The Latest Report From the IEA Shows Electricity Demand Is Growing.
The International Energy Agency (IEA) has released its Electricity Mid-Year Update 2025, (1) providing a comprehensive look at electricity demand, supply, emissions and pricing trends globally. This report – a follow-up to the Electricity 2025 publication released earlier this year – confirms a global power market in transition, where renewable energy continues to rise rapidly, while energy security and emissions targets remain critical policy concerns.
The findings, supported by insights summarised in a Carbon Brief article, underscore a key milestone: the world is now within reach of renewables surpassing coal as the largest source of electricity – possibly as early as 2025. But while that headline captures attention, the broader narrative is more complex.
A Demand Rebound – and It's Not Just About EVs
Electricity demand is surging. Despite economic headwinds and a downward revision to global GDP forecasts, global electricity use is forecast to grow by 3.3% in 2025 and 3.7% in 2026. That’s well above the 2015–2023 average of 2.6%. This growth is fuelled by data centres, electric vehicles (EVs), air conditioning, and electrification of homes and industry – especially in China, India and the United States.
China and India remain the twin engines of demand. Together, they account for 60% of global electricity growth to 2026. China's electricity demand is forecast to rise 5% in 2025 and 5.7% in 2026, while India is expected to post 4% growth in 2025, accelerating to 6.6% the following year. The United States is also seeing strong demand, particularly from hyperscale data centres and semiconductor manufacturing.
Europe, on the other hand, is still limping from industrial downturns in 2022–2023. Its electricity demand is expected to rise only 1.1% in 2025, though recovery is forecast to pick up slightly in 2026.
The Rise of Renewables
The most significant takeaway from the IEA’s update is that renewables – primarily wind and solar – are rapidly closing in on coal. In 2024, solar and wind surpassed 4,000 TWh. They are projected to exceed 5,000 TWh in 2025 and 6,000 TWh in 2026. This means that, depending on weather and economic factors, renewable generation could overtake coal globally in 2025 or 2026.
As per the report, wind and solar are expected to cover over 90% of additional demand in 2025. Their share of global electricity generation is forecast to rise from 15% in 2024 to 17% in 2025, and nearly 20% in 2026 – a fivefold increase over a decade. Nuclear generation is also trending upwards, driven by restarts in Japan, robust output in France and the US, and new capacity coming online in China, India and Korea.
Hydropower has been more erratic, owing to climate variability. But after rebounding in 2024, it's expected to stay relatively flat in 2025, with hopes of a recovery in 2026, assuming favourable weather.
Coal’s Long Goodbye – But Not Everywhere
While renewables are surging, fossil fuels aren't disappearing just yet. Coal-fired generation is forecast to dip by 0.6% in 2025 and by 1.3% in 2026. The decline is led by China and the European Union, with modest increases in the US, India and parts of Asia partially offsetting those drops.
Gas-fired power is expected to grow by 1.3% annually in both 2025 and 2026, hitting new highs. The Middle East and parts of Asia are driving this trend, while in the US, higher gas prices in early 2025 triggered a short-term coal rebound.
Nuclear generation is on track to hit a record high in 2025, approaching 3,000 TWh by 2026. While politically sensitive in some regions, nuclear is clearly back in the global energy conversation.
Emissions Flatten – For Now
The good news is that power sector CO₂ emissions are plateauing. After rising 1.2% in 2024, they are expected to hold steady in 2025 and decline slightly (0.9%) in 2026. This is thanks to the acceleration of renewables and nuclear, even amid higher demand.
China remains the wildcard. It’s responsible for over half of global coal-fired generation. Even modest declines in China’s coal use can materially shift the global emissions trajectory.
In terms of carbon intensity, the global average is forecast to drop from 445g CO₂/kWh in 2024 to 415g CO₂/kWh in 2026. The EU leads the way, slashing intensity by around 10% annually, followed by China at over 5%.
Power Prices Diverge – and Negative Prices Rise
Wholesale electricity prices moved in opposite directions depending on the region. In Europe and the US, prices rose 30–40% in the first half of 2025 due to higher gas costs. In contrast, India and Australia experienced price drops of 5–15%, helped by strong renewable output and reduced input costs.
An increasingly common phenomenon is negative pricing – where surplus supply (especially from solar) pushes prices below zero. Germany, Spain and the Netherlands saw negative pricing in 8–9% of hours during H1 2025 – nearly double the level in 2024. This volatility highlights the growing need for grid flexibility, energy storage and improved market design.
For industrial users, price divergence remains stark. EU energy-intensive industries now face electricity prices roughly double those in the US and 50% higher than in China, up significantly from pre-2020 levels.
Energy Security: Still Front and Centre
While renewables are rising and emissions flattening, electricity security is more urgent than ever. As per the report, recent blackouts in Chile (February) and the Iberian Peninsula (April) underscore the growing complexity of electricity grids. The Iberian event alone left tens of millions without power.
The message from the IEA is clear: as systems decarbonise and electrification expands, grid investment, flexibility and resilience must keep pace.
The Bottom Line
The IEA’s Electricity Mid-Year Update 2025 delivers a largely optimistic message: the energy transition is gaining momentum, and renewables are set to become the dominant global electricity source by 2026. But investors should not mistake this for a smooth ride. Volatile pricing, regional disparities, and grid security risks remain live issues.
References
International Energy Agency. “Electricity Mid-Year Update 2025.” 30 July 2025. https://www.iea.org/reports/electricity-mid-year-update-2025
Evans, S. Carbon Brief. “IEA: Renewables will be world’s top power source ‘by 2026’.” 31 July 2025. https://www.carbonbrief.org/iea-renewables-will-be-worlds-top-power-source-by-2026/
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