Feature, Freight News, Logistics

Robust Electricity Demand Faces Headwinds, IEA

[ September 5, 2025   //   Gary Burrows ]

Global electricity demand is expected to expand at one of the fastest sustained paces in more than a decade despite ongoing economic pressures, according to a recent report of the International Energy Agency, or IEA.

Renewables, natural gas and nuclear all contributing to meet the additional demand.

Electricity demand is set to rise by 3.3 percent in 2025 and 3.7 percent in 2026 – more than twice as fast as total energy demand growth over the same period, the IEA’s Electricity Mid-Year Update finds. The new report underscores the increasing demand for electricity to power factories and appliances, keep buildings cool, operate growing fleets of data centers, run electric vehicles and more.

While the latest forecasts for global electricity demand growth this year and next are a deceleration from the 4.4 percent surge recorded in 2024, they remain well above the 2015-2023 average of 2.6 percent.

Renewables are expected to overtake coal as the world’s largest source of electricity as early as 2025 or by 2026 at the latest, depending on weather and fuel price trends. At the same time, nuclear power output is expected to reach record highs, driven by reactor restarts in Japan, robust output in the U.S. and France, and new additions, mostly in Asia. The steady increase in gas-fired power generation is set to continue displacing coal and oil in the power sector in many regions.

As a result of these developments, carbon dioxide emissions from electricity generation are forecast to plateau in 2025 and record a slight decline in 2026, although weather and economic conditions could affect that trajectory.

“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 strong expansion of renewables and nuclear is steadily reshaping electricity markets in many regions. But this must be matched by greater investment in grids, storage and other sources of flexibility to ensure power systems can meet the growing demand securely and affordably.”

Emerging economies in Asia account for the bulk of global electricity demand growth. China and India are expected to drive 60 percent of the increase in global electricity consumption over 2025 and 2026. Demand growth is forecast to accelerate to 5.7 percent in China and 6.6 percent in India next year, from 5 percent and 4 percent in 2025, respectively.

In the U.S., the rapid expansion of data centers is expected to keep annual electricity demand growth above 2 percent in both 2025 and 2026, more than double the average growth rate over the past decade. By contrast, electricity consumption in the European Union is set to grow more slowly this year, at about 1 percent, though a modest acceleration is expected in 2026, the report shows.

In the first half of 2025, wholesale electricity prices in the European Union and the U.S. rose 30 percent to 40 percent from the same period a year earlier, largely due to higher natural gas prices amid a tighter global gas market. While average power prices remained below the 2023 annual levels in these markets, they were above the levels seen in 2019. Meanwhile, the frequency of negative wholesale prices is increasing in various markets, underscoring the need for greater flexibility in supply and demand, where appropriate regulatory frameworks and market designs to boost greater demand response and energy storage will be essential.

Electricity prices still vary considerably across different regions, with implications for industrial sectors. Average electricity prices for energy-intensive industries in the European Union are still double those in the U.S. and significantly higher than in China. These cost differences continue to pose challenges to the competitiveness of energy-intensive industries in the European Union.

Tags: International Energy Agency