Global Electricity Demand Surges, Driven by AI and Electrification, Highlighting Energy Production as Key Economic Metagame

Global electricity demand is projected to experience robust growth in the coming decades, with experts like John Loeber emphasizing that "the economic metagame of the coming decades is becoming increasingly clear: it all reduces to electricity production." Nations that can produce the most affordable electricity are poised to gain a significant economic advantage, according to Loeber, a co-founder and CEO of Limit and former founding engineer at Coalition.

The International Energy Agency (IEA) forecasts global electricity demand to expand by 3.3% in 2025 and 3.7% in 2026, outpacing overall energy demand growth. This surge is attributed to increasing industrial activity, the widespread adoption of air conditioning, the rapid expansion of data centers, and the growing fleet of electric vehicles. The IEA notes that this growth rate remains well above the 2015-2023 average of 2.6%.

Emerging economies in Asia, particularly China and India, are expected to drive 60% of the increase in global electricity consumption over 2025 and 2026. China's electricity demand is forecast to rise by 5.7% next year, while India's is projected to grow by 6.6%, reflecting strong economic activity and ongoing electrification efforts in these regions.

In the United States, the rapid expansion of data centers, fueled by investments in artificial intelligence, is a significant factor. Data centers are expected to keep annual electricity demand growth above 2% in both 2025 and 2026, more than double the average growth rate over the past decade. The Electric Power Research Institute estimates that the U.S. data center industry could consume as much as 9% of all power on the grid by 2030.

Renewable energy sources, alongside natural gas and nuclear power, are anticipated to meet this escalating demand. Renewables are expected to surpass coal as the world's largest source of electricity as early as 2025 or by 2026. This shift is crucial for mitigating carbon dioxide emissions from electricity generation, which are currently projected to plateau in 2025 and see a slight decline in 2026.

Despite these advancements, significant investments in grid infrastructure, storage, and other flexibility sources are essential to ensure power systems can securely and affordably meet the growing demand. The IEA highlights that electricity prices still vary considerably across regions, with implications for industrial competitiveness, particularly in the European Union where prices remain significantly higher than in the U.S. and China.