February 14th,  2025

Rising Global Electricity Demand Sparks Concerns Over Costs and Climate Progress

The world’s electricity consumption is set to surge, with annual increases exceeding the total electricity use of Japan, driven by the rapid expansion of electric transport, air conditioning, and data centres, according to the International Energy Agency (IEA).

The Paris-based energy watchdog has revised its electricity demand forecasts upwards, predicting an annual growth rate of nearly 4% through 2027—higher than its previous estimate of 3.4%.

This shift marks what the IEA calls a “new age of electricity,” fueled by the climate crisis and the ongoing transition away from fossil fuels. Rising global temperatures are increasing reliance on air conditioning, while governments are accelerating the adoption of electric vehicles, clean heating systems, and electrified heavy industry. Additionally, the rapid expansion of AI-powered data centres is contributing to soaring electricity demand.

The prospect of an electricity-hungry AI boom has raised concerns that energy supplies could become strained, pushing up costs and hindering efforts to phase out fossil fuels from power generation.

China is expected to lead this surge, with electricity demand rising 7% last year and projected to grow at an average of 6% annually over the next three years. Much of this increase is linked to China’s dominance in solar panel, battery, and electric vehicle manufacturing.

In the US, electricity demand is set to rise significantly, adding the equivalent of California’s total power consumption by 2027. Meanwhile, demand in the European Union is forecast to return to 2021 levels after declining in recent years due to soaring energy prices.

Keisuke Sadamori, an IEA director, noted that the accelerating demand for electricity reflects the profound transformation of global energy systems. However, he cautioned that this shift presents new challenges for governments in maintaining a secure, affordable, and sustainable power supply.

Dave Jones, a director at global energy think tank Ember, emphasised that while clean energy projects are expanding to meet rising demand, their growth is not yet sufficient to replace fossil-fuel-based electricity entirely.

“Greater investment in clean electricity is crucial,” Jones said. “Without it, coal and gas generation could remain at record levels in 2027, just as they are in 2024. The age of electricity must also be the age of clean electricity if we are to unlock its cost, security, and climate benefits.”