Electricity consumption
The decline in electricity consumption in advanced economies curtailed the growth of global power demand in 2023. Worldwide electricity demand grew by 2.2% in 2023, slightly below the 2.4% growth seen in 2022. While countries like China, India, and several Southeast Asian nations experienced strong growth in electricity demand, advanced economies saw significant declines due to a sluggish macroeconomic environment and high inflation, which led to reduced manufacturing and industrial output.
Global electricity demand is projected to increase more rapidly over the next three years, with an average annual growth rate of 3.4% through 2026. This acceleration will be driven by an improved economic outlook, boosting electricity demand in both advanced and emerging economies. In particular, the ongoing electrification of residential and transport sectors, as well as the expansion of the data center sector, will support electricity demand in advanced economies and China. Electricity’s share in final energy consumption is estimated to have reached 20% in 2023, up from 18% in 2015. However, to meet global decarbonization targets, electrification must accelerate significantly. In the IEA’s Net Zero Emissions by 2050 Scenario, which aligns with limiting global warming to 1.5°C, electricity’s share in final energy consumption is expected to approach 30% by 2030.
Electricity consumption from data centers, artificial intelligence (AI), and the cryptocurrency sector could double by 2026. Data centers are major drivers of electricity demand growth across many regions. After consuming an estimated 460 terawatt-hours (TWh) globally in 2022, data centers’ total electricity consumption could surpass 1,000 TWh by 2026, equivalent to Japan’s electricity consumption. Updated regulations and technological advancements, including efficiency improvements, will be essential in moderating the surge in energy consumption from data centers.
Emerging and developing economies are the primary drivers of global electricity demand growth. Approximately 85% of the additional electricity demand through 2026 is expected to come from outside advanced economies, with China making a substantial contribution even as its economy undergoes structural changes. In 2023, China’s electricity demand rose by 6.4%, driven by the services and industrial sectors. Although China’s economic growth is expected to slow and become less reliant on heavy industry, its electricity demand growth is forecasted to moderate to 5.1% in 2024, 4.9% in 2025, and 4.7% in 2026. Despite this slowdown, China’s total increase in electricity demand through 2026, about 1,400 TWh, will be more than half of the European Union’s current annual electricity consumption. Electricity consumption per capita in China surpassed that of the European Union by the end of 2022 and is set to rise further. The rapidly expanding production of solar PV modules, electric vehicles, and the processing of related materials will continue to support electricity demand growth in China as its economy evolves.
India is set to post the fastest growth rate in electricity demand among major economies through 2026, following a 7% increase in 2023. We expect India’s electricity demand to grow by over 6% annually until 2026, driven by strong economic activity and increasing ownership of air conditioners. Over the next three years, India’s additional electricity demand will be roughly equivalent to the current consumption of the United Kingdom. While renewables are expected to meet nearly half of this demand growth, one-third is likely to come from rising coal-fired generation. Southeast Asia is also expected to see robust annual increases in electricity demand, averaging 5% through 2026, driven by strong economic activity.
While electricity use per capita in India and Southeast Asia is rising rapidly, it has stagnated in Africa for over three decades. Per capita consumption in Africa even declined in recent years due to population growth outpacing electricity supply. We only expect it to recover to its 2010-2015 levels by the end of 2026 at the earliest. Thirty years ago, an average person in Africa consumed more electricity than someone in India or Southeast Asia. However, rapid increases in electricity demand and supply in India and Southeast Asia in recent decades have transformed these regions at a spectacular pace. Meanwhile, Africa’s per capita electricity consumption in 2023 was half that of India and 70% lower than in Southeast Asia. Our forecast for Africa for the 2024-26 period anticipates average annual growth in total electricity demand of 4%, double the mean growth rate observed between 2017 and 2023. Two-thirds of this growth in demand is expected to be met by expanding renewables, with the remainder covered mostly by natural gas.
In the United States, electricity demand fell by 1.6% in 2023 after a 2.6% increase in 2022, but it is expected to recover during the 2024-2026 outlook period. The decline was mainly due to milder weather in 2023 compared to 2022, along with a slowdown in the manufacturing sector. We forecast a moderate demand increase of 2.5% in 2024, assuming a return to average weather conditions. This will be followed by growth averaging 1% in 2025-26, led by electrification and the expansion of the data center sector, which is expected to account for more than one-third of additional demand through 2026.
In the European Union, electricity demand declined for the second consecutive year in 2023, despite falling energy prices. Following a 3.1% drop in 2022, EU demand fell by another 3.2% year-on-year in 2023, reaching levels last seen two decades ago. Weaker consumption in the industrial sector was the main factor reducing electricity demand, as energy prices, though lower than in 2022, remained above pre-pandemic levels. In 2023, there were also signs of permanent demand destruction, particularly in the energy-intensive chemical and primary metal production sectors. These segments will continue to be vulnerable to energy price shocks during our outlook period.
EU electricity consumption is not expected to return to 2021 levels until 2026 at the earliest. Electricity demand in the European Union’s industrial sector fell by an estimated 6% in 2023 after a similar decline in 2022. Assuming a gradual recovery in the industrial sector as energy prices moderate, EU electricity demand growth is forecast to average 2.3% annually between 2024 and 2026. Electric vehicles, heat pumps, and data centers will remain key drivers of growth during this period, together accounting for half of the expected gains in total demand.
Electricity prices for energy-intensive industries in the European Union in 2023 were nearly double those in the United States and China. Despite an estimated 50% decline in prices in the European Union in 2023 compared to 2022, energy-intensive industries in the region continued to face significantly higher electricity costs than their counterparts in the United States and China following Russia’s invasion of Ukraine. The pre-existing price gap between the European Union and these regions has widened. As a result, the competitiveness of EU energy-intensive industries is expected to remain under pressure. Policymakers are currently discussing new initiatives and financial instruments to position the European Union among other global industrial heavyweights. The scope and effectiveness of these measures will likely determine the future of the European Union’s energy-intensive industrial sector.
Clean electricity supply is expected to meet all global demand growth through 2026. Record-breaking electricity generation from low-emission sources, including nuclear and renewables such as solar, wind, and hydro, is set to cover all global demand growth over the next three years. Low-emission sources, which will reduce the role of fossil fuels in global electricity production, are forecast to account for nearly half of the world’s electricity generation by 2026, up from 39% in 2023. Over the next three years, low-emission generation is set to rise at twice the annual growth rate seen between 2018 and 2023—a significant change, given that the power sector is the largest contributor to global carbon dioxide (CO2) emissions today.
Renewables are set to provide more than one-third of total global electricity generation by early 2025, overtaking coal. The share of renewables in electricity generation is forecast to rise from 30% in 2023 to 37% in 2026, driven largely by the expansion of increasingly affordable solar PV. During this period, renewables are expected to more than offset demand growth in advanced economies such as the United States and the European Union, displacing fossil-fired supply. In China, the rapid expansion of renewable energy sources is expected to meet all additional electricity demand, although the weather and the pace at which the country’s demand growth eases remain key uncertainties for the outlook. The strong expansion in renewable power capacity must also be accompanied by accelerated investment in grids and system flexibility to ensure its smooth integration.
The rapid growth of renewables, supported by rising nuclear generation, is set to displace global coal-fired generation, which is forecast to decline by an average of 1.7% annually through 2026. This follows a 1.6% increase in coal-fired output in 2023, driven by droughts in India and China that reduced hydropower output and increased coal-fired generation, more than offsetting strong declines in coal-fired generation in the United States and the European Union. The global outlook will be significantly influenced by trends in China, where more than half of the world’s coal-fired generation takes place. Coal-fired generation in China is currently on course for a slow structural decline, driven by the strong expansion of renewables and growing nuclear generation, as well as moderating economic growth. Despite the commissioning of new plants to boost energy supply security, the utilization rate of Chinese coal-fired plants is expected to continue falling as they are used more flexibly to complement renewables. Nevertheless, coal-fired generation in
