The growth in world electricity demand is expected to accelerate to an average of 3% over the next three years.
More than 70% of the increase in global electricity demand over the next three years is expected to come from China, India, and Southeast Asia, although considerable uncertainties remain over trends in China as its economy emerges from strict Covid restrictions. China’s share of global electricity consumption is currently forecast to rise to a new record of one-third by 2025, up from one-quarter in 2015. At the same time, advanced economies are seeking to expand electricity use to displace fossil fuels in sectors such as transport, heating, and industry.
While natural gas-fired power generation in the European Union is forecast to fall in the coming years, based on current trends, significant growth in the Middle East is set to partly offset this decrease. Sharp spikes in natural gas prices amid the energy crisis have in turn fueled soaring electricity prices in some markets, particularly in Europe, prompting debate in policy circles over reforms to power market design.
The strong growth of renewables means their share of the global power generation mix is forecast to rise from 29% in 2022 to 35% in 2025, with the shares of coal- and gas-fired generation falling. As a result, the CO2 intensity of global power generation will continue to decrease in the coming years. Europe bucked this global trend last year, however. The CO2 intensity of Europe’s power generation increased because of higher use of coal and gas amid steep drops in output from both hydropower, due to drought, and nuclear power, due to plant closures and maintenance. This setback will be temporary, though, as Europe’s power generation emissions are expected to decrease on average by about 10% a year through 2025.
As the clean energy transition gathers pace, the impact of weather events on electricity demand will intensify due to the increased electrification of heating, while the share of weather-dependent renewables will continue to grow in the generation mix. In such a world, increasing the flexibility of power systems while ensuring security of supply and resilience of networks will be crucial.