Low-emissions electricity to outpace demand increase for next three years at least

Low-emissions electricity to outpace demand increase for next three years at least
Low-emissions electricity generation will outpace robust electricity demand growth for the next three years / GWEC
By by Roberta Harrington in Los Angeles January 24, 2024

Low-emissions electricity generation will outpace robust electricity demand growth for the next three years. This is because renewables are growing rapidly and nuclear power is on track to reach new a all-time high in 2025, says a new report by the International Energy Agency (IEA).

Electricity 2024 is the latest edition of the IEA’s annual analysis of electricity market developments and policies, providing forecasts for demand, supply and CO2 emissions from the sector through the end of 2026.

The study reveals a shift in electricity demand trends. In 2023, global electricity consumption growth slowed to 2.2% due to reduced usage in advanced economies. However, projections indicate an upcoming surge to an average of 3.4% from 2024 to 2026.

Around 85% of the world's increased electricity demand until 2026 will originate outside advanced economies, notably from China, India and Southeast Asian countries.

Nonetheless, renewable and low-emission electricity generation – comprising renewables, such as solar, wind and hydro, as well as nuclear power – is poised to reduce fossil fuel reliance for homes and businesses.

Low-emission sources are anticipated to contribute nearly half of global electricity generation by 2026, up from below 40% in 2023.

Renewables will surpass coal, constituting over one-third of total electricity generation by early 2025.

Additionally, global nuclear power generation is predicted to reach record levels by next year as output from France climbs, several plants in Japan come back online, and new reactors begin commercial operations in many markets, including in China, India, South Korea and Europe.

This shift signifies a historic moment as the share of fossil fuels in global electricity generation falls below 60% for the first time in more than five decades, according to IEA records.

IEA executive director Fatih Birol remarked: "Renewables and the resurgence of nuclear power show promising trends to meet rising global electricity demand while reducing CO2 emissions."

“The power sector currently produces more CO2 emissions than any other in the world economy, so it’s encouraging that the rapid growth of renewables and a steady expansion of nuclear power are together on course to match all the increase in global electricity demand over the next three years,” he said.

“This is largely thanks to the huge momentum behind renewables, with ever cheaper solar leading the way, and support from the important comeback of nuclear power, whose generation is set to reach a historic high by 2025. While more progress is needed, and fast, these are very promising trends,” he said.

The report also highlights a structural decline in emissions from electricity generation, with global emissions anticipated to decrease by 2.4% in 2024, followed by smaller declines in 2025 and 2026.

This disconnect between electricity demand and emissions is significant as electrification increases, with technologies like electric vehicles and heat pumps becoming more prevalent.

Electricity accounted for 20% of final energy consumption in 2023, up from 18% in 2015.

While this is progress, electrification needs to accelerate rapidly to meet the world’s decarbonisation targets. In the IEA’s Net Zero Emissions by 2050 Scenario, a pathway aligned with limiting global warming to 1.5 °C, electricity’s share in final energy consumption nears 30% in 2030.

Electricity prices were generally lower in 2023 than in 2022, said IEA. However, price trends varied widely among regions, affecting their economic competitiveness.

Wholesale electricity prices in Europe declined by more than 50% on average in 2023 after having reached record highs in 2022 following Russia’s invasion of Ukraine. Yet electricity prices in Europe last year were still more than double pre-Covid levels, while prices in the US were about 15% higher than in 2019.

Electricity demand in the European Union declined for the second consecutive year in 2023, and it is not expected to return to levels seen before the global energy crisis until 2026 at the earliest.

Although demand for electricity in Europe and the United States declined in 2023, many emerging and developing economies recorded robust growth that is set to continueto the end of 2026 in response to increasing populations and industrialisation.

During the outlook period, China is expected to account for the largest share of the global increase in electricity demand in terms of volume, even as its economic growth slows and becomes less reliant on heavy industry.

Meanwhile, India is set to see electricity demand rise the fastest among major economies, with demand added over the next three years forecast to be roughly equivalent to the current electricity consumption of the United Kingdom.

Africa remains an exception, with stagnant per capita electricity use for over three decades.

Dr. Birol emphasised the importance of reliable and sustainable energy access for African countries' economic and climate goals, calling for international collaboration with African governments to achieve urgent progress.

“Electricity use is a key indicator of economic development in any country, and it’s a grim sign that it has flatlined in Africa on a per capita basis for over three decades,” he said.

“Access to reliable, affordable and sustainable energy for all citizens is essential for African countries to achieve their economic and climate goals. The international community needs to work together with African governments to enable the urgent progress that is needed,” he said.