Earth Set Q1 Climate Review: What Just Happened
Luke, Lucy, Amy and Max discuss what happened in energy and climate at the beginning of 2026
April 2026
Earth Set Q1 Climate Review: What Just Happened
The final episode of the Earth Set Podcast Series 2 took a different form: a structured review of the first quarter of 2026.
Across geopolitics, energy systems, capital markets and policy, a large number of developments have landed in a short period of time. Taken individually, none are entirely new. Taken together, they begin to reveal something more cohesive: the transition is progressing, but the constraints are shifting and becoming more visible.
Joining Amy Rennison were Lucy Shaw, Luke Shore and Max Bray.
Five areas anchored the discussion: AI and electricity demand, US climate policy, capital allocation, energy market volatility, and UK policy delivery.
AI and Data Centres: Demand Has Arrived Faster Than the System
The most immediate structural shift this quarter is the scale and speed of electricity demand associated with AI. Data centres are no longer marginal additions to the system, they are emerging as large, concentrated sources of demand, with timelines driven by private capital rather than system planning.
As Lucy Shaw noted: “When you quote data centre size, it’s in megawatts,” reflecting a shift from data centres being treated as real estate assets to being understood as energy system participants.
In the UK, this is already visible in the grid connection pipeline. Around 140 data centre projects are currently seeking connections, representing roughly 50GW of demand. UK peak demand is approximately 45GW, so as Max Bray put it, “That’s already bigger than the whole of UK peak demand.”
There are questions about whether all these have a realistic chance of being built, but even if they don’t, they will occupy capacity in connection queues, slowing down other developments including renewables, industrial electrification and housing. This demand growth is unpredictable and non-linear, the system is facing step-changes driven by a small number of actors with very large requirements. The result is a coordination problem, as generation, networks and demand are being developed on different timelines, by different actors, with limited alignment.
The US: Policy Retrenchment, System Momentum
The US withdrawal from the Paris Agreement in early 2026 marks a clear shift in federal positioning. But its practical implications are more complex.
As Max summarised: “There’s now a split between politics and economics… the market just doesn’t care enough.”
Renewables deployment continues, and capital continues to be allocated. In many cases, this is driven by cost competitiveness rather than policy support. This does not imply that policy is irrelevant, it remains critical for shaping the pace and distribution of investment, but it is no longer the sole determinant of direction.
At the same time, Luke Shore highlighted a divergence in political salience: “AI is becoming an electoral issue in the US in a way that it just isn’t in Britain or in Europe …. yet.” In the US, rising electricity prices, infrastructure constraints and emerging labour market impacts are beginning to register with voters. These pressures are interacting with federal policy in ways that are not yet present in the UK.
This creates a divergence between where the system is moving and where politics is focused, a gap that is likely to matter more over time.
Capital and Companies: From Expansion to Selection
The capital environment continues to evolve, as the high-liquidity, subsidy-supported phase of 2020–2022 has given way to a more selective market. However, this should not be interpreted as a reduction in activity.
As Bray noted: “If you have something with great unit economics and fundamentals, there’s just as much, if not more, appetite to invest.” So the shift is qualitative rather than quantitative, with capital concentrating in areas where:
revenue models are clear
deployment risk is understood
policy exposure is manageable
This favours infrastructure, platforms and asset-backed businesses. It is more challenging for early-stage technologies requiring large amounts of capital before commercial viability, which reinforces a broader point: the constraint is not capital in aggregate, but the conditions under which capital can be deployed at scale.
Iran and Energy Markets: Exposure Persists
The escalation involving Iran brings geopolitical risk back into immediate focus, significance of which is not simply the event itself, but what it reveals about ongoing exposure. A substantial proportion of global oil and gas flows transit through the Strait of Hormuz. Disruption risk feeds directly into price expectations, even before physical supply is affected. The UK remains structurally exposed:
Electricity prices are still set by gas at the margin
Heating demand remains heavily fossil-dependent
Domestic production does not eliminate exposure to global pricing
Retail prices have not yet fully adjusted, due to lag effects in the price cap. but the underlying mechanism remains intact. This creates a recurring tension between long-term system change and short-term political pressure. We’ve been here before, as Luke wryly commented:
“Energy shocks, conflict, high bills… it feels like the 70s again.”
UK Policy: Coherence Without Completion
UK policy developments in Q1, including AR7, the Warm Homes Plan and Clean Power 2030, have pointed in a consistent direction. The strategy is clear: reduce exposure to fossil fuels, increase domestic clean generation, and improve efficiency. However, the discussion highlighted three areas where the system remains incomplete.
Electrification of heat and transport is not yet keeping pace with decarbonisation of power. Without this, fossil fuel demand and therefore exposure remains.
Network constraints continue to delay both supply and demand-side projects. Planning and grid reform remain critical bottlenecks.
The benefits of system change are not yet clearly visible to consumers. Cost remains the primary lens through which policy is judged.
Conclusion: A System Under Pressure to Deliver
Across all five areas, a consistent picture emerges. Technologies are viable, capital is available, deployment is underway, but the constraints are now operational.
Infrastructure must scale to meet new forms of demand, policy must translate into delivery and the system must do so while maintaining public support. The challenge is not whether the transition can happen, it is whether it can happen at the pace required, within the constraints that now define it.
Thank you to Lucy Shaw, Luke Shore and Max Bray for a rich and technically grounded discussion,
🎧 The full conversation is available now as Episode 10, Series 2 of the Earth Set Podcast:
Earth Set Q1 Climate Review: What Just Happened
