The hard stuff 2025: Taking stock of progress on the physical challenges of the energy transition

At a glance

• The physical transformation needed for the energy transition is advancing, but at about half the pace required to meet global commitments. Less than 15 percent of the low-emissions technologies required to meet Paris-aligned targets by 2050 have been deployed—a few percentage points higher than two years ago.
• Deployment advanced in three of the seven parts of the energy system but stalled elsewhere. Momentum is strongest in low-emissions power, electrifying transportation, and critical mineral supplies. Progress is mostly stuck in carbon capture, hydrogen fuels, and heavy industry.
• China accounts for about two-thirds of additional solar and wind power and electric vehicle sales since 2022. Emerging economies have stepped up, but the pace of deployment in the United States and the European Union slowed in 2025 in some areas.
• The outlook has worsened for the hardest physical challenges of the transition. Advancing the transition will require tackling 25 physical challenges. There are bright spots such as improved range for electric vehicles. But progress on the most demanding challenges, including those related to hydrogen and decarbonizing steel, has been hampered by project cancellations, slow technological progress, and policy shifts.
• Understanding the physical realities of the energy transition is more important than ever. This lens clarifies the scale of the task ahead, helping to set priorities amid uneven progress and to pinpoint emerging areas of opportunity and bottlenecks that demand new approaches.

Today’s energy system, encompassing the production and consumption of energy resources, is high performing, deeply enmeshed in the global economy, and has developed over centuries. But for all its advantages, today’s system also has flaws, most notably the fact that it generates more than 85 percent of global emissions of carbon dioxide (CO₂).¹McKinsey EMIT database.

Stakeholders around the world are engaged in the task of transforming the system to reduce its emissions. There is growing recognition that this must be done in a way that is affordable, reliable, enables competitiveness, and, in many places in the world, while increasing overall access to energy.²“An affordable, reliable, competitive path to net zero,” McKinsey Sustainability, November 2023. More recently, a shifting policy landscape, geopolitical tensions, and surging energy demand from data centers have added further complexity.

In a digital age, we have become accustomed to lightning-fast transformations. However, the energy transition, particularly one that enables these broader objectives, is a challenging undertaking and requires a vast and complex physical transformation.

In 2024, the McKinsey Global Institute report The hard stuff: Navigating the physical realities of the energy transition took stock of where the world stands on this physical transformation. We found that, despite meaningful progress, the transition was in its early stages, with just about 10 percent of the required deployment of low-emissions technologies by 2050 achieved in most areas.³“The hard stuff: Navigating the physical realities of the energy transition,” McKinsey Global Institute, August 2024. The research identified 25 physical challenges that must be overcome for the transition to succeed—from developing and scaling new low-emissions technologies to building the supply chains and infrastructure they depend on.

We grouped the 25 physical challenges into three levels of difficulty. Level 1 challenges require progress on deploying established technologies and face the fewest physical hurdles. Level 2 challenges require accelerating deployment of known technologies, along with scaling the associated infrastructure and inputs. In Level 3 challenges—we call these 12 the “demanding dozen”—gaps in technological performance remain (often in demanding use cases), large interdependencies exist, and the transformation is just beginning.

In this research, we update our assessment of the energy transition with another reality check on where things stand, where progress has been made, and the task ahead. We find that an estimated 13.5 percent of the deployment to meet Paris-aligned goals has now been done. Many factors have driven progress on deployment across regions where it has occurred—emissions reduction goals, but also favorable economics, and the broader imperatives that we have noted.⁴For a broader discussion of energy transition scenarios and how the imperatives of emissions reduction, affordability, reliability, and competitiveness could play out, see also “Global energy perspective 2025,” McKinsey, October 2025. Nevertheless, progress has proceeded at roughly half the pace that would have been required to meet targets aligned with the 2015 Paris Agreement, with only a few percentage points of headway in two years.

Against this backdrop, we find a tale of many transitions (Exhibit 1). Deployment has taken place, but it has largely involved only critical minerals, low-emissions power, and electric vehicles (EVs). There has been little movement in hydrogen, carbon capture, or low-emissions technologies for making steel and other key materials.

China accounted for about two-thirds of recent deployment in EVs and in solar and wind power.⁵China is defined as the collective economies of Mainland China, Hong Kong, and Macao, unless otherwise noted. In the first half of 2025, emerging economies (excluding China) installed more new solar and wind capacity than either the European Union (EU) or the United States, where momentum is slowing.

And what of progress on the 25 challenges that will need to be tackled for the energy transition to succeed? The picture is mixed. Many of the easier challenges are getting solved, but we remain stuck on the most demanding ones, particularly related to improving performance and affordability.

Our aim with this research is to help business leaders and policymakers identify where there is opportunity from the energy transition and where fresh ideas are needed.

An hexagon chart titled "The 25 physical challenges identified in 2024" is divided into seven sections: Power, Mobility, Industry, Buildings, Raw materials, Hydrogen and other energy carriers, and Carbon and energy reduction. The chart presents 25 physical challenges that must be addressed for a successful energy transition, categorized by domain. The challenges are grouped into three levels, according to the level of difficulty of addressing them. Level 1 challenges require deploying established technologies that face the least physical hurdles. Level 2 challenges require deploying known technologies to accelerate and scale them. Level 3 challenges occur when technological performance gaps meet demanding use cases and the transformation is just beginning.

The chart indicates the 2024-25 development trend as mostly negative, neutral, or mostly positive. Focusing on the key takeaways, the diagram highlights that most of the challenges are categorized as Level 2 or Level 3, with the majority having a mostly negative development trend. Specifically, the Power section includes challenges such as "Managing renewables variability" (Level 2, mostly negative) and "Scaling emerging power systems" (Level 2, mostly negative), while the Mobility section includes "Driving BEVs beyond breakeven" (Level 2, mostly positive) and "Going the distance on BEV range" (Level 2, neutral). The Industry section has challenges like "Furnacing low-emissions steel" (Level 3, neutral) and "Cementing change for construction" (Level 3, mostly positive). The key takeaways are that the most severe challenges are in the Industry and Hydrogen and other energy carriers sections, with several Level 3 challenges, and that the development trend is mostly negative for many of the challenges, indicating a need for significant progress to address these physical challenges.

The transition is moving at half the pace needed to meet Paris-aligned targets

The energy transition is moving forward, but unevenly. Deployment of solar panels, batteries, and electric cars has been accelerating, for example. Similarly, the supply of critical minerals is rising quickly as new facilities come online, so much so that there are worries of oversupply in the short term.⁶Global critical minerals outlook 2025, International Energy Agency (IEA), May 2025. But progress in other areas—notably, decarbonizing heavy industries, scaling hydrogen, and capturing carbon—is largely stuck. Of the seven domains of the energy system we track, three are progressing and accelerating, but four are not.

By the end of 2024, about 13.5 percent of low-emissions technologies needed to meet Paris-aligned 2050 targets across the seven domains we study had been deployed on average.⁷Based on the simple average of the deployment percentage of each domain. The seven domains are power, three large energy-consuming sectors (mobility, buildings, and industry), and three enabling domains (raw materials, hydrogen and other energy carriers, and carbon and energy reduction). This is about three percentage points of progress in two years. This pace is roughly half of what would be required to meet Paris-aligned targets. Six percentage points on deployment in the past two years would have been in line with such targets (Exhibit 2).

A chart illustrates the deployment of low-emissions technologies in 2022 and 2024, comparing actual deployment with the "cruising speed" required to meet 2050 targets. The chart shows that most sectors are not on track to meet their 2050 targets, with the average pace of deployment being 13.5% compared to the required 17% cruising speed. The sectors listed include Power, Mobility, Industry, Buildings, Raw materials, Hydrogen and energy carriers, and Carbon and energy reduction. The chart highlights that some sectors, such as Raw materials, are already past their 2024 target, while others, like Hydrogen and energy carriers and Carbon and energy reduction, are significantly behind, with deployment levels far below the required cruising speed. The key takeaways from the chart are that the energy transition is advancing at half the required pace, with some sectors making progress while others lag behind, and that significant acceleration is needed to meet the 2050 targets.

We also analyze how deployment is progressing in each domain by measuring it against a “cruising speed.” By this, we mean a hypothetical constant speed of required annual deployment that is consistent with keeping global warming well below 2°C. While recognizing that progress may not be linear, this approach is a useful way to calibrate how we are going (for more on our approach, see sidebar “Measuring progress”).⁸The deployment calculation assumes a linear share of deployment every year from 2022 for each domain in order to reach 100 percent of required deployment by 2050. For details on what deployment would be required for each domain (for example, how many electric vehicles on the road) by 2050, see “The hard stuff: Navigating the physical realities of the energy transition,” McKinsey Global Institute, August 2024. Averaged across the domains, this corresponds to roughly three percentage points of additional deployment per year, or six percentage points from 2022 to 2024.

Among the domains, raw materials is the only one where progress is outstripping cruising speed (Exhibit 3). Supply of critical minerals has been growing, especially in Africa, China, and Indonesia. Higher investment and an acceleration in the time it takes to bring projects online have put critical minerals on a trajectory that can sustain rapid growth in solar, batteries, and EVs.⁹Even within critical minerals, there is nuance on progress. First, looking ahead, minerals such as cobalt, lithium, and nickel may face slowdowns in new additions in the near term, given that supply growth has been fast, but demand has progressed slower than expected. Second, even if global levels have grown, focus on regional self-sufficiency is increasing as countries try to reduce supply chain risks and ensure enough supply for domestic industries. See Global critical minerals outlook 2025, IEA, May 2025.

Power is also in high gear. Between 2022 and 2024, annual additions of solar, wind, and other low-emissions generation doubled to 600 gigawatts, almost as much as the combined power grids of India and Brazil.¹⁰The analysis considers net capacity additions for data availability reasons. Momentum on capacity additions further strengthened in early 2025, with wind and solar collectively up more than 60 percent year on year. The vast majority of these additions were of solar capacity. To put this into perspective, more solar capacity has been added since 2022 than in all previous years.¹¹Renewable capacity statistics 2025, © International Renewable Energy Agency (IRENA), 2025. If the pace holds, global capacity additions could reach a cruising speed of about 1,000 gigawatts of new low-emissions power annually before 2030.

Mobility is another bright spot. By mid-2025, about one in four passenger cars sold worldwide was electric. Global sales of battery electric and plug-in hybrid cars reached 17 million in 2024, up 70 percent from 2022, and momentum carried into 2025. Still, a reality check is in order: Volumes would need to more than triple, to around 60 million a year, for this domain to reach cruising speed.¹²Electric passenger cars include battery electric vehicles (BEVs), plug-in hybrid vehicles (PHEVs), and range-extended electric vehicles (REEVs). See Global and EU auto industry: First half 2025, European Automobile Manufacturers’ Association (ACEA), September 2025.

In the other domains—buildings, industry, hydrogen, and carbon management—the story is far less encouraging. Although sales of heat pumps are above prepandemic levels, the surge in deployment of heat pumps after Europe’s 2022 gas price shock has receded.¹³Global energy review 2025, IEA, March 2025; and Pump it down: Why heat pump sales dropped in 2024—a country-by-country breakdown, European Heat Pump Association, March 2025. In the other three domains, deployment remains negligible.

Even in the accelerating domains of power, mobility, and raw materials, it is certainly too soon to declare victory on their ability to reach cruising speed. There are two important caveats. First, so far, China has driven the lion’s share of progress. If these domains are to keep growing and reach their cruising speed, progress will have to be more global. Second, as we discussed in our 2024 report, as deployment advances, it can become harder. For example, as more renewables are introduced into power generation, the system can become more volatile.

The next two chapters examine precisely these two aspects: regional differences and the physical challenges that need to be tackled for the energy transition to succeed.

A set of line charts compares the annual capacity additions in 2022 and 2024 for various domains, including raw materials, power, mobility, industry, buildings, hydrogen and energy carriers, and carbon and energy reduction. The first section, "Domains at or above cruising speed," shows that raw materials have actual annual additions exceeding the required annual adds to maintain cruising speed. They have increased from 1.4x to 1.8x. Two domains are accelerating deployment, but are still below cruising speed: power has risen from 0.3 TW to 0.6 TW, and mobility has grown from 10 million to 17 million electric vehicle sales. In contrast, the bottom section, "Domains with stagnant or decelerating deployment," reveals that industry, buildings, hydrogen and energy carriers, and carbon and energy reduction are not meeting their required annual adds, with industry remaining at approximately 0 Mt, buildings decreasing from 111 GW to 108 GW, hydrogen and energy carriers increasing from 0.02 Mt to 0.05 Mt, and carbon and energy reduction rising from 1.6 Mt to 2.5 Mt.

China accounts for two-thirds of deployment, but emerging economies are stepping up

The geography of deployment in the energy transition is also not even and is shifting. China sits at the front, emerging economies are moving faster, and deployment in advanced economies is slowing down in some areas. In the domains that are accelerating, notably power and mobility, China has been responsible for around two-thirds of deployment in recent years (Exhibit 4).

A pair of line charts compares the solar and wind generation capacity additions and EV sales across selected world regions from 2022 to the first half of 2025. The left chart shows that China's share of solar and wind generation capacity additions increased from around 46% in 2022 to approximately 74% in the first half of 2025, a 28 percentage point increase. In contrast, the US, EU-27, and other advanced economies saw declines of 5, 10, and 7 percentage points, respectively, while emerging markets (excluding China) experienced a 7 percentage point decrease. The right chart illustrates that China's EV sales share rose from around 60% in 2022 to about 65% in the first half of 2025, a 5 percentage point increase. Conversely, the US and other advanced economies witnessed declines of 2 percentage points each. EU-27 saw a 5 percentage point decrease, and emerging markets (excluding China) saw a 5 percentage points increase.

China is playing the largest role globally in deploying low-emissions technologies

China is the world’s largest emitter of CO₂ and has also accounted for most increases in emissions since 2022.¹⁴Global energy review 2025, IEA, March 2025; and CO₂ emissions in 2023, IEA, March 2024. Fossil fuels provide about 87 percent of China’s energy supply, and its electricity grid is still heavily reliant on coal and other fossil fuels for more than 60 percent of generation.¹⁵China, IEA, accessed October 2025.

Nonetheless, China also accounts for the most progress in the deployment of low-emissions technologies. Since 2022, China has delivered nearly two-thirds of all new global capacity of solar and wind power. In the first half of 2025, this figure reached three-quarters. This boom now gives China almost a quarter of the low-emissions power needed to meet its share of 2050 deployment targets—nearly double the global average.

China’s role in mobility is just as notable. China accounts for six out of ten passenger EVs and nine out of every ten electric trucks on the road. In the first half of 2025, passenger EVs sold in China accounted for almost 65 percent of global sales. China has already reached 19 percent of the EV deployment needed by mid-century, compared with just 3 percent elsewhere.¹⁶Across all vehicle types. See Global EV outlook 2025, IEA, May 2025.

Momentum in the United States and Europe slowed in 2025

In 2024, the United States added about 40 gigawatts of solar and wind capacity, a 60 percent jump from 2022 additions. But in the first half of 2025, new additions were flat compared with the same period in the previous years. EV sales also hit a plateau after years of rapid growth.¹⁷EV sales in the United States were flat in the first half of 2025 versus the first half of 2024. In the third quarter of 2025, sales spiked, driven by consumers anticipating the end of subsidies in September 2025. See Kyle Stock, “Electric vehicles make up 11 percent of US car sales,” Bloomberg, October 16, 2025.

In Europe, deployment is also advancing at a slower pace in some areas. The EU added about 70 gigawatts of solar and wind in 2024—a 40 percent increase relative to 2022—but as in the United States, there hasn’t been any year-on-year growth in 2025. By contrast, EV adoption continued to climb, with passenger EV sales up more than 20 percent in the first half of 2025, compared with a year earlier.¹⁸McKinsey Center for Future Mobility.

Nevertheless, progress on deployment can be found within each of these regions. For instance, in the United States, some states moved ahead faster. While installations of solar power in the United States overall were up by less than 5 percent in the first six months of 2025, compared with a year earlier, several states, including Arizona, Georgia, Ohio, and Texas, grew installations by 15 to 80 percent.¹⁹Utility-scale solar capacity only. See 860 Survey Data, EIA, September 2025. A similar picture played out in the EU, where Spain and France increased the solar and wind capacity installed by around 35 and 25 percent, respectively.²⁰Renewable capacity statistics 2025, © IRENA, accessed October 2025.

Emerging economies stepped up deployment

Perhaps the most striking development has been the increased role of deployment of low-emissions technologies in emerging economies. Since 2022, the additions of solar and wind power have grown faster than in the United States or the EU. In fact, in the first six months of 2025, emerging economies installed an estimated 30 gigawatts, similar to the EU. India alone added more than 20 gigawatts—more solar and wind power than the United States during that period.

Much of this momentum has been fueled by Chinese exports. Solar exports to emerging economies doubled from 2022 to 2024, overtaking those to high-income economies.²¹“China Briefing 3 April 2025: Solar exports; Carbon market expansion; Leaders’ climate commitments,” Carbon Brief, April 3, 2025. Brazil, India, Pakistan, and Saudi Arabia have emerged as leading importers while demand across Africa has also surged.²²World energy investment 2025, IEA, June 2025; and “Guest post: Saudi Arabia’s surprisingly large imports of solar panels from China,” Carbon Brief, March 31, 2025. The growth of distributed generation (for example, solar panels installed on the rooftops of people’s homes) is a big driver, helping extend access in markets where central grid expansion is slower.²³World energy investment 2024, IEA, June 2025.

EV adoption in emerging markets is also accelerating. Between 2022 and 2024, their share of global EV car sales almost doubled, from about 3 percent to 5 percent. In the first half of 2025, the number increased to 7 percent—roughly equal to the US total. The growth has been striking in economies like Brazil, where sales jumped from about 20,000 in 2022 to more than 120,000 in 2024, and in Southeast Asian countries, where sales grew from around 40,000 to more than 200,000 in the same period, a fivefold rise.²⁴Global EV outlook 2025: Expanding sales in diverse markets, IEA, July 2025.

The hardest stuff may be getting harder

While progress has been achieved in deploying low-emissions technologies, the transition remains in its early stages, and progress is far from even. Achieving the remainder of the energy transition will require addressing 25 physical challenges, as outlined in our 2024 report. Examples of physical challenges are managing power systems with a large share of variable renewables, addressing range and payload challenges in electric trucks, and finding alternative heat sources, feedstocks, and processes for producing industrial materials.

In 2024–25, we find that many of the (relatively) easy physical challenges are being solved, but the hardest ones remain broadly stuck. Since 2022, almost no progress has been made on the demanding dozen. However, about half of energy-related emissions depend on tackling these challenges (Exhibit 5).

A chart illustrates the number of challenges by level and the 2024-25 trend for various energy-related issues. The chart is divided into three levels and three trend categories: mostly negative, neutral, and mostly positive. Level 1 has one challenge with a neutral trend, "Facing the cold with heat pumps," and two challenges with a mostly positive trend, "Driving BEVs beyond breakeven" and "Going the distance on BEV range." Level 2 has one challenge with a mostly negative trend, "Connecting through grid expansion," five challenges with a neutral trend, including "Flexing power demand" and "Securing land for renewables," and four challenges with a mostly positive trend, such as "Navigating nuclear and other clean firm energy" and "Charging up EVs." Level 3 has five challenges with a mostly negative trend, including "Refueling aviation and shipping" and "Synthesizing low-emissions ammonia," five challenges with a neutral trend, including "Managing renewables variability" and "Capturing point-source carbon," and two challenges with a mostly positive trend, "Loading up electric trucks" and "Cementing change for construction." Overall, level 3 challenges face the strongest headwinds.

Easier challenges are being solved

In this update, we found that the 13 challenges previously categorized as Level 1 and 2 remained in those categories. But many of them continue to experience forward momentum. There has been progress in the form of continued technological improvement and removal of bottlenecks to help with scaling in six of them since our 2024 report.

Most progress was in electrification-related areas and improvements in underlying technologies. Batteries are a prime example. Their energy density has improved 10 to 20 percent across different chemistries, which has extended the range of EVs (challenge 8).²⁵McKinsey Battery Insights. Furthermore, the increased use of chemistries such as lithium iron phosphate (LFP) has led to the reduction in both emissions from manufacturing and the cost of manufacturing EVs, improving the breakeven distance of EVs in comparison with internal combustion engine (ICE) vehicles in terms of their carbon (and cost) savings (challenge 7).²⁶Global EV outlook 2025, IEA, May 2025.

Having sufficient clean firm power as a complement to variable renewables (challenge 6) has also progressed. While deployment of clean firm power has not advanced meaningfully since 2022, new technologies promise to create new options even if they are a few years away from mass commercialization. Geothermal drilling times have fallen by about 80 percent; pilots for enhanced geothermal systems have launched in the United States; and a few small modular reactors (SMRs) are actively under construction, including in Argentina, China, Russia, and the United States, with more than 30 in the design stage.²⁷“Fervo Energy drills 15,000-FT, 500°F geothermal well pushing the envelope for EGS deployment,” FERVO Energy press release, June 10, 2025; “Fervo Energy secures $206 million in new financing to accelerate Cape Station development,” FERVO Energy, June 11, 2025; The state of energy innovation, IEA, 2025; and Small modular reactors: Advances in SMR developments 2024, International Conference on Small Modular Reactors and their Applications, International Atomic Energy Agency, 2024.

That is the good news, but of the comparatively easy Level 1 and 2 challenges, there are still six where progress has, on balance, been neutral, often with both positive and negative developments.

And in one case, the negatives outweighed the positives. The grid is a growing bottleneck (challenge 5). Supply chain constraints have pushed transformer and cable prices up by about a third since 2022, while delivery times have doubled to two or three years.²⁸Building the future transmission grid: Strategies to navigate supply chain challenges, IEA, February 2025. At the same time, the IEA has estimated that 1,650 gigawatts of solar and wind capacity globally were awaiting connection in 2024, due to grid investment and permitting delays. That is equivalent to six times Germany’s current generation capacity.²⁹World energy investment 2025, IEA, June 2025. Expanding the grid is critical to the entire transition to, for instance, support the connection of new low-emissions power sources, integrate storage, and enable EV charging.

Overall, policy has had a mixed impact on the pace of the transition. In the case of Level 1 and Level 2 challenges, policy measures did offer some tailwinds. One example is reforms to nuclear permitting that streamline approvals for early-stage projects, including advanced reactor designs (challenge 6).³⁰From the Office of the Federal Register, National Archives and Records Administration come four executive orders all published on May 23, 2025: Executive Order 14299—Deploying advanced nuclear reactor technologies for national security; Executive Order 14300—Ordering the reform of the Nuclear Regulatory Commission; Executive Order 1430—Reforming nuclear reactor testing at the Department of Energy; and Executive Order 14302—Reinvigorating the nuclear industrial base. Also see About the ADVANCE Act, United States Nuclear Regulatory Commission, accessed October 2025. In Europe, recent initiatives streamlined permitting to secure critical mineral supplies (challenge 19) and expanded support for heat electrification (challenge 16).³¹Critical raw materials act, European Commission, accessed October 2025; Commission selects 13 strategic projects in third countries to secure access to raw materials and to support local value creation, European Commission, June 4, 2025; and Heat pumps in the net-zero industry act (NZIA): EHPA recommendations for the trilogue negotiations, European Heat Pump Association, January 2024; Cameron Murray, “Spain launches €700 million support scheme for BESS, thermal storage and pumped hydro,” Energy-Storage.news, June 2, 2025.

But for the hardest—Level 3—challenges, the picture looks meaningfully different.

Level 3 challenges are mostly stuck, despite a few bright spots

Solving Level 3 challenges requires meaningful technology advances, establishing a track record of deployment to build scale, and solutions to complex interdependencies. However, during the past two years, the opposite has occurred for many Level 3 challenges. Attempts to tackle five of the demanding dozen challenges are mostly experiencing negative trends.

Across these five, of course there has been some innovation, such as the emergence of new types of hydrogen electrolyzers and new processes for producing industrial materials. However, by and large, more effort is needed to improve performance and costs in these areas. Moreover, a deteriorating economic background together with policy shifts (some in 2025) have prompted the cancellation of many of the few pilot projects that had been underway. So, progress toward commercial scale has been negligible (see sidebar “New forces are reshaping the transition”).

Consider hydrogen’s two physical challenges—deploying hydrogen in an efficient way (challenge 20) and scaling hydrogen infrastructure (challenge 21). These have come up against significant headwinds. Cancellations of more than 50 hydrogen projects were announced from 2024 to mid-2025.³²Global Hydrogen Compass 2025: Industry progress and lessons learned from the first wave of mature clean hydrogen projects, Hydrogen Council and McKinsey, September 2025. A wave of cancellations has also hit downstream projects reliant on hydrogen, including low-emissions steel projects (challenge 12) in Germany; ammonia production (challenge 15) in Australia; and more than 15 sustainable aviation fuel (SAF) projects for aviation (challenge 11).³³Halina Yermolenko, Major pause in EU steel industry decarbonization projects, GMK Center, October 8, 2025; Petra Stock, “Green hydrogen projects ‘stalled’ as government still ‘revving it up,’” Guardian, March 24, 2025; and The e-SAF market: Europe’s head start and the road ahead, European Federation for Transport and Environment (T&E), June 2025.

Having said this, there have been success stories even within Level 3. Better batteries and improvements in design, such as aerodynamics, have enabled electric trucks (challenge 9) to reach longer average ranges. Many original equipment manufacturers have extended the ranges of their flagship models, many of which can now travel more than 600 kilometers without recharging. The performance gap with diesel is narrowing. Battery electric trucks can now serve use cases that were previously thought to need low-emissions fuels such as hydrogen.³⁴Zero-Emission Technology Inventory (ZETI) Data Explorer, Global Commercial Vehicle Drive to Zero, accessed October 2025; Global EV outlook 2025: Expanding sales in diverse markets, IEA, July 2025; Semi, Tesla, accessed October 2025; “The Volvo FH Aero is here—a new benchmark for energy efficient heavy-duty trucks,” Volvo Trucks press release, January 29, 2024; and Electric trucks: A truly sustainable truck platform, Scania, accessed October 2025. Furthermore, megawatt charging systems are offering faster charging than ever before. They could charge the average heavy-duty truck in about 15 minutes—half the time of an ultra-fast charging system.³⁵The example refers to a heavy-duty vehicle with a 300-kilowatt-hour battery pack (consistent with the 2024 global sales-weighted average) and a 350-kilowatt ultra-fast charging system. See Global EV outlook 2025: Expanding sales in diverse markets, IEA, July 2025. The global stock of medium- and heavy-duty electric trucks more than tripled between 2022 and 2024. Still, they are at less than 1 percent of the 2050 target, and about 90 percent of them are in China.³⁶Global EV outlook 2025: Expanding sales in diverse markets, IEA, July 2025.

In heavy industry, cement has similarly bucked the trend. In 2025, the world’s first full-scale cement carbon capture, utilization, and storage (CCUS) plant came online in Norway, and a pilot plasma-heated kiln came online in Sweden.³⁷“The future of construction: Heidelberg Materials launches evoZero®, the world’s first carbon captured net-zero cement,” Heidelberg Materials press release, November 28, 2023; and “Major breakthrough for plasma-heated cement kiln in Sweden,” Heidelberg Materials, February 17, 2025. These were both milestones in tackling one of the toughest industrial decarbonization challenges.

Navigating the physical realities

The past two years have shown that the energy transition is moving in many directions at once. Some barriers are falling, while others seem to be getting taller. Overall, a nuanced understanding of the physical challenges and where there are headwinds and tailwinds remains critical for leaders looking to navigate the energy transition. (For details of all 25 physical challenges, see the appendix: “Progress report, 2024–25.”)

Progress on what were already the Level 1 and 2 challenges has opened new opportunities. But making further headway will take more disciplined execution, both to maintain the pace of progress in challenges where it has been made and to accelerate where it hasn’t. For business leaders, advantage will come from anticipating the next constraint and positioning early to remove it. The organizations most likely to succeed will be those that treat execution as a source of competitive advantage.

The hardest obstacles—Level 3 challenges—still depend on innovation, both in individual technologies and across entire systems. As our 2024 report discussed, it is essential to keep testing how technologies fit together within a wider system and how their roles may evolve. In the past two years, breakthroughs in low-emissions cement and electric trucks show that there is rarely a single route forward. For a long time, low-emissions fuels such as hydrogen were seen as the main way to match the performance of fossil fuels in these applications. Now denser batteries for trucks and electric and plasma-heated kilns for cement are pushing electrification ahead. Similar shifts could reshape other industries and open new paths to solving the demanding dozen.

Tackling the physical challenges of the energy transition remains hard stuff. There is progress but there are also headwinds. Building the capacity to read the landscape and act quickly on opportunities will matter more than ever. Clearly seeing the physical realities and how they change will help leaders steer toward lower emissions while ensuring an affordable, reliable, and competitive path to net zero.