Global electricity demand will grow at an accelerated rate over the next three years, but the additional demand will be covered by technologies that produce low-emissions electricity, according to a new report from the IEA.
In its latest annual analysis of electricity market developments and policies, the IEA provides forecasts for demand, supply and carbon dioxide (CO2) emissions from the sector through 2026.
The Electricity 2024 report found that global growth in electricity demand is projected to accelerate by an average annual rate of 3.4% from 2024 through 2026, and will do so after the growth rate had eased slightly to 2.2% in 2023 due to falling electricity consumption in advanced economies.
The IEA report stated that about 85% of the increase in the world’s electricity demand through 2026 is expected to come from outside advanced economies – most notably China, India and countries in Southeast Asia.
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The IEA also forecast that “record-setting electricity generation from low-emissions sources – comprising renewables, such as solar, wind and hydro, as well as nuclear power – should reduce the role of fossil fuels in providing power for homes and businesses”.
Low-emission sources are expected to account for almost half of the world’s electricity generation by 2026, up from a share of just under 40% in 2023.
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“Renewables are set to make up more than one-third of total electricity generation by early 2025, overtaking coal.” the report stated
It added that nuclear power generation will reach also reach an all-time high in 2025 as output from France climbs, several plants in Japan come back online, and new reactors begin commercial operations in markets including in China, India, Korea and Europe.
The IEA noted that the world will reach an important milestone when the share of fossil fuels in global generation eventually falls beneath 60% as it will mark the first time it has gone below this threshold in IEA records dating back more than five decades.
“The power sector currently produces more CO2 emissions than any other in the world economy, so it’s encouraging that the rapid growth of renewables and a steady expansion of nuclear power are together on course to match all the increase in global electricity demand over the next three years,” said IEA executive director Fatih Birol.
“This is largely thanks to the huge momentum behind renewables, with ever cheaper solar leading the way, and support from the important comeback of nuclear power, whose generation is set to reach a historic high by 2025. While more progress is needed, and fast, these are very promising trends.”
The report found that the increase in electricity generation from renewables and nuclear “appears to be pushing the power sector’s emissions into structural decline”.
Global emissions from electricity generation are expected to decrease by 2.4% in 2024, followed by smaller declines in 2025 and 2026.
“The decoupling of global electricity demand and emissions would be significant given the energy sector’s increasing electrification, with more consumers using technologies such as electric vehicles and heat pumps,” the IEA stated.
Electricity was described as accounting for 20% of final global energy consumption in 2023, up from 18% in 2015, though the IEA warned that “meeting the world’s climate goals would require electrification to advance significantly faster in the coming years”.
The IEA found that electricity prices were generally lower in 2023 than in 2022, but noted that price trends varied widely among regions, affecting their economic competitiveness.
Wholesale electricity prices in Europe declined by more than 50% on average in 2023 after having reached record highs in 2022 following Russia’s invasion of Ukraine.
Electricity demand in the European Union declined by 3.1% in 2022 and by 3.2% in 2023 — a fall of “historic proportions” according to the IEA. The report said this was primarily due to lower consumption in the industrial sector, and forecast that demand is unlikely to return to levels seen before the global energy crisis until 2026 at the earliest.
Yet electricity prices in Europe last year were still more than double pre-Covid levels, while prices in the United States were about 15% higher than in 2019.
And demand has continued to rise in many emerging and developing economies in response to increasing populations and industrialisation, the IEA stated.
India is set to see electricity demand rise the fastest among major economies, with demand added over the next three years forecast to be roughly equivalent to the current electricity consumption of the United Kingdom, the report noted.
China is still expected to account for the largest part of the global increase in electricity demand in terms of volume, even as its economic growth slows and becomes less reliant on heavy industry in the outlook period, the IEA stated.
In contrast, electricity use per capita in Africa remains “effectively stagnant” , the IEA noted.
“Electricity use is a key indicator of economic development in any country, and it’s a grim sign that it has flatlined in Africa on a per capita basis for over three decades,” Birol said.
“Access to reliable, affordable and sustainable energy for all citizens is essential for African countries to achieve their economic and climate goals. The international community needs to work together with African governments to enable the urgent progress that is needed.”