Bite-sized report: International Energy Agency (IEA) Electricity 2025

The International Energy Agency’s (IEA) latest report proves the transition to renewables is well underway and not driven by idealism but by economic common sense.

With electricity consumption rising at its fastest pace in recent years, renewables are poised to meet 95% of this demand growth.

Energy demand surging

• Global electricity consumption is projected to rise by 4% per year to 2027.
• This equates to adding an amount greater than Japan’s annual electricity consumption every year.
• This is being driven by industry, air conditioning, data centres and transport electrification.

IEA director of energy markets and security Keisuke Sadamori commented on the report: “The acceleration of global electricity demand highlights the significant changes taking place in energy systems around the world and the approach of a new Age of Electricity. But it also presents evolving challenges for governments in ensuring secure, affordable and sustainable electricity supply.

“While emerging and developing economies are set to drive the large majority of the growth in global electricity demand in the coming years, consumption is also expected to increase in many advanced economies after a period of relative stagnation. Policymakers need to pay close attention to these shifting dynamics.”

Emerging economies drive demand

85% of demand growth is projected to come from emerging economies, led by the two giants of China and India.

China’s demand grew by 7% in 2024 and is expected to rise 6% annually to 2027.

Key drivers in China include:

• Manufacturing of solar panels, batteries, and EVs
• Air conditioning
• Data centre and 5G network expansion

Meanwhile, economic expansion and extreme heat waves fuel India's demand growth.

Although this trend may increase emissions, grids in these regions are getting cleaner. Also, electricity consumption still sits higher among richer nations.

For example, the US will add the equivalent of California’s entire power consumption over the next three years.

Europe’s demand will be more modest, only returning to 2021 levels by 2027, following major declines in 2022 and 2023 triggered by the energy crisis.

Renewables dominate

Low-emissions sources – particularly renewables and nuclear – will be enough to meet all demand growth over the next three years.

In the US and EU, clean energy may put gas out of business and meet 100% of demand.

• Renewables are on track to provide 35% of global electricity by 2025 (up from 30% in 2023).
• Solar PV is forecast to meet 50% of global electricity demand growth through 2027, supported by cost reductions and policy.
• 2024 saw European solar power overtake coal, exceeding 10% of the EU mix; the same is expected across China, the US, and India by 2027.
• Solar and wind together will cover 75% of demand growth, thanks to falling costs and scalability, something that no policy shift can easily reverse.
• Nuclear is making a strong comeback, with generation on course to hit new records every year from 2025 onward.

As a result of these forecasts, carbon dioxide emissions from global electricity generation are expected to plateau in the coming years, following a 1% increase in 2024.

All this is a massive shift - and it’s happening quietly, commented Tatiana Mitrova, research fellow at the Center on Global Energy Policy: “The future isn’t in oil - it’s in electrons. And guess what? Renewables are taking the lead - not because of policies, but because of economics.

“Electricity demand is skyrocketing, renewables are leading the charge, and energy security is reshaping the world’s power map,” said Mitrova, who was a peer reviewer for the report. “The market follows the money.” 

Despite all this, coal generation is unlikely to decline in 2025 - mostly due to China and India’s enormous demand.

“This means CO₂ emissions from the global power sector are stagnating instead of falling - not exactly great news for climate goals,” commented Mitrova.

Grid and infrastructure challenges

While renewable generation soars, infrastructure and storage remain the biggest challenges.

Who controls supply chains, technology, and infrastructure will shape the future energy landscape.

The IEA warns that without major investments in grid upgrades, storage solutions, and policy coordination, the transition could face delays, inefficiencies, and energy security risks.

“Grids and storage will make or break the transition. The real bottleneck isn’t generation - it’s infrastructure,” said Mirova.

Resilience and market volatility

The report also looked at some of the major strains faced by electricity systems in 2024, including US winter storms, hurricanes in the Atlantic, blackouts caused by extreme weather in Brazil and Australia, and droughts reducing hydropower in Ecuador, Colombia and Mexico.

These exposed vulnerabilities in electricity grids worldwide and highlighted the importance of improving resilience.

The report also examined the role weather plays in the rising volatility in wholesale electricity prices in some regions, which indicate a growing need for system flexibility.

Although relatively uncommon globally, wholesale electricity prices have been volatile in some markets, signalling a need for flexibility.

Some markets are seeing negative electricity prices, exposing inefficiencies in regulation and storage capacity.

With demand surging and renewables leading the way, modernising both physical and digital grid infrastructure is now a top priority.

Finally, energy efficiency is the missing puzzle piece that will help manage demand across sectors.

“Other IEA work has shown that if we meet global goals to double efficiency progress, we could avoid much of this anticipated demand to cut costs, improve resilience, and accelerate our climate progress,” commented Will Atkinson, climate and energy solutions research at think tank RMI.