Electricity demand will rise will expand significantly faster than total energy consumption over the next few decades, highlighting the importance of a variety of energy options, a report published on Wednesday indicated.
TL;DR
- The International Energy Agency (IEA) warns the world is unprepared for a significant electricity demand surge, impacting both developing and advanced economies.
- Renewable energy, especially solar, is projected to grow fastest, while coal and oil demand may peak soon, despite natural gas project approvals.
- Data center investments are soaring, and expanding economies will increasingly shape energy markets, driven by electrification and heating/cooling needs.
- Global efforts are insufficient for universal energy access and climate goals, with 730 million lacking electricity and many relying on inefficient cooking.
According to the International Energy Agency's report, renewable energy, led by solar power is projected to expand more rapidly than any other primary energy source in the coming years, with global coal and oil demand anticipated to reach their peak by the decade's close. The agency observed that numerous natural gas projects received approval in 2025, influenced by shifts in U.S. Policy, suggesting an increase in global supply despite ongoing uncertainties regarding its application. Concurrently, worldwide nuclear power capacity is expected to see a rise of at least one-third by 2035, following a period of stagnation.
This week's release of the annual World Energy Outlook occurred concurrently with U.N. Climate negotiations in Brazil, a forum where international leaders are advocating for methods to reduce global warming.
Regional dynamics
According to the IEA, strengthening energy system resilience is particularly crucial given that energy demand is being pushed by factors like data centers, heating and cooling, and electrification. The report indicates that investments in data centers are projected to hit $580 billion this year, surpassing investments in oil supply.
The IEA stated that expanding economies such as India, along with countries in Southeast Asia, the Middle East, Africa, and Latin America, will “increasingly shape energy market dynamics in the years,”, highlighting their capacity for solar energy.
Since 2010, China has been responsible for fifty percent of the worldwide increase in oil and gas consumption, and over fifty percent of the rise in electricity demand.
“In a break from the trend of the past decade, the increase in electricity consumption is no longer limited to emerging and developing economies,” IEA Executive Director Fatih Birol said in a release. Birol said that electricity use is also rising in advanced economies.
Countries are struggling to satisfy current energy needs and simultaneously get ready for risks brought on by the planet’s warming. The IEA reports that global efforts are insufficient for achieving universal energy access and climate change objectives. The IEA states that approximately 730 million individuals remain without electricity, and despite advancements, nearly a quarter of the world's population still depends on inefficient cooking practices that negatively impact their health or the planet. 2024 was also the hottest year on record.
The IEA advised that countries ought to diversify their energy supplies and collaborate to enlarge the supply chains for essential minerals required for manufacturing items such as electric vehicle batteries and components for solar and wind energy production. This also encompasses accelerating improvements to the grid, energy storage solutions, and wider infrastructure development.
“When we look at the history of the energy world in recent decades, there is no other time when energy security tensions have applied to so many fuels and technologies at once,” Birol said. “With energy security front and (center) for many governments, their responses need to consider the synergies and trade-offs that can arise with other policy goals – on affordability, access, competitiveness and climate change.”
In a conference call Wednesday, Birol said: “We will still use oil, we will still use gas. But the growth of electricity demand is spectacular.”
He pointed out that transportation accounts for 45% of worldwide oil usage, for instance. “How the electrification of the transportation takes place, especially in countries beyond China and Europe, will determine the shape of the oil demand and growth.”
Global reaction
The yearly report released Wednesday is the first since U.S. President Donald Trump began his second term. Trump's administration has, for the second time, opted out of the Paris agreement, rescinded dozens of climate regulations, cut federal support for renewable energies such as wind and solar power, and is undoing the “endangerment finding” that sits at the core of U.S. Climate policy.
Instead, Trump has committed to backing the fossil fuel sector, investing in coal and easing environmental regulations.
Energy analysts stated that the transition to clean energy is occurring irrespective of climate regulations globally.
“The evidence on the ground is overwhelming. EV sales are taking off in many emerging countries, solar is permeating even through the Middle East,” said Dave Jones, chief analyst at global energy think tank Ember. “Renewables and electrification will dominate the future.”
Maria Pastukhova, who heads the energy transition program at the climate change think tank E3G, stated that the report makes “the choices for the global energy system and the global economy unambiguous.”
“If countries want to grow their economies and protect their citizens from roller-coaster energy prices, they need to focus relentlessly on energy efficiency and the (decarbonization) of energy demand,” Pastukhova said.
Conversely, some individuals voiced disapproval regarding the outlook's treatment of oil and gas. Ben Backwell, who leads the Global Wind Energy Council, stated that the outlook fails to adequately reflect the growing momentum in renewables. He suggested it ought to have highlighted the accelerating path of renewable energy, propelled by declining technology costs, robust policy backing, and the shift towards electrification.
“We’re accelerating,” he added. “You can see it all around the world and we can see it in our numbers for last year, but also in our numbers for the first half of this year. It looks very, very exciting, both for wind and for solar, in fact, and for next year, even more so.”
The outlook foresees the likelihood of surpassing the warming threshold of 1.5 degrees Celsius (2.7 degrees Fahrenheit) established in the Paris Agreement. Nonetheless, Stephan Singer, global energy senior advisor at CAN International, a global network of environmental organizations, said getting below that point is still possible.
The IEA addressed some of the criticism in the call Wednesday. It said that it sees differences economically, politically and with regard to clean energy efforts across the globe, and that its analysis tries to account for those differences.
“In a nutshell, the IEA is backsliding. As a global think tank, the IEA has largely failed to represent where most countries in the (Organisation for Economic Co-operation and Development) and the developing world are, as they’re supporting net zero emissions with 98% CO2 emissions reductions by mid-century,” Singer said.
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Associated Press reporters Jennifer McDermott in Providence, Rhode Island, and Sibi Arasu in Bengaluru contributed to this report.
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