Global electricity demand and renewable energy generation are set to reach record levels in 2025 and 2026, according to the Electricity Mid-Year Update 2025 released by the International Energy Agency (IEA). The report highlights how sustained electrification trends are driving growth even as global economic expansion slows.
Electricity demand is forecast to rise by 3.3% in 2025 and 3.7% in 2026, more than double the growth rate of overall energy consumption. The bulk of this increase is expected from China and India, which together will account for around 60% of the global growth. Meanwhile, demand in the United States is being fueled by expanding data centers and electrification initiatives, while the European Union is gradually rebounding from earlier declines.
Renewable Energy at the Forefront
The report notes that wind and solar power will contribute more than 90% of new demand in 2025, with total generation from these sources expected to surpass 5,000 TWh this year and 6,000 TWh in 2026. Renewables are forecast to overtake coal-fired generation for the first time in history by 2025 or 2026, as coal’s share of electricity falls below 33%.
Solar PV and wind combined are projected to rise from 15% of global generation in 2024 to nearly 20% by 2026, marking a fivefold increase in just a decade.
In addition to renewables, nuclear power is expected to reach record levels due to reactor restarts in Japan and capacity additions in China and India. Gas-fired generation is also set to grow, driven by oil-to-gas switching in the Middle East and increased demand in Asia.
Emissions Stabilize Amid Rising Demand
The IEA forecasts that CO₂ emissions from electricity generation will plateau in 2025 and slightly decline in 2026, despite record-breaking heatwaves boosting demand for cooling. Emission reductions are largely led by China and the EU, while increases in India and Southeast Asia—where coal-based generation is still expanding—temper global progress.
The carbon intensity of electricity is expected to fall by 3.7% annually, with the EU achieving a 10% annual reduction through 2026.
Electricity Prices Show Regional Disparities
Electricity prices have diverged across regions, with Europe and the U.S. experiencing price increases of 30–40% amid high gas costs. In contrast, prices in India and Australia are expected to decline by 5–15% due to improved supply.
The report also highlights the rise of negative electricity pricing in Europe, where 8–9% of hours are projected to see prices drop below zero—underscoring the growing importance of grid flexibility solutions such as energy storage and demand response.
Security Risks and Grid Stability Concerns
The IEA warns that increased complexity in power systems has led to recent blackouts, including a 17-hour outage in Chile and over 10 hours of disruptions in Spain and Portugal. Experts are calling for updated grid codes, diversified flexibility options, and strengthened supply chains to ensure resilience.
Outlook
Despite economic headwinds, the electrification of transport, industry, and cooling is expected to continue driving growth in electricity demand. Renewables remain at the center of this transformation, complemented by nuclear and gas-fired power. However, policymakers and energy stakeholders are urged to address supply security, pricing volatility, and grid stability to sustain the momentum toward global energy transition goals.
Discover more from SolarQuarter
Subscribe to get the latest posts sent to your email.
