Urban power outage. Credit: Alexandra_Koch, Pixabay
Announced by the International Energy Agency (IEA). World Energy Outlook 2025warns that global electricity demand is increasing faster than expected due to booms in electric vehicles, data centers and the electrification industry.
The report also highlights the widening energy gap and the urgent need for grid investment and clean energy financing.
The IEA’s flagship analysis maps three scenarios: the Current Policy Scenario (CPS), the Prescribed Policy Scenario (STEPS) and the Net Zero Emissions Scenario (NZE).
Emerging economies drive demand, but inequality remains
Under the IEA’s access scenario, universal electricity access could be achieved by 2035 and clean cooking access by 2040, reducing emissions by 1.25 gigatonnes of CO₂eq per year and reducing premature deaths from household air pollution by almost two-thirds.
However, 730 million people still live without electricity and 2 billion people rely on polluting cooking methods. The IEA warns that without significant new investment, “the world is not on track to close this major gap.”
Achieving universal access would require approximately $23 billion a year for electricity and $4 billion a year for clean cooking. Although this is a modest amount compared to global energy expenditures, it is essential for human development.
Demand for fossil fuels slows
In the CPS, demand for oil and gas will continue to grow until mid-century, with coal peaking before 2030. In the STEPS scenario, coal use declines faster and oil demand peaks by the end of the 2020s. Natural gas will remain resilient through the 2030s, supported by new liquefied natural gas (LNG) exports that will ease prices.
In contrast, the NZE scenario (aligned with the Paris Agreement) is expected to quadruple renewable energy capacity by 2035, increase energy efficiency by 4 percent per year, and reduce methane emissions by 80 percent.
The NZE path would reduce global energy-related CO₂ emissions from 38 gigatons in 2024 to 18 gigatons by 2035 and limit temperature rise to 1.65 °C by mid-century, before gradually returning to below 1.5 °C by 2100.
Data center and AI
Electricity demand from AI and data centers accounts for less than 10% of global growth, but the share is much higher in the US and Europe. Peak electricity demand is expected to increase by 40% by 2035, challenging power grids that were not designed for this sudden increase in load.
Taryn Fransen, global research director at WRI’s Polsky Center, said the report “illustrates both the opportunities and risks of the global energy transition.”
“It may be difficult for power systems to catch up, but with smart investments in transmission, storage and efficiency, this challenge can become an opportunity,” she told the World Resources Institute.
Fransen urged policymakers to work with big power buyers, such as tech companies that operate data centers, warning that without coordination, “households will face higher bills and more power outages.”
Critical minerals and supply chain risks
An important new theme this year is the security of supply of critical minerals that support renewable energy and battery technology. The IEA notes that mining remains highly concentrated in a few countries, creating vulnerability to market shocks.
The agency is calling for “responsible mining, better recycling and circular design” to reduce pressure on supply chains, especially as energy transition investment is projected to reach $4.8 trillion (4.42 trillion euros) a year by 2035, up from $3.3 trillion (3.04 trillion euros) now.
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