Global Electricity Demand Set to Soar, Driven by Electrification and AI, IEA Reports

The International Energy Agency (IEA) released its flagship World Energy Outlook 2025 report today, Wednesday, November 12, projecting a significant surge in global electricity demand that will outpace previous expectations. This unprecedented growth signals a new "Age of Electricity," according to iea Executive Director Fatih Birol.

The IEA attributes this accelerating demand to widespread electrification across various sectors, including transport, industry, heating, and cooling. This shift away from fossil fuels towards electrically-powered equivalents is a key driver of the revised forecasts.

A major contributor to this escalating demand is the rapid expansion of data centers and the burgeoning field of artificial intelligence (AI). Global investment in data centers is projected to reach $580 billion in 2025, surpassing the $540 billion allocated to oil supply, as reported by TechCrunch.

Additionally, rising energy needs in emerging economies, particularly in regions like India and Southeast Asia, are significantly contributing to the global increase. These regions are increasingly shaping energy market dynamics, according to the IEA.

The report, released during the opening days of the U.N. climate negotiations in Brazil, highlights both the substantial opportunities and critical risks associated with this global energy transition. It underscores the urgent need for strategic investments and policy decisions.

Taryn Fransen, Director of Global Research and Data at the WRI Polsky Center for the Global Energy Transition, stated that while power systems could struggle to keep pace, the challenge presents an opportunity to accelerate the clean energy transition with the right policies.

The IEA warns that without careful management, this surge could lead to higher energy bills, increased blackouts, and continued emissions, as noted in a statement from the WRI. Conversely, informed decisions can cut emissions and expand the clean energy sector.

• Background and Historical Context: The IEA's World Energy Outlook is an annual publication that analyzes global energy trends and scenarios. For years, the IEA has noted the growing role of electricity, but Executive Director Fatih Birol confirmed that the "Age of Electricity" has now definitively arrived, with electricity demand growing twice as fast as overall energy demand.

• Key Drivers of Demand Surge: The report details several factors behind the unprecedented electricity demand growth. Electrification of transport, such as electric vehicles, and industrial processes are significant. Furthermore, increased use of heating and cooling systems, particularly air conditioning in warmer climates and growing economies, adds substantial load to grids.

• The Impact of Data Centers and AI: Data centers, especially those supporting artificial intelligence, are emerging as one of the largest new sources of electricity demand in decades. The IEA estimates that global electricity consumption for data centers could double to approximately 945 TWh by 2030, representing nearly 3% of total global electricity consumption.

• Geographic Distribution of Demand Growth: While global, the demand surge has distinct regional characteristics. China accounted for over half of the global increase in electricity demand in 2024, with its power demand growing faster than its economy since 2020. The United States is also experiencing significant growth, with data centers projected to account for almost half of the country's total power demand growth this decade.

• Opportunities in the Energy Transition: The increased electricity demand presents a strong impetus for accelerating the deployment of low-carbon energy sources. Renewables, led by solar power, are expected to grow faster than any other major energy source, and nuclear energy is poised for a revival, with global capacity projected to increase by at least a third by 2035, according to The Associated Press.

• Risks and Challenges to Energy Security: The IEA warns that energy security risks are broadening beyond traditional oil and gas to include electricity grids, critical minerals, and digital infrastructure. Around 20% of planned data center projects risk delays due to grid bottlenecks, and investments in grid infrastructure have not kept pace with generation investments, as noted by Utilities Middle East and Electrek.

• Socio-Economic Implications: Despite the rapid growth in electricity demand, approximately 730 million people worldwide still lack access to electricity, and nearly 2 billion rely on polluting cooking methods, according to the IEA. This highlights a critical disparity and the need for inclusive energy transition strategies.

• Policy Recommendations and Future Outlook: The IEA emphasizes that governments must prioritize investments in strengthening and modernizing transmission, distribution, and storage infrastructure. Policymakers and regulators should collaborate with large electricity consumers, like data centers, to meet demand without increasing reliance on fossil fuels or driving up costs, as stated by the WRI.