The rise of energy realism – five takeaways from CERAWeek

The topics discussed at CERAWeek 2025: Moving Ahead focused on energy strategies for our complex world, reflecting the challenges and opportunities resulting from geopolitical shifts, supply challenges, and the need to meet climate goals.   

I joined a team of ERM experts and leaders for the week in Houston. These are the five main takeaways from the events and discussions we participated in, centering on energy security, LNG growth, AI, data centers, and renewables.   

1. Energy transition is continuing but not necessarily in the ways society thought it would.

Most CERA participants agreed that the energy-transition narrative has shifted. The terms ‘energy realism’ and ‘energy pragmatism’ emerged in many conversations, as well as the need for resilience, reliability, and economic stability. It highlighted the enduring consequences of a volatile geopolitical landscape.  

In response, companies are making pragmatic adjustments by pursuing approaches that align with their core strengths, combining traditional energy with clean technologies to meet the growing demand for energy while decarbonizing their operations and maturing future-state business models.  Additional attention is given to developing domestic energy sources and strengthening markets with partner nations.   

The amount of fossil fuels required by ‘energy realism’ varies depending on who you ask. Several oil companies at CERA predict oil will be the dominant fuel for decades to come. They see robust exploration as a prerequisite to meet a growing demand, which won’t peak for another 15-20 years. The International Energy Agency estimates oil demand will peak in 2029 and foresees an oil surplus this year. However, everybody agrees that the demand for natural gas and LNG is growing fast.  

CERA participants, no matter their view on what a diversified energy portfolio looks like, also agreed that predictable policies, regulatory simplification, and faster permitting are crucial for accelerating energy projects across the board – from solar or hydrogen to LNG terminals.  

2. LNG is soaring, but environmental and regulatory challenges remain. 

Liquefied Natural Gas (LNG) was front and center at this year’s CERA conference. According to the IEA, the global gas market is at an all-time high, primarily driven by LNG. LNG supply grew 8 percent annually between 2016 and 2020, while demand has been soaring, driven by geopolitical tensions, growing Asian economies, and the search for a cleaner fossil alternative to coal and oil. Demand has been accelerating, driven by geopolitical tensions, growing Asian economies, and the search for a cleaner fossil alternative to coal and oil.   

However, the LNG market is tight. As demand for LNG rose sharply in the last few years, supply slowed down. Regulatory hurdles have often caused bottlenecks in reaching the final investment decision (FID) stage. For example, no U.S. LNG project reached FID due to the LNG export pause implemented by the Biden administration in early 2024.  

Now the Trump administration has lifted the export pause, prospects for U.S. LNG projects are looking up, while new LNG projects in other regions are slated to come online in 2025, almost quadrupling new capacity compared to 2024. However, many participants at CERA stress that regulatory hurdles still need to be lowered to keep up with demand. 

Another challenge debated during CERA are the climate benefits of LNG. Although natural gas burns cleaner than coal, the liquefaction and transport of LNG also generate carbon emissions.  Furthermore, shale gas production, the feedstock of most U.S. LNG, leaks substantially more methane than conventional gas. As a result, LNG’s geopolitical value is undisputed but doubts remain that it can genuinely claim to be a cleaner fossil alternative to coal.  

Oil and gas companies recognize the challenge. CERA’s Methane Innovation House presented the latest innovations to curb methane emissions, such as AI-powered analysis of satellite images to detect methane leaks. A recent S&P report highlighted the progress the industry is making. In 2023, methane emissions during oil and gas production in the Permian Basin decreased by 26 percent compared to 2022, despite increased production.  

3. AI grows in its role as optimizer of the energy sector.

AI’s appetite huge thirst for electricity is well-documented. However, many discussions at CERA focused on AI’s ability to lower costs and energy use through optimizing operations and improving efficiency. A few applications jumped out. In upstream oil and gas, companies leverage AI for seismic imaging, drilling automation, and predictive maintenance, increasing the certainty and efficiency of resource extraction while lowering environmental and operational risks. 

AI is also poised to play a critical role in managing increasingly overburdened grids. The integration of renewables has long been challenging for grid operators. AI-driven forecasting models can help utilities predict demand more accurately, optimize energy distribution in real-time, and manage battery storage to match supply and demand.  

At CERA, the National Grid announced its venture capital arm would invest $100 million in AI start-ups that aim to optimize electricity grids, underscoring grid operators' high expectations of AI. Christian Bruch, President and CEO of Siemens Energy, also emphasized AI will revolutionize the management and reliability of complex grid structures.  

Industrial decarbonization is another area where AI could be a transformational force. Companies have started using it to identify energy efficiency opportunities through constant monitoring and analysis. ERM’s emissions.AI assists industrial companies in doing so effectively by building a digital twin of existing plants. Early-stage research also indicates that AI can improve efficiency and, hence, lower costs of carbon capture and storage and green hydrogen production, which are pivotal for decarbonizing hard-to-abate sectors like cement and steel.  

A few barriers hamper the beneficial potential of AI’s current and near-future applications in energy. Companies at CERA mentioned a lack of data for AI to churn, hard-to-find trained personnel and domain experts, and worries about how AI will affect safety and cybersecurity as their main concerns.   

4. Data center growth triggers energy innovations. 

CERA highlighted how tech companies drive energy innovation in low-carbon power generation. The sector’s demand for more data center capacity, combined with its firm commitment to reducing its carbon footprint, has pushed big tech companies into unchartered territory since renewables alone can no longer meet their low-carbon power needs. To illustrate, the U.S. data centers supporting AI and cloud computing are projected to consume up to 12 percent of all U.S. power by 2028. 

To overcome this tension, the tech sector has been at the forefront of an unexpected nuclear energy renaissance. Several large tech companies will be launching customers of small nuclear reactors, so-called SMRs, a technology that has yet to prove itself commercially.  

At CERA, the tech sector reiterated that it plans to go all-in. A coalition of large energy users, Meta, Google, and Amazon among them, signed a pledge that nuclear capacity should at least triple by 2050. However, it will take a while before data centers run on new nuclear power. The SMRs will start operations between 2030 and 2039, while the reopening of a Three Mile Island nuclear reactor, financed by Microsoft, is scheduled for 2028. 

The tech sector’s hunt for low-carbon solutions triggered more surprising moves. Earlier this year, Chevron announced it is designing a natural gas-fired power plant that feeds directly into adjacent data centers, making it an off-grid solution. The direct power plants will also have the ability to integrate carbon capture and storage (CCS). During CERA, the company took it a step further, announcing its plans to build, operate, and power its own data centers.     

5. Solar and wind are down but not out.

Despite the relative emphasis on fossil fuels and nuclear energy at CERA, solar and wind remain the fastest-growing global energy sources. According to the IEA, renewables will provide 35 percent of global electricity in 2025, up from 30 percent in 2023. Their prices are also hard to beat. In 2023, 96 percent of new utility-scale solar PV and onshore wind capacity had lower generation costs than new coal and natural gas plants.  

However, wind and solar have another significant advantage: it doesn’t take long to build new solar or wind capacity. The construction of a large solar farm takes 12 to 18 months, said John Ketchum, CEO of NextEra Energy, in an interview during CERAWeek. In contrast, power companies have to wait five years for a new gas turbine. Building out nuclear capacity takes even longer. 

Ketchum is not opposed to gas-fired power plants: his company owns 19 of them. But he says the reality is that wind and solar projects are crucial short-term options to boost power supply, and any policy discouraging instead of accelerating them is misguided. New power capacity projections for the U.S. underscore the dominance of renewables: solar, wind, and battery storage make up 93 percent of all new utility-scale power generating capacity planned for 2025.  

Security and sustainability go hand in hand 

Our visit to CERAWeek 2025 made clear that the energy transition has entered a new phase with more emphasis on energy security. This doesn’t mean embedding sustainability has become less vital to avoid risks and seize commercial opportunities. On the contrary, embedding sustainability into business operations is more critical than ever to increase business resiliency in turbulent times. Companies must ensure their approach prioritizes actions that contribute to both value creation and sustainability in a substantial way.