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Much of the world is once again asking whether fossil fuels are as reliable as they thought — not because power plants are tripping off or wellheads are freezing up, but because terawatts’ worth of energy are currently stuck outside the Strait of Hormuz in oil tankers and liquified natural gas carriers.
The current crisis in many ways echoes the 2022 energy cataclysm, kicked off when Russia invaded Ukraine. Then, oil, gas, and commodity prices immediately spiked across the globe, forcing Europe to reorient its energy supplies away from Russian gas and leaving developing countries in a state of energy poverty as they could not afford to import suddenly dear fuels.
“It just shows once again the risk of being dependent on imported fossil fuels, whether it’s oil, gas, LNG, or coal. It’s an incredibly fragile system that most of the world depends on,” Nick Hedley, an energy transition research analyst at Zero Carbon Analytics, told me. “Most people are at risk from these shocks.”
Countries suddenly competing once again for scarce gas and oil will have to make tough decisions about their energy systems, with consequences for both their economies and the global climate. In the short run, it is likely that many countries will make a dash for energy security and seek to keep their existing systems running, either paying a premium for LNG or turning to coal. In the long run, however, this moment of energy scarcity could provide yet another reason to turn towards renewables and electrification using solar panels and batteries.
The immediate economic risks may be most intense to Iran’s east.
About 90% of LNG from Qatar goes to Asia, with Qatar serving as essentially the sole supplier of LNG to some countries. Even if there’s more LNG available from non-Qatari sources, many poorer Asian countries are likely to lose out to richer countries in Europe or East Asia that can outbid them for the cargoes.
For countries like Pakistan and Bangladesh, “The result is demand destruction, not aggressive spot purchasing,” according to Kpler, the trade analytics service.
LNG supply is “critical” for Asia — roughly a fifth of Asia’s power can be traced back to LNG from the Middle East, Morgan Stanley analysts wrote in a note to clients Thursday.
In its absence, coal usage will likely tick up in the power sector, leading to declining air quality locally and higher emissions of greenhouse gases globally. “For uninterrupted power, coal remains the key alternative to LNG and there is flex capacity available in South Asia, which has seen new coal plants open,” the Morgan Stanley analysts wrote.
In India, the government is considering implementing an emergency directive to coal-fired power plants to “boost generation and to plan fuel procurement to meet peak summer demand,” sources told Argus Media.
Anne-Sophie Corbeau, global research scholar at the Columbia University Center on Global Energy Policy, told me that she does “expect to see some coal switching,” and that she has “already seen an increase in coal prices.” Benchmarks have already risen to their highest level in at least two years, according to the Financial Times.
This likely coal surge comes as two of the world’s most coal-hungry economies — namely India and China — saw their electricity generation from coal power drop in 2025, the first time that’s happened in both countries at once in around 50 years, according to an analysis by Lauri Myllyvirta of the Centre for Research on Energy and Clean Air. In much of the rich world, by contrast, coal consumption has been falling for decades.
At the same time energy insecurity may tempt countries to stoke their coal fleet, the past few years have also offered examples of huge deployments of solar in some of the countries most affected by high fossil fuel prices, leading some energy analysts to be guardedly optimistic about how the world could respond to the latest energy crisis.
In the developing world especially, the need to import oil for gasoline and natural gas for electricity generation weighs on the terms of trade. Countries become desperate to export goods in exchange for hard currency to pay for essential fuel imports, which are then often subsidized for consumers, weighing on government budgets. But at least for electricity and transportation, there are increasingly alternatives to expensive, imported fossil fuels.
“This is the first oil and gas crisis-slash-pricing scare in which clean alternatives to oil and gas are fully price-competitive,” Isaac Levi, an analyst at CREA, told me. “Looking at the solar booms, we can expect this to boost clean energy deployment in a major way, and that will be the more significant and durable impact.”
The most cited example for this kind of rapid emergency solar uptake is Pakistan, which has experienced one of the fastest solar conversions in history and expects this year to see a fifth of its electricity come from solar, according to the World Resources Institute.
The country was already under pressure from the rising price of energy following the Russian invasion of Ukraine in 2022, when it was forced to hike fuel and power prices and cut subsidies as part of a deal with the International Monetary Fund. From 2021 to 2024, Pakistan’s share of generation from solar more than tripled thanks to the growing glut of inexpensive Chinese solar panels that were locked out of the rich world — especially the United States — by tariffs.
“Countries which are heavily dependent on fossil fuel imports are once more feeling very nervous,” Kingsmill Bond, an energy strategist at the clean energy think tank Ember, told me. “The interesting thing is we have two answers: renewables and electrification. If you want quick results, you put solar panels up quickly.”
Other examples of fast transitions have been in transportation, particularly electric cars.
Ethiopia banned the import of internal combustion vehicles due to worries about the high costs of oil imports and fuel subsidies. EVs make up some 8% of the cars on the road in the East African country, up from virtually zero a few years ago. In Asia, Nepal executed a similar push-pull as part of a government effort to reduce both imports and smog; about five years later, over three-quarters of new car sales in the country were electric.
But getting all the ducks in a row for a green transition has proven difficult in both the rich world and the developing world. Few countries have been able to electrify their economies while also powering them cheaply and cleanly. Ethiopia and Nepal are two examples of electrifying demand for power, particularly transportation. But while the two countries are poor compared to much of the world, they are rich in water and elevation, giving them plentiful firm, non-carbon-emitting electricity generation.
Pakistan, on the other hand, is far from being able to, say, synthesize fertilizers at scale with renewable power. In addition to being a power source, natural gas is also a crucial input in industrial fertilizer manufacturing. Faced with spiking costs, fertilizer plants in Pakistan are shutting down, imperiling future food supplies. All the cheap Chinese solar panels and BYD cars in the world can’t feed a chemical plant.
What remains to be seen is whether this crisis will be severe and enduring enough to lead to a fundamental rethinking about the global energy supply — what kind of energy countries want and where they will get it.
“Energy security crises produce the same structural response: the search for sources that do not require crossing borders and global chokepoints,” Jeff Currie, a longtime commodities analyst, and James Stavridis, a retired admiral and NATO’s former Supreme Allied Commander, argued in an analysis for The Carlyle Group. “Solar, wind, and nuclear are children of the 1970s oil shocks — with growth driven by security, not environmentalism.”
While the United States is not unaffected by the unfolding energy crisis — gasoline prices have spiked over $0.25 per gallon in the past week, and diesel prices have spiked $0.40 — its resilience comes from both its domestic oil and gas production and its solar, wind, and nuclear fleets. Much of this electricity generation and power production can be traced back in some respect to those 1970s oil shocks.
In 2024, the United States imported 17% of its primary energy supply, according to the Energy Information Administration, compared to a peak of 34% in 2006 and the lowest since 1985. Today, Asia still imports 35%, and Europe 60%, Bond told me.
“That’s massive levels of dependency in a fragile world,” Bond said. “It’s a question of security.”
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The gains set up Democrats to potentially flip the utility commission in 2028.
The blue wave has officially reached the Arizona down ballot. Though two Democratic wins in the Arizona Corporation Commissioner race might not drum up the same national coverage as, say, flipping a Senate seat in South Carolina, the election of Clara Pratte and Jonathon Hill to the five-seat commission could have major energy implications in a state that already saw renewables champions take over the state’s largest utility earlier this year. (With close margins in slow-to-count Arizona, the ACC race wasn’t officially called until Thursday evening, when both Republicans conceded.)
Arizona is one of 10 states that elects its utility commissioners, with the ACC regulating private water, gas, and electric companies in the state. That includes overseeing Arizona Public Service and Tucson Electric Power, where bills have increased 52% and 10%, respectively, over the past five years, per Heatmap’s data. (The publicly owned Salt River Project, which serves much of the Phoenix area, operates largely without ACC oversight.)
The ACC has been wholly in Republican hands since 2024; during that time, the body repealed Arizona’s Electric Efficiency Standards, which had incentivized utilities to pursue energy efficiency programs, as well as the state’s Renewable Energy Standard and Tariff, which supported the build-out of solar and wind power. “They were a rubber stamp for all our utilities and refused to even consider anything in support of protecting our climate,” Arizona State Representative Brian Garcia, who was reelected on Tuesday, said during a press call with Lead Locally this week. “At one instant, one of the commissioners told someone who got sick from the heat — who turned off their power and their AC — ‘Well, that’s on them.’ And I think our state and our communities have had enough of that.”
Though the ACC remains under Republican control despite the two Democratic additions, it puts full control within a one-seat striking distance for progressives when the other three seats are up in 2028 — a much easier fight to win, and potentially a huge one, given that the party hasn’t controlled the ACC since 1997.
Of particular concern in 2026, though, was the development of data centers. Ralph Heap, a Republican in the race who made the League of Conservation Voters’ 12-person “worst of the worst” list out of all 6,342 seats up for grabs nationwide on Tuesday, previously told the Arizona Capitol Times he supports the data center build-out in the name of American AI dominance. Incumbent Republican Kevin Thompson, meanwhile, has argued that the commission “has done its job of shielding ratepayers from costs associated with servicing data centers and other large load users.”
Voters evidently disagreed, backing Hill and Pratte, who say they support a data center moratorium. “The Corporation Commission might not be able to implement a pause, but I think they can certainly be a clearinghouse for information,” Hill told Yellow Sheet Report, an Arizona political tipsheet, acknowledging the relatively limited role the ACC actually has in regulating data centers beyond demanding transparency of utilities’ energy service agreements.
There are other concerns, too. Climate organizers zeroed in on the ACC race because of its influence over the solar buildout in the nation’s sunniest state, where nevertheless six of the state’s 15 counties have a restrictive ordinance against the resource, Heatmap Pro data shows. Commissioner-elect Pratte, a member of the Navajo Nation and the first Indigenous person elected to statewide office in Arizona, is also the co-founder of Navajo Power, a clean-energy company that helps tribal nations develop solar energy and storage projects.
Arizona Public Service and Tucson Electric Power also both have pending rate increase requests under review by the ACC; a 14% rate increase for residential customers and a 45% or more increase for data centers in the case of APS, and a 10% increase for residential customers in the case of TEP. (The APS’ rate case will likely be decided in December, before Pratte and Hill take their seats.)
Additionally, State Senator Lauren Kuby has introduced a bill to change the name of the ACC to the Arizona Public Utility Commission, a move intended to highlight to voters “its significance to their daily lives,” as she told the Arizona Capitol Times earlier this year. Sure enough, John Qua, the campaign director at Lead Locally, and Caroline Spears, the executive director of Climate Cabinet, previously told my colleague Matthew Zeitlin that part of the trouble with supporting progressive candidates in the ACC race was communicating to Arizona voters that, like the race for governor, it is a partisan election.
But given how things turned out Tuesday nationwide — a referendum on cost-of-living and, perhaps, data centers — it seems they needn’t have worried. Arizonans worked out exactly who to blame.
Electricity companies look like one of the biggest losers of the 2026 midterms.
This is Heatmap Daily, a weekday digest written by our executive editor. Subscribe here.
I’m still wrapping my head around the size and scale of the Democratic victory on Tuesday. I suspect Wall Street is, too. Yesterday, the S&P 500 gained about 1.6% as investors saw an upside in the Democratic blow-out. Today, they lost their nerve: The S&P fell almost 4.4%, and the tech-focused Nasdaq slid by more than 5%. That AI-loaded index is now down more than 10% from its all-time high in October, which means it’s technically entered a “correction.” (If it drops by 20%, it’ll be in a bear market.)
Amid the market carnage, utilities have held out alright. The Vanguard utilities index fell by less than one percent today, and two of the country’s biggest vertically integrated electricity monopolies — Duke and Southern Company — actually gained ground. Other power companies — including Xcel Energy, which serves the Midwest and Dominion Energy in the Southeast — did okay as well.
I find that surprising, because utilities strike me as one of the biggest losers of Tuesday’s election.
That’s partly because utilities showed up in surprisingly specific ways in candidate policy proposals this cycle. Last night, I wrote about how Senate Democratic candidates took a fairly moderate tack on climate and energy policy this year. What I didn’t mention is that Adam Hamilton, Kansas’ newly elected Democratic senator, called out utilities specifically in his proposal for major new transmission. One of his four big energy policy proposals is as follows:
Require competitive bidding processes for transmission projects instead of handing utility companies lucrative contracts at taxpayer expense. When a nearly half-billion-dollar transmission project is handed to a single utility with no competitive bidding, Kansas ratepayers can end up paying far more than they should. Competitive bidding has been shown to cut these costs by twenty to thirty percent. Politicians on both sides of the aisle should speak out against harmful policies that avoid competitive bidding, like the $493 million project that was handed to Evergy.
I mean, sounds great to me, but transmission policy does not normally rank among Democrats’ biggest applause lines. Hamilton’s other energy ideas are far more conventional, including ending Trump’s tariffs, his war on domestic energy projects, and restoring the clean energy tax credits.
Hamilton wasn’t alone in targeting utilities. David Pomerantz, who leads the watchdogging Energy and Policy Institute, has a great blog post today looking at utility politics in the 2026 election. He argues that we’re about to see utilities endure a much tougher oversight regime than they’ve faced in decades.
Why? There was much more attention on public utility regulators in this election than there have been in previous ones, he argues. Historically, public utility commission appointments have been sleepy affairs. But “incoming new governors Amy Acton (Ohio), Jocelyn Benson (Michigan), David Crowley (Wisconsin), Aaron Ford (Nevada), and Hannah Pingree (Maine) all campaigned overtly on a promise to appoint commissioners who would put ratepayers first,” he writes. In a few of those gubernatorial races, the losing Republican candidate had also promised to fire or replace the existing utility commissioners.
It goes beyond just oversight. The incoming governors in Pennsylvania, Iowa, and Maine have all vowed to reform or lower utility profits. Democrats won a majority on Georgia’s public utility commission — and flipped two seats in Arizona’s five-person board — promising to look closely at the utility profit structure, too.
In one state, voters even directly intervened to limit utility action. Michigan’s Proposition 2, which bars regulated utilities from making campaign contributions, passed overwhelmingly with more than 80% of the vote (although it now faces a legal challenge). And more than 100 politicians, including the winning Benson, pledged not to take utility campaign contributions.
Anyway, it’s an interesting post. You might remember I spoke to David last week for Shift Key about how the bipartisan permitting legislation would weaken monopoly utilities. As my colleagues Jael Holzman and Emily Pontecorvo wrote yesterday, Democrats and Republicans are now negotiating a top-down amendment to that permitting package. We’ll soon learn if the new version — which could come out any time in the next two weeks — preserves the same tough-on-utilities provisions that Dave praised.
When it comes to energy and data centers, everyone loves Texas. Its pro-business political consensus, unusually deregulated electricity market, wide-open plains, sunny skies, and large natural gas and oil deposits have attracted data center developers, renewables developers, liquefied natural gas export terminals, and battery storage entrepreneurs alike.
But this all happened under decades of unified Republican control of Texas’ government. That’s ending on January 19, when Gina Hinojosa is sworn in as governor alongside every other holder of statewide elected office who won this year. In Austin, they will join a Democratic majority Texas House of Representatives, which has been under Republican control since 2003.
Immediately following the election, stocks linked to data center development in Texas swooned — Elon Musk’s SpaceX is down 12.5% since Tuesday, data center developer CoreWeave is down almost 19%, Oracle is down 9%, Texas-based independent power producer Vistra is down 19%. Sterling Infrastructure, a civil construction company headquartered outside Houston, has seen its shares fall 32%.
On the campaign trail, Hinojosa called for a moratorium on data centers until the legislature could pass legislation putting guardrails around development, including protecting residential ratepayers from electricity price hikes and giving local communities more leeway to restrict and condition development. Two weeks before election day, she released a video criticizing Governor Greg Abbott’s “Batch Zero” review process — which had been broadly characterized as a “pause” when it was announced over the summer — for allowing new permits, and she said that she would issue a “ban” on all data center approvals until new laws could be passed.
When Abbott introduced his pause over the summer, Texas’s electricity market ERCOT had 474 gigawatts of data center interconnection requests in its queue (almost all from data centers), a figure he said was around five times the electricity market’s peak demand. That review is due to end next month, shortly before Hinojosa is due to take office, leaving little time for new projects to get approved before the moratorium goes into effect.
Some observers and investors took a sanguine view of Hinojosa’s data center policies. Gavin Baker, a longtime investor in SpaceX, said on X that Hinojosa’s policies “sound reasonable” and pointed to an interview she gave saying that the moratorium would be on new permits and would not affect the pipeline of permitted projects.
The data center and energy industry, however, is in wait-and-see mode when it comes to the severity of the moratorium.
“If she was thinking of trying to go after projects that had begun the construction process,” Brandt Vermillion, U.S. research lead at Modo Energy, said, “I think it would change the overall outlook a ton.”
According to Modo Energy analysis, there are some 25 gigawatts worth of projects under construction in Texas, another 4.6 gigawatts permitted, and another 90 gigawatts that are either just announced or have only submitted grid studies. If Hinojosa “is only going after non-permitted projects,” Vermillion added, then anyone thinking about the future path of data center development in Texas should be more concerned about supply chain constraints like obtaining enough chips to power the data centers.
That being said, the Texas legislature’s session doesn’t end until May 2027, meaning that Hinojosa’s pause could last several months before lawmakers put guardrails into law.
“I don’t think we’re going to not build another data center in the state,” Joshua Rhodes, a research scientist at the University of Texas at Austin, told me. “But I think that they’re going to be under quite a bit more scrutiny.”
That being said, analysts are now much more uncertain about the future path of electricity demand in the state. “Texas demand is difficult to project after Gina Hinojosa’s surprise win,” Jefferies analyst Julien Dumoulin-Smith wrote in a note to clients on Thursday.
That means more trouble for developers in Texas, especially for storage projects, which had already been seeing extremely volatile monthly revenue.
“Batteries and energy storage have been counting on demand to go up because they’re having a rough time out there right now in terms of revenues,” Rhodes said. “Demand will have a pretty big impact on supply.”
One thing the battery storage industry, as well as solar and wind developers, can cheer is that Democratic control of the governorship and the state House means that the threat of anti-renewables bills has fallen to essentially zero.
The renewables industry is hoping that data center development does continue in Texas, but that it looks more orderly and grid-connected.
Going forward, Vermillion expects that data center developers will have a harder time getting tax abatements, which means that a “well-capitalized hyperscaler” could potentially still pursue projects.
“Project A that was going to go about development in a certain way of seeking tax abatements and buying a bunch of reciprocating engines and trying to run themselves off grid” is much less likely to be able to go forward in Hinojosa’s Texas, Vermillion told me, especially as she is able to appoint new commissioners to the Texas Public Utility Commission or the Texas Commission on Environmental Quality.
Tim Woodruff, the data center lead at Modo, told me similarly. “In the near term, if you're one of the neo clouds, maybe now you start pushing a little harder on your projects that you have in MISO or in CAISO,” he said.