Global Electricity Demand Surges Amid Heatwaves And Economic Growth: IEA Mid-Year Update 2024

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Representational image. Credit: Canva

The International Energy Agency (IEA) released its mid-year update on global electricity trends in July 2024, providing a detailed analysis of electricity demand, supply, and CO2 emissions. The report highlighted significant trends and projections for the coming years, focusing on major markets like China, the United States, the European Union, and India.

Despite the enduring impacts of the global energy crisis, electricity demand has remained robust in the first half of 2024, driven by solid economic activity, intense heatwaves, and continued electrification. The report forecasts a 4% growth in global electricity demand for 2024, the highest since 2007, except for the post-crisis rebounds in 2010 and 2021. This growth is particularly strong in China, India, and the United States.

In China, electricity demand is expected to increase by 6.5% in 2024, fueled by robust activity in the services and industrial sectors, including solar PV, electric vehicle (EV), and battery production. The ongoing expansion of 5G networks and data centers, along with strong domestic EV uptake, are also contributing factors.

India, the fastest-growing major economy, is forecast to see an 8% rise in electricity consumption in 2024, supported by strong GDP growth and increased cooling demand due to prolonged heatwaves. The first half of 2024 saw record durations of heatwaves, leading to exceptional strains on power systems. Assuming average weather conditions, electricity demand growth in India is expected to moderate to 6.8% in 2025.

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The United States is set to see a significant rebound in electricity demand in 2024, with a 3% year-on-year increase. This stronger growth rate is partly due to the comparison with 2023 when demand declined by 1.6% amid mild weather. The improved economic outlook and rising demand for air conditioning amid severe heatwaves, along with the surge in data center expansions, are driving this growth.

In the European Union, electricity demand is expected to increase by 1.7% in 2024 as economic difficulties ease. Signs of a recovery in EU electricity demand began to emerge in the fourth quarter of 2023, with further traction gained in the first half of 2024 as energy prices stabilized. However, the pace of demand recovery remains uncertain due to the elevated energy prices compared to pre-COVID levels and a moderately sluggish macroeconomic outlook.

The rise of artificial intelligence (AI) has put the electricity consumption of data centers in focus. Historical estimates of data centers’ electricity consumption are hampered by a lack of reliable data, and future projections include wide uncertainties related to AI deployment and potential energy efficiency improvements. The IEA plans to host the Global Conference on Energy and AI in December 2024 to provide more insight into this topic.

Heatwaves continue to strain power systems worldwide, with May 2024 being the hottest month since global records began. Many regions, including India, Mexico, Pakistan, the United States, and Vietnam, experienced severe heat waves, leading to surging peak loads due to increased cooling needs. As more households purchase air conditioners, particularly in emerging economies, the impact on power systems will grow. Implementing higher efficiency standards for air conditioning and expanding power grids will be crucial to ensuring reliability.

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Clean energy sources are expected to set new records through 2025. Solar PV is projected to meet roughly half of the growth in global electricity demand, with wind power generation making up almost 75% of the increase. Global electricity generation from solar PV and wind is expected to surpass hydropower in 2024. The share of renewables in global electricity supply is projected to climb to 35% in 2025.

In the European Union, wind and solar PV generation is set to exceed fossil-fired output in 2024, with the combined share of these renewable sources rising from 26% in 2023 to 33% in 2025. The share of all renewable energies in total generation is expected to reach 50% in 2024.

Global nuclear generation is on track to reach a new high in 2025, surpassing its previous record in 2021. This growth is supported by increases in output from the French nuclear power fleet, the restarting of reactors in Japan, and new reactors coming online in various markets.

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Power sector emissions are plateauing, with a slight increase expected in 2024 followed by a decline in 2025. Despite the rapid growth of renewables, strong electricity demand growth in China and India is resulting in increased use of coal-fired generation. Global coal-fired output is expected to increase by less than 1% in 2024. Global CO2 emissions from electricity generation are set to remain broadly on a plateau through 2025.

The report also noted a significant increase in the frequency of negative wholesale price events in numerous power markets in 2024, signaling the urgent need to increase system flexibility. Negative prices indicate that generation is not flexible enough, and there is insufficient storage available. Increasing system flexibility and storage capacity will be crucial to addressing this issue.


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