Global electricity demand is expected to accelerate in 2026 and 2027 despite ongoing volatility in energy markets, driven by rising consumption from industry, cooling systems, electric vehicles, appliances and expanding data centre capacity, according to the International Energy Agency’s (IEA) latest Electricity Mid-Year Update.

The IEA forecasts global electricity demand will grow by 3.6 per cent in 2026 and 3.8 per cent in 2027, following 3 per cent growth in 2025.

Global electricity consumption is projected to reach 30,700 terawatt-hours (TWh) by 2027, up from 28,600 TWh in 2025, reflecting continued electrification across major economies.

The outlook comes as global power markets face disruption from recent LNG supply constraints linked to instability in the Middle East.

Disruptions to liquefied natural gas flows through the Strait of Hormuz pushed natural gas prices in Asia and Europe to their highest levels since the 2022-23 energy crisis, increasing power generation costs and prompting some regions to introduce emergency measures to reduce energy consumption.

However, electricity systems have largely managed the impact, supported by additional LNG supplies, particularly from North America.

Higher gas prices have led several Asian and European markets to increase coal-fired generation, while the continued expansion of renewable energy has helped diversify electricity supply and improve energy security.

Renewables are expected to become the world’s largest source of electricity generation in 2026, overtaking coal after reaching near parity in 2025.

Renewable power output is forecast to increase by more than 8 per cent in 2026, raising its share of global electricity generation from 33 per cent in 2025 to 37 per cent by 2027.

Solar photovoltaic (PV) technology remains the main driver of renewable growth. Solar generation is expected to increase by around 600 TWh in 2026, matching its record annual expansion in 2025.

The growth will allow solar PV to overtake wind power in 2026 and become the world’s second-largest renewable electricity source after hydropower.

Electricity demand growth will remain strong across major economies.

China’s electricity consumption is expected to rise by 5.5 per cent in 2026, supported by manufacturing activity and increasing electric vehicle charging demand. India’s electricity demand is forecast to rebound by 7 per cent following weaker growth in 2025 due to weather-related factors.

In advanced economies, electricity consumption is projected to expand by nearly 2 per cent in both the United States and the European Union.

However, higher fuel costs and supply challenges are expected to weigh on demand in some LNG-importing Asian markets, including Pakistan and Bangladesh.

The IEA warned that weather conditions could introduce additional uncertainty into electricity markets.

A stronger-than-expected El Niño event in 2026 could increase demand for cooling while reducing hydropower and wind generation in some regions, potentially increasing dependence on other sources of electricity.

Global carbon dioxide emissions from power generation are expected to rise by around 1 per cent in 2026 before stabilising in 2027.

While higher gas prices have supported increased coal use, continued renewable expansion and stronger nuclear generation are expected to limit further emissions growth.

Electricity price volatility is also increasing. Average spot electricity prices in the European Union and Japan rose by more than 30 per cent year-on-year in the second quarter of 2026 due to LNG market pressures.

Meanwhile, wholesale electricity prices remained broadly stable in the United States and increased by less than 10 per cent in India.

The report highlighted the growing importance of flexibility measures, including battery storage and demand response, as renewable penetration increases.

Negative wholesale electricity prices are becoming more frequent in some markets, reflecting challenges in balancing supply and demand due to limited system flexibility.

The IEA said expanding storage capacity and improving grid flexibility will be critical to maintaining reliable electricity systems as renewable energy becomes an increasingly dominant part of global power generation. -OGN/TradeArabia News Service