI accelerating demand for smart energy solutions in the shorter-term and what opportunities does that create?
AI is creating a step-change in energy demand that is already visible today, and the pace is only accelerating. Hyperscaler capital expenditure is approaching $800 billion in 2026 and is expected to surpass $1 trillion in 2027. The energy requirements of a data centre are roughly twice the actual power consumed for computing, once you account for grid transmission losses, power conversion inefficiencies, and the substantial cooling requirements. This is driving demand for energy-efficient electrical infrastructure, power semiconductors, and cooling systems.
The immediate bottleneck is infrastructure. Data centre operators are increasingly encountering grid connection delays, which is driving real demand for two things: more energy-efficient electrical components, particularly power semiconductors, and decentralised on-site power generation, typically a combination of gas turbines, large-scale battery storage, and renewables.
Beyond data centres, AI is catalysing an expected 40% increase in battery energy storage system deployments in 2026 alone, as grid stability requirements tighten. It is also accelerating the development of humanoid robotics, with the first major commercial deployments expected this year. As these systems become more complex and widespread, their energy efficiency will be a key determinant of economic viability, which opens another interesting avenue of investment opportunities.
A lot of people associate smart energy with renewables but your portfolio is much broader than that. How do you define you the smart energy universe?
Renewable energy generation represents only a fraction of our portfolio today. The investment universe is built around the full value chain of electrification, not just the power generation side.
We organise that universe into four investment clusters that together capture the electrification megacycle: clean power generation, energy transmission and distribution, energy conversion and storage, and energy efficiency.
Energy transmission and distribution covers grid equipment, smart meters, transformers, switchgear, and cable solutions. It reflects the enormous amount of investment required to modernise and expand global grid infrastructure.
Energy conversion and storage encompass battery systems, power semiconductors and hydrogen-related technologies.
Energy efficiency is where we invest in companies that help electricity be used as productively as possible, from the power semiconductors inside data centres and industrial machinery, to cooling systems, to the electrification of buildings and transport. We regard energy efficiency as arguably the most important lever in the energy transition. Generating clean power is necessary, but ensuring it is used and managed effectively is equally critical to meeting growing electricity demand.
The Fund is predominantly invested in the leading solution providers enabling efficient electrification, rather than in utilities or traditional energy producers. We are also expanding into adjacent areas such as the supply chain for humanoid robotics, where energy-efficient solutions are increasingly relevant. The Fund's proprietary universe currently spans approximately 250 companies and it evolves as new structural growth opportunities emerge.
As a thematic fund, how do you go about constructing a diverse portfolio?
Within each of the four investment clusters, we invest across multiple subsectors and geographies to maintain diversification and avoid overexposure to any single technology or regulatory risk. Portfolio construction is driven by bottom-up fundamental research, with sustainability analysis fully integrated into the investment process.
This approach allows the portfolio to capture multiple points of value creation along the energy system, from upstream electricity infrastructure to downstream efficiency gains inside data centres, factories and buildings, rather than relying on any single technology or policy outcome. Position sizing reflects conviction, liquidity and risk contribution, ensuring that no single theme or stock dominates overall portfolio outcomes.
The closure of the Strait of Hormuz and the Ukraine war have sharpened the focus on energy security and independence. How are geopolitics structurally shifting the energy investment case?
The closure of the Strait of Hormuz and its impact on oil and gas prices have directed the world’s attention to the dangers of reliance on fossil fuels. This has led to an intensified rollout of nationwide electrification initiatives across many countries, designed to better shield their economies from future oil price shocks.
The EU has introduced an ‘AccelerateEU’ plan to speed up the clean energy transition, aiming to keep it affordable for consumers and businesses while phasing out fossil fuels from electricity production. Other oil import-dependent countries, such as South Korea, have also announced aggressive plans to accelerate renewable deployment, aiming to double the share of renewables in their power mix to 20% by 2030, while progressively shutting down their coal-fired power plants by 2040 and overhauling their electrical grid.
The extent to which the geopolitical impasse between the US/Israel and Iran – and its upward pressure on oil prices – will lead to lasting global economic harm remains uncertain.
Regardless of how the Middle East conflict concludes, the global move toward clean electrification will only speed up, reinforcing the strong fundamental outlook for the Polar Capital Smart Energy Fund’s core holdings.
