Twin shock in fossil energy: Is this the mo­ment for electri­fication?

Key takeaways on the oppor­tunities of electri­fication for a more secure energy supply:

1. The Iran conflict has caused the second supply shock in fossil energy within four years, following the outbreak of the Ukraine war in 2022. This makes the search for alternatives all the more urgent.
2. Since the oil crisis of the 1970s, the importance of electrification has grown steadily. Despite economic growth, the tipping point for demand for fossil fuels could be reached in just a few years’ time.
3. Replacing fossil fuels with renewable energy and electrification offers potential worth billions. From an investment perspective, we find electrical engineering and specialist planning and construction firms for electricity grids particularly interesting.
   

Even if the Strait of Hormuz were reopened to shipping in the coming days, the damage has already been done. The blockade of this vital waterway has led to a backlog of over 1 billion barrels of oil among Middle Eastern producers, according to a recent warning from the International Energy Agency (IEA). Observers like Ember are already calling it the greatest oil supply shock of all time.

Moreover, according to the highly regarded energy think tank, this is the second such major event in just four years. In 2022, Russia, the largest exporter of fossil energy, invaded Ukraine. The war forced Europe to sever ties with its most important energy supplier. Now, with the Iran conflict, the continent is also cut off from liquefied natural gas imports from the Middle East, which had served as a replacement.

Ember analysts are calling this a "Twin Shock." They conclude that trading in oil and gas has never been riskier.

Investments are rapidly shifting toward renewable energy and electrification

In our view, recent developments underscore the importance of the investment theme of energy transition. The conclusion is clear: as the supply of fossil fuels becomes increasingly uncertain in an unstable world, the search for alternatives becomes ever more urgent. One alternative, in particular, offers potential for both energy security and as a sustainable investment theme: transitioning systems and processes to use electricity instead of fossil fuels (electrification), along with the necessary expansion of power grids and renewable electricity generation capacities.

As we have previously analyzed, energy transition and electrification are mutually reinforcing. Investments have been shifting rapidly for years from fossil fuels to renewable energy sources. At the same time, electricity demand is expected to grow rapidly due to electrification; according to IEA estimates, it could double or triple by 2050. The more electrification gains traction, the faster dependence on fossil fuels will diminish (see box below).

Electricity consumption is growing three times faster than fossil fuel use

Interestingly, this shift has been underway since the last major oil crisis in the 1970s. At that time, the "long march of electrification," as Ember calls it, began. Back then, more efficient energy use proved to be the most effective tool for cushioning higher oil prices. Between 1960 and 1985, global energy productivity tripled, and in industrialized countries, it increased tenfold. Interestingly, these productivity gains came primarily at the expense of oil and gas. In contrast, electricity consumption has kept pace with global GDP growth since the 1970s, growing three times faster than fossil fuel consumption.

The rapid growth of electricity consumption and electrification has gone hand in hand with advances in electrotech. Interestingly, market observers suggest that this sector is now also at a turning point. Electrotech is poised to revolutionize the global approach to energy, according to a September 2025 study by Ember.

The advantages of electrotech as a tool for electrification

This revolution spans the entire spectrum of applications, starting with energy generation, where renewable energy can already meet the entire growth in electricity demand. It extends to the transport and storage of energy, leveraging new network and battery technologies. Finally, it includes energy consumption, where electric vehicles and heat pumps are experiencing rapid growth.

Electrotech offers several key advantages in these areas:

• Physical Advantages Systems based on fossil fuels lose about two-thirds of their primary energy as heat. This is one reason why electrotech is about three times more efficient in energy use.
• Economic Advantages Electrotech is often modular, supporting technological learning curves where costs decrease by about 20% with every doubling of deployment, according to Ember's study. For example, solar panel prices have halved since 2022, while the number of newly installed panels has nearly tripled annually. The argument that renewable energy and electrical engineering offer better value for money would be even more compelling if the government subsidies currently enjoyed by fossil fuels in many parts of the world were to be reduced in future: according to OECD surveys, governments provided more than USD 900 billion in direct subsidies for fossil fuels in 2024.
• https://www.oecd.org/en/about/news/announcements/2025/12/government-support-for-fossil-fuels-remains-high-despite-a-10-decline.htmlResilience to Geopolitics According to Ember, 80% of the world's population lives in countries that must import fossil fuels. This dependency becomes painfully evident during crises, particularly for poorer countries that cannot compete in the global energy market during price spikes. This leads to supply shortages or blackouts.

For this reason, Ember analysts expect that Asian emerging markets are currently experiencing their own "Ukraine moment" due to the Iran crisis. Faced with high oil and gas prices, these countries are likely to accelerate their shift to electrotech and renewable energy. Ember argues that this transition is logical, as over 90% of countries worldwide have renewable energy potential exceeding ten times their current needs.

Electrification and electrotech: Opportunities for quality growth

The advantages outlined above suggest that the increasing use of electrotech could significantly improve energy security. This points to a potential market worth billions, that could also interest investors. Ember calculates that deploying three existing key technologies – electric vehicles, heat pumps, and renewable energy – could replace 75% of fossil fuel energy demand and save $1.3 trillion annually (see chart below).

Share of energy demand that can be electrified (in %)
 

From an investment perspective focused on sustainable growth, quality, and especially solid capital returns, we concentrate on specific segments of electrotech and renewable energy.

For example, we focus on suppliers of power transmission networks, which enjoy strong pricing power due to high demand. Specialized construction and planning firms for power infrastructure are also experiencing high demand for their services. Additionally, we are interested in applications for energy consumption, such as companies in the electric vehicle, stationary energy storage, or heat pump sectors, as well as solutions that intelligently manage the electricity consumption of these applications.

Electrification and electrotech are here to stay

Once established, electrification and its associated electrotech are likely to prove sustainable in the best sense of the word, ensuring long-term energy security. Renewable energy, power grid infrastructure, and heat pumps are designed for decades of use, protecting their users from the volatility of fossil fuel prices.

Environmental activist and author Bill McKibben recently put it this way:"Sunlight travels 93 million miles to reach the earth. None of them through the Strait of Hormuz."

Investment theme «Climate»: Insights