Global electricity demand is poised for a substantial surge through , driven by the rapid expansion of artificial intelligence, data centers, electric vehicles, and increased use of air conditioning. However, the International Energy Agency (IEA) warns that existing grid infrastructure is struggling to keep pace, potentially hindering the growth of clean power sources.
The IEA’s Electricity 2026 report, released on , projects that global power demand will grow by more than 3.5% annually through the end of the decade – a rate significantly faster than overall energy demand and outpacing grid expansion in many regions. This growth is not limited to emerging economies; advanced economies, after fifteen years of relatively flat consumption, are now contributing approximately one-fifth of the projected increase in power demand through .
The rise of AI is a particularly significant factor. Electricity demand from data centers worldwide is expected to more than double by , reaching around 945 terawatt-hours (TWh) – exceeding the entire electricity consumption of Japan today. Demand from AI-optimized data centers alone is projected to quadruple over the same period. In the United States, data centers are on track to account for nearly half of the country’s electricity demand growth between now and . The report highlights that, driven by AI, the US economy is projected to consume more electricity processing data in than it currently uses for all energy-intensive manufacturing – including aluminum, steel, cement, and chemicals combined.
Addressing this escalating demand requires substantial investment in electricity generation and grid infrastructure, according to the IEA. The report emphasizes the need for improved efficiency and flexibility in data centers, alongside stronger collaboration between policymakers, the technology sector, and the energy industry. Approximately 1,600 gigawatts (GW) of currently stalled projects – out of a total of over 2,500 GW – could be integrated into the grid with swift and effective action.
On the supply side, the outlook for renewable energy is positive. Renewables are nearing parity with coal and are now projected to overtake it. Global renewable electricity generation, boosted by record solar deployments, surpassed coal in and is continuing to gain ground. Nuclear power is also experiencing a resurgence, with generation reaching a new record in , supported by reactor restarts in Japan, increased output in France, and new capacity additions in China and India. By , renewables and nuclear are expected to collectively provide half of the world’s electricity, up from approximately 42% today.
However, the IEA report also highlights challenges related to energy affordability. Household electricity prices have been rising faster than incomes in many countries since , placing financial strain on both consumers and industries. A significant portion of household electricity bills consists of non-energy components, such as network charges, taxes, and levies. Electricity is often taxed more heavily than natural gas, potentially discouraging electrification of heating and cooking. Policymakers are increasingly focused on market designs and regulations to improve affordability while incentivizing demand-side flexibility.
Electricity security remains a critical concern. Recent incidents, including blackouts in Chile, the Iberian Peninsula, and Mexico in , as well as outages affecting critical infrastructure in Finland, Estonia, the United Kingdom, and Germany, have exposed vulnerabilities in power systems. The IEA stresses the importance of strengthening the physical protection of critical infrastructure and deploying advanced monitoring and early-detection systems. A reliable electricity supply depends on robust grids, resilient supply chains, and diverse flexibility resources.
The report underscores that navigating this “Age of Electricity” requires a multifaceted approach. Beyond expanding generation capacity, significant attention must be paid to grid modernization, regulatory reform, and ensuring affordability and security of supply. The rapid growth in electricity demand, while presenting challenges, also offers opportunities for innovation, efficiency gains, and progress towards a more sustainable energy future.
