Renewables and nuclear energy to play a crucial role in meeting growing electricity needs driven by data centres and EVs. ESG BROADCAST shares key takeaways.
Electricity demand worldwide is forecast to grow at one of its fastest sustained rates in over a decade, with global consumption projected to rise by 3.3% in 2025 and 3.7% in 2026, according to the International Energy Agency’s (IEA) Electricity Mid-Year Update. This growth, despite prevailing economic headwinds, is more than twice the rate of total energy demand, and well above the 2015–2023 average of 2.6%. The surge is attributed to industrial electrification, appliance use, data centres, air conditioning, and the rapid proliferation of electric vehicles (EVs).
The IEA report indicates that renewables will overtake coal as the world’s largest source of electricity as early as 2025 or 2026, contingent on fuel pricing and weather conditions. Additionally, nuclear energy generation is expected to reach record highs due to reactor restarts in Japan, stable output in the United States and France, and capacity expansions in Asia. Gas-fired power is also projected to increase, displacing more carbon-intensive coal and oil-based sources.
Consequently, electricity-related carbon dioxide (CO₂) emissions are forecast to plateau in 2025 and slightly decline in 2026. However, the IEA cautions that this trend is vulnerable to economic shifts and climate variability. Keisuke Sadamori, IEA Director of Energy Markets and Security, stated that while supply is evolving rapidly, significant investment in grids, storage, and flexibility is essential to meet future demand securely and affordably.
Emerging Asian economies remain the epicentre of demand acceleration, with China and India expected to contribute 60% of global electricity growth through 2026. China’s demand is projected to increase by 5% in 2025 and 5.7% in 2026, while India’s will grow from 4% to 6.6% in the same period. In contrast, electricity demand in the European Union is estimated to grow by only 1% in 2025, with moderate improvement expected in 2026. The United States, driven by the rise of AI-enabled data centres, is expected to maintain growth above 2%, double the average of the past decade.
Wholesale power prices have surged by 30–40% in the EU and U.S. in the first half of 2025 compared to the same period in 2024, largely due to global gas market tightening. Although average prices remain below 2023 levels, they exceed pre-COVID benchmarks from 2019. Furthermore, the increase in negative wholesale pricing events signals a growing urgency to implement responsive market mechanisms and enhance storage capabilities.
Electricity costs remain a point of contention for industrial competitiveness. The European Union’s energy-intensive sectors still face electricity prices twice as high as those in the U.S. and substantially higher than in China.
Strategic significance lies in the global shift towards low-carbon electricity sources and the mounting pressure to modernise grid infrastructure to support sustainable demand. Policymakers and ESG stakeholders must align energy security with affordability while investing in flexible systems that can adapt to rapid technological and climate changes.
ESG BROADCAST will continue monitoring the updates related to this topic. Stay tuned to be updated on the related policy and pivotal regulatory shift.
