The IEA’s (International Energy Agency) latest Electricity Market Report revealed that the global electricity demand growth is expected to slow down in 2023 due to declining consumption in advanced economies, which continue to face the impact of the ongoing global energy crisis and an economic slowdown. Electricity demand in the European Union (EU) is projected to plummet to its lowest level in the past 20 years. The growth of renewables assumes greater significance, highlighting the importance of shifting away from fossil fuels in the energy landscape.
According to the report’s July update, the United States is expected to witness a nearly 2% decline in electricity demand this year, while Japan’s demand is forecasted to fall by 3%. The situation is similar in the European Union, where electricity demand is set to drop by 3%, matching the decrease seen in 2022. This marks the EU’s largest recorded slump in electricity demand, bringing consumption levels back to those last observed in 2002.
As a result of these developments, global electricity demand growth is predicted to increase by slightly less than 2% in 2023, down from the 2.3% growth rate seen in 2022. However, the IEA’s latest projections suggest that assuming an improving global economic outlook, demand growth is expected to rebound in 2024, reaching a rate of 3.3%.
Despite the challenges in advanced economies, global electricity demand is still being supported by various factors. Efforts to reduce emissions have led to the electrification of energy systems, and the increasing use of indoor cooling in response to rising temperatures has contributed to higher demand. Additionally, emerging and developing economies are experiencing robust growth in electricity consumption, with China’s demand projected to increase at an average annual rate of 5.2% over the next two years slightly below its 2015-19 average, and India’s estimated to grow at 6.5%, surpassing its averages from 2015 to 2019.
A notable trend highlighted in the report is the strong deployment of renewables worldwide, positioning them to meet all the additional growth in global electricity demand over the next two years. The share of renewables in global electricity generation is expected to exceed one-third by 2024, potentially surpassing coal as the primary source of electricity generation worldwide, depending on weather conditions.
Consequently, electricity generated from fossil fuels is anticipated to decline over the next two years. The IEA report indicates a significant decrease in electricity generated from oil, while coal-fired generation is projected to slightly decline in 2023 and 2024, following a 1.7% rise in 2022.
Keisuke Sadamori, the IEA’s Director for Energy Markets and Security commented, “The world’s need for electricity is set to grow strongly in the years to come. The global increase in demand through 2024 is expected to amount to about three times the current electricity consumption of Germany. And we’re encouraged to see renewables accounting for a rising share of electricity generation, resulting in declines in the use of fossil fuels for power generation. Now is the time for policymakers and the private sector to build on this momentum to ensure emissions from the power sector go into sustained decline.”
The report also highlights a significant development in the energy transition, with the IEA observing a decline in electricity generated from fossil fuels in four out of the six years between 2019 and 2024. This trend signals that the world is steadily approaching a tipping point where electricity generation from clean energy sources will progressively replace fossil fuels.
The IEA report delves into the reasons behind the declines in electricity demand in the EU, emphasizing that the bloc’s energy-intensive industries are still recovering from a production slump experienced last year. Nearly two-thirds of the net reduction in EU electricity demand in 2022 is attributed to energy-intensive industries grappling with elevated energy prices resulting from Russia’s invasion of Ukraine. This trend has persisted into 2023, despite some moderation in energy commodities and electricity prices from previous highs.