A new International Energy Agency (IEA) report forecasts the global electricity demand to grow at close to 4% annually through 2027, with consumption expected to rise by 3,500 TWh. Solar PV generation will meet roughly half of the electricity demand growth as this clean energy industry continues to be backed by cost reductions and policy support.
Coal was the largest source of power generation in 2024 with a share of 47%. Solar PV, on the other hand, produced 7% of the global electricity generation as it hit the 2,000 TWh mark, up from 5% in 2023.
According to the IEA’s Electricity 2025 report, in the European Union (EU), solar PV surpassed coal in terms of electricity generation in 2024 as its share exceeded 10%. Elsewhere in China, the US and India, its share will reach 10% over the forecast period. Wind energy generation will meet around 1/3rd of additional global electricity demand during 2025-2027.
Combined, renewable energy generation sources such as solar, wind and hydropower are forecast to meet about 95% of the electricity demand growth through 2027. In 2025, these are forecast to provide more than one-third of total electricity generation globally, overtaking coal, according to the report writers.
Emerging and developing economies will account for 85% of this demand growth over the next 3 years, led by China where electricity consumption rose by 7% in 2024, and is expected to grow by an average of around 6% by the forecast year. Electricity-intensive manufacturing of solar panels, batteries, electric vehicles (EV) and associated materials are contributing to China’s growing demand for electricity. To understand this, the report writers analyze the country’s exports of energy-intensive goods in the form of products manufactured in the country.
It reads, “New energy products are responsible for most of the increase in indirect electricity exports of the considered goods in this analysis. The electricity required for the manufacturing processes for exports of solar PV modules, batteries and EVs are 60 TWh higher in 2024 compared to 2021. PV modules alone make up almost 92% of this increase, exports of lithium batteries around 6% and the remainder EVs.”
The report writers attribute the surge in power demand over the next 3 years to the growing use of electricity for industrial production, increased demand for air conditioning, accelerating electrification led by the transport sector, and the rapid expansion of data centers.
(Photo Credit: IEA)
The IEA report explores the recent rising occurrences of negative wholesale electricity prices, especially in Australia’s NEM that it sees as having the highest level of negative electricity price occurrences globally.
The IEA also reflects on the extreme weather events of 2024 as winter storms in the US, hurricanes in the Atlantic, weather-related blackouts in Brazil and Australia, and droughts reducing hydropower in Ecuador, Colombia and Mexico, to stress the importance of ensuring sufficient dispatchable capacity and storage.
Writers recommend, “When planning for resource adequacy to reliably meet electricity demand with available supply, taking into consideration the unpredictable nature of weather events is becoming increasingly important.”
It also touches upon the negative wholesale electricity price trend whose occurrence is increasing in some regions, including southern California in the US, in some countries of Europe, and even in Australia’s Victoria and South Australia.
In fact, the IEA singles out Australia’s National Electricity Market (NEM) as having the highest level of negative electricity price occurrences globally. In South Australia, wholesale electricity prices have been negative 25% of the time since 2023. Across the country, barring Tasmania, inflexible rooftop solar PV is identified as a significant contributor to negative prices with a share of 20% to 30% in generation during negative price periods.
Rising instances point to the lack of flexibility in the system due to technical, regulatory or contractual reasons, particularly during times of low electricity demand and abundant electricity generation. These need to be addressed through adequate regulatory frameworks, market designs and tariff structures, recommend the report writers.
