International Energy Agency forecasts faster growth in global electricity consumption despite energy market volatility.
Global electricity demand is expected to accelerate over the next two years, even as power systems continue to navigate energy market disruptions and volatile fuel prices, according to the International Energy Agency’s (IEA) latest Electricity Mid-Year Update.
Published today, the report forecasts global electricity demand will increase by 3.6 per cent in 2026 and a further 3.8 per cent in 2027, compared with growth of 3 per cent in 2025. Global electricity consumption is projected to reach 30,700 terawatt-hours (TWh) by 2027, up from 28,600 TWh in 2025.
The IEA said demand continues to be driven by industrial activity, household appliances, air conditioning, electric vehicles and the rapid expansion of data centres around the world.
RELEVANT SUSTAINABLE GOALS
Energy Market Disruptions Test Global Power Systems
The report says recent disruptions to global natural gas markets caused by the war in the Middle East have increased electricity generation costs in many regions.
Disruptions to liquefied natural gas (LNG) flows through the Strait of Hormuz pushed natural gas prices in Asia and Europe to their highest levels since the 2022-23 energy crisis and prompted emergency measures to reduce energy consumption in some regions.
According to the IEA, power systems have largely weathered the impacts of the crisis so far. Additional LNG supplies, particularly from North America, have helped ease market tightness.
Nevertheless, higher natural gas prices have prompted fuel switching from natural gas to coal in several countries across Asia and Europe.
At the same time, growing electricity generation from renewable energy sources has diversified power supplies in many countries, strengthening energy security and helping cushion the impact of the market disruption.
Renewable Energy Set to Overtake Coal in Global Electricity Generation
The report projects that renewable energy will become the world’s largest source of electricity generation in 2026, overtaking coal after reaching near parity in 2025.
Renewable electricity generation is expected to grow by more than 8 per cent in 2026, increasing its share of global electricity generation from 33 per cent in 2025 to 37 per cent by 2027.
The IEA said the continued expansion of renewable energy is reshaping the global electricity mix as countries increase investment in cleaner sources of power.
Solar Power Continues to Lead Global Electricity Growth
Solar photovoltaic (PV) generation is expected to remain the fastest-growing source of electricity supply worldwide.
According to the report, solar PV generation will expand strongly over the next two years, overtaking wind power in 2026 to become the world’s second-largest source of renewable electricity generation after hydropower.
Global solar PV electricity output is forecast to increase by around 600 TWh in 2026, matching the record annual growth achieved in 2025. The report expects similarly strong expansion in 2027.
China, India, United States and European Union Drive Demand Growth
The world’s largest economies are expected to record strong increases in electricity consumption over the forecast period.
In China, electricity demand growth is projected to accelerate to 5.5 per cent in 2026, supported by manufacturing activity and expanding electric vehicle charging.
India’s electricity demand is forecast to rebound to 7 per cent after weather-related weakness in 2025.
Among advanced economies, electricity demand growth is expected to remain robust at close to 2 per cent in both the United States and the European Union.
By contrast, the report says sharply higher fuel costs and supply disruptions are weighing on electricity consumption in more price-sensitive LNG-importing markets in Asia, including Pakistan and Bangladesh.
Weather Could Significantly Influence Electricity Demand
The IEA cautions that weather conditions remain a significant source of uncertainty for electricity demand projections.
According to the report, a stronger-than-expected El Niño event during 2026 could increase electricity demand further by raising cooling needs while simultaneously reducing hydropower and wind generation in some regions.
Such conditions could increase reliance on other electricity generation sources.
Carbon Emissions Expected to Rise Before Stabilising
Global carbon dioxide (CO2) emissions from electricity generation are forecast to increase by around 1 per cent in 2026 before flattening in 2027.
The report attributes the increase partly to higher natural gas prices, which have encouraged greater coal-fired electricity generation.
However, continued expansion in renewable energy together with a strong increase in nuclear power generation is expected to prevent emissions from rising further in 2027.
LNG Price Shock Pushes Wholesale Electricity Prices Higher
The report says the LNG price shock linked to disruptions through the Strait of Hormuz has translated into higher wholesale electricity prices in markets that rely heavily on LNG.
Average spot electricity prices in the European Union and Japan increased by more than 30 per cent year on year during the second quarter of 2026.
In comparison, wholesale electricity prices in the United States remained broadly stable during the same period, while prices in India increased by less than 10 per cent.
Battery Storage and Grid Flexibility Become Increasingly Important
As renewable electricity generation expands globally, the report finds that negative wholesale electricity prices are becoming more frequent in some markets.
According to the IEA, these occurrences generally indicate insufficient system flexibility resulting from technical, regulatory or contractual constraints.
The report says wider fluctuations in electricity prices throughout the day are increasing the importance of flexibility measures, including battery energy storage and demand response, to maintain reliable and efficient electricity systems.
With electricity demand continuing to grow across major economies and renewable energy expected to account for an increasing share of global generation, the report highlights the evolving balance between energy security, market stability and the transition toward lower-carbon power systems.
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