Electricity demand: Clean energy races to meet global surge

01 08 2025 | 15:10 ESI Africa

Global electricity demand is expected to grow at one of the fastest sustained rates in more than a decade, outpacing overall energy demand and fuelling a greater shift towards renewables, natural gas and nuclear power.

This is according to a new report by the International Energy Agency (IEA) – The Electricity Market Report: Mid-Year Update – released on Wednesday (30 July).

The report forecasts that electricity demand will rise by 3.3% in 2025 and 3.7% in 2026.

What’s driving electricity demand globally?

While slightly down from the 4.4% spike recorded in 2024, these figures remain well above the 2015-2023 average of 2.6%.

This accelerating demand is driven by the rapid electrification of industrial processes, rising appliance use, expanded air conditioning, the proliferation of data centres and the growth of electric vehicles (EVs).

“The growth in global electricity demand is set to remain robust through 2026, despite an uncertain economic backdrop,” said Keisuke Sadamori, IEA Director of Energy Markets and Security.

The IEA projects that renewables could overtake coal as the world’s largest source of electricity this year or by 2026, depending on weather and fuel price trends.

Meanwhile, nuclear power generation is expected to reach new highs, supported by reactor restarts in Japan, strong output in the US and France, and new capacity additions across Asia.

Natural gas-fired power generation is also set to continue rising, helping displace coal and oil in many regions.

As a result of these trends, the report notes that global carbon dioxide emissions from electricity generation are expected to plateau in 2025 and decline slightly in 2026, though outcomes will depend on weather conditions and broader economic factors.

China, India to drive global electricity consumption

Emerging economies in Asia are forecast to account for the bulk of new electricity demand, with China and India alone projected to drive 60% of global consumption growth in 2025 and 2026.

Demand growth in China is expected to accelerate from 5% in 2025 to 5.7% in 2026, while in India it is set to rise from 4% to 6.6% over the same period.

In the US, surging data centre development is expected to keep electricity demand growth above 2% annually – more than twice the average of the past decade. In contrast, electricity consumption in the EU is expected to rise by just 1% this year, with a modest acceleration predicted in 2026.

Price volatility the only constant at present

The IEA report highlights that electricity prices remain volatile.

Wholesale electricity prices in the US and EU rose by 30% to 40% in the first half of 2025 compared to the same period a year earlier, largely driven by higher natural gas costs amid tightening global markets.

While still below 2023 levels, prices remain higher than in pre-pandemic 2019.

The report also notes an increasing frequency of negative wholesale electricity prices in some markets, highlighting the urgent need for improved system flexibility.

The IEA warns that stronger investment in power grids, storage solutions and flexible generation will be essential to support growing demand while maintaining secure and affordable electricity supply.

Also, electricity price disparities across regions continue to affect industrial competitiveness.

Energy-intensive industries in the EU face electricity costs that are still twice as high as those in the US, and significantly higher than in China, posing a persistent challenge to the bloc’s industrial competitiveness, says the report.