Solar power is on course to become the world’s largest energy source by 2035, surpassing coal, oil, and natural gas, according to new research from BloombergNEF. The same analysis finds that AI data centers will sustain demand for fossil fuels well past that milestone, keeping gas and coal generators in the mix through 2050.
Matthias Kimmel, BloombergNEF’s head of energy economics, was direct about the trend: “Solar is winning the race.” The economics drive the transition. Solar panel costs have been falling faster than those of any competing technology, and BloombergNEF projects another 30 percent drop by 2035. By 2050, the firm expects solar generation to exceed natural gas output by more than double.
The price shift is already changing investment behavior. Pakistan added 25 gigawatts of solar capacity in just two years after Russia’s invasion of Ukraine sent natural gas prices sharply higher. Countries with limited domestic fuel resources have been among the fastest to respond to falling solar costs.
The data center drag on solar power
AI infrastructure is where the picture gets complicated. BloombergNEF projects data centers will drive roughly 1 terawatt of new utility-scale power capacity through 2050, with the breakdown running to 400 gigawatts from solar, 370 gigawatts from natural gas, and 110 gigawatts from coal.
The reason fossil fuels retain a large share comes down to availability. Solar generates power when the sun shines. Data centers need power around the clock. BloombergNEF projects fossil fuels will cover approximately 51 percent of incremental data center generation through 2050, even as solar becomes the largest global source by total annual output.
Battery storage closing the gap
Grid-scale battery installations hit 112 gigawatts globally last year. BloombergNEF expects that figure to nearly triple by 2035, following the same cost curve solar has traveled. “Costs fall with every doubling of installed capacity,” Kimmel said, a dynamic that has applied to solar and is now beginning to apply to storage.
Chinese manufacturing scale has been the main driver of cost declines in both technologies. As battery capacity expands, the economics that made solar power competitive are beginning to work on the storage problem that holds back a fully renewable grid.
Google recently committed $1 billion to Form Energy‘s 100-hour iron-air batteries as a direct bet on solving data center intermittency. Fervo Energy and X-energy completed IPOs this month, with investors backing geothermal and nuclear as options for facilities that need continuous power.
Energy independence as a secondary gain
Kimmel also pointed to the geopolitical dimension. “The transition, which in many ways is cost efficient, is actually good for energy independence,” he said. Building out domestic solar and storage reduces exposure to international fossil fuel price swings, a lesson Pakistan absorbed faster than most.
BloombergNEF’s projection that fossil fuels will cover half of data center growth through 2050 rests on storage costs not falling as sharply as solar has. If battery capacity triples by 2035 as the firm projects, that assumption will face a real test.