Electricity demand will rise much faster than overall energy growth in the coming decades, underscoring the need for diversified energy sources, according to an analysis released on Wednesday.
The report by the International Energy Agency (IEA) said renewable energy, led by solar power, will grow faster than any other major source in the next few years and that coal and oil demand will likely peak globally by the end of this decade.
The report noted that many natural gas projects were approved in 2025 due to changes in US policy, indicating worldwide supply will rise even as questions remain about how it will be used. Meanwhile, global nuclear power capacity is set to increase by at least a third by 2035 after being stagnant for years.
The release of the annual World Energy Outlook coincided with UN climate negotiations in Brazil this week, where global leaders are calling for ways to curb the planet’s warming.
Energy demand is on the rise
The IEA says building greater resilience in energy systems is especially important as data centres, heating and cooling, electrification and more drive energy demand. Electricity demand is on track to rise by around 40 per cent by 2035.
“Last year, we said the world was moving quickly into the Age of Electricity – and it’s clear today that it has already arrived,” said IEA Executive Director Fatih Birol.
“In a break from the trend of the past decade, the increase in electricity consumption is no longer limited to emerging and developing economies. Breakneck demand growth from data centres and AI is helping drive up electricity use in advanced economies, too.”
Dr Birol pointed out that global investment in data centres is expected to reach $580 billion (€501 billion) in 2025, surpassing the $540 billion (€467 billion) being spent on global oil supply. For those who say “data is the new oil”, he said, it is “a striking example of the changing nature of modern economies”.
Global warming to exceed 1.5°C
The outlook explores a range of different scenarios that represent the potential futures of the global energy system. It stresses that none of these scenarios “should be regarded as a forecast”.
This year’s outlook shows the world surpassing 1.5°C of warming in any scenario, including those with very rapid emissions reductions.
If governments’ stated policies are implemented as planned, the IEA expects global warming to reach 2.5°C by 2100 – up slightly from 2.4°C in last year’s outlook.
If the world reaches net-zero emissions by mid-century, it projects that temperatures could be brought back below 1.5°C in the long term. Alongside “very rapid progress” in transforming the energy sector, this would require “widespread deployment of CO2 removal technologies”- technologies that are currently unproven at a large scale.
This year, the IEA has also reintroduced a more pessimistic pathway known as the “current policies scenario” for the first time since 2019. It looks at what could happen if governments abandon planned energy policies and move forward with only what is already set in legislation or regulation.
In this “current policies scenario”, the outlook suggests that the world would warm to 2.9°C above pre-industrial levels by 2100, and continue climbing from there.
As many countries missed the deadline to publish their new climate plans ahead of COP30, the IEA will publish a scenario which looks at “announced pledges” at a later date once there is a “more complete picture” of these commitments.
Will demand for fossil fuels peak?
If the world’s governments implement their stated energy policies as planned, overall fossil fuel use is still likely to peak before 2030, according to the IEA.
In previous years, the IEA’s annual outlook suggested that the use of oil, gas and coal could start to decline by the 2030s. Now, the picture is much more complicated, reflecting how momentum behind climate action has slowed in some major economies, making the transition away from fossil fuels less certain.
Coal use has already peaked or is very close to doing so, and it is expected to steadily decline if governments deliver on their current energy and climate policies. Oil demand is set to flatten by 2030 before gradually falling. But natural gas use is expected to continue growing into the 2030s, rather than peaking earlier as previous outlooks had suggested.
Under the “current policies scenario”, the IEA says global oil and gas demand could continue to grow until 2050.
In a conference call on Wednesday, Birol said: “We will still use oil, we will still use gas. But the growth of electricity demand is spectacular.”
He noted the role transportation plays in accounting for 45 per cent of global oil consumption, for example.
“How the electrification of the transportation takes place, especially in countries beyond China and Europe, will determine the shape of the oil demand and growth.”
Not a ‘business as usual’ scenario
Wednesday’s version of the annual report is the first to be released since the start of President Donald Trump’s second term as US President. After opting out of the Paris Agreement for the second time, Trump’s administration has rolled back dozens of climate regulations and slashed support for renewable energy projects.
Instead, Trump has pledged his support to the fossil fuel industry, investing in coal and loosening restrictions on pollution.
The IEA has reportedly come under pressure from the US, which is a major funder of the Paris-based agency, to include the current policies scenario – one that is more positive about the future of fossil fuels.
The authors of the report said inan essay published online that they were bringing back this scenario because it was important to “view the world through different lenses” and didn’t mention pressure from the US.
The outlook emphasises that this scenario is not “business as usual” and would require no change from governments, even where they have indicated their intention to do so. In the EU, for example, it would mean countries failing to meet their coal phase-out pledges or making no further improvements to energy efficiency regulations.
Renewables and electrification will ‘dominate the future’
Energy analysts believe that the shift to clean power is happening regardless of climate policy around the world.
“The evidence on the ground is overwhelming. EV sales are taking off in many emerging countries, solar is permeating even through the Middle East,” said Dave Jones, chief analyst at global energy think tank Ember.
“Renewables and electrification will dominate the future.”
Some, like Ben Backwell, CEO of the Global Wind Energy Council, said the outlook does not fully capture the momentum in renewables. He said it should have emphasised that the trajectory for renewable energy is accelerating, driven by the decreasing cost of the technologies, strong policy support and the move toward electrification.
“We’re accelerating,” he added. “You can see it all around the world and we can see it in our numbers for last year, but also in our numbers for the first half of this year. It looks very, very exciting, both for wind and for solar, in fact, and for next year, even more so.”
Stephan Singer, global energy senior advisor at CAN International, said that the IEA is “backsliding”.
“As a global think tank, the IEA has largely failed to represent where most countries in the (Organisation for Economic Co-operation and Development) and the developing world are, as they’re supporting net zero emissions with 98 per cent CO2 emissions reductions by mid-century,” he added.
The IEA addressed some of the criticism in the call on Wednesday. It said that it sees differences economically, politically and with regard to clean energy efforts across the globe, and that its analysis tries to account for those differences.