Global power demand to rise faster in 2026-27 amid conflict: IEA

The IEA forecasts global power demand will rise faster in 2026-27 than in 2025, driven by data centres and EVs. The West Asia conflict is raising generation costs, prompting a shift from natural gas to coal, the report states.

The global power demand will rise faster in 2026 and 2027 than in 2025, the International Energy Agency (IEA) has said in its mid-year review. The outlook comes in the backdrop of electricity generation costs rising due to the ongoing West Asia conflict.

The report said that electricity demand will grow by 3.6 per cent in 2026 and 3.8 per cent in 2027, up from 3 per cent in 2025.

Key Drivers and Risks

The report highlighted that the increasing demand from data centres, along with accelerating uptake of electric vehicles, air conditioning and heat pumps, will boost power consumption. "As a result, global electricity consumption is set to reach 30 700 terawatt hours (TWh) in 2027, up from 28 600 TWh in 2025," according to the report.

The ongoing West Asia conflict could serve as a downside risk to the outlook as rising energy prices could weigh on the global economy and lead to an overall consumption slowdown.

Fuel Shift and Renewables' Role

The report further underscored the shift in fuel used for generation from natural gas to coal on account of elevated gas prices. "The temporary loss of nearly 20% of global LNG supply has triggered significant price volatility, pushing natural gas prices in both Asia and Europe to their highest levels since the 2022-2023 energy crisis. The elevated gas prices have, in turn, prompted fuel switching from natural gas to coal in several Asian and European countries," the report stated.

Rising share of renewable energy in the overall mix has "played a key role in diversifying electricity supplies, thereby supporting energy security and helping limit the impacts of the shock".

Regional Outlook and Climate Impact

Some of the world's largest economies will see strong rises in electricity consumption. China's electricity demand growth is expected to rise to 5.5 per cent in 2026 from 5.2 per cent in 2025, driven by rising EV adoption as well as stronger manufacturing activity, according to the report.

For India, the report pegs electricity demand growth to rebound significantly to 7 per cent, up from 1.6 per cent in 2025 as the early monsoon last year cooled demand for electricity.

The report further said that a stronger El Nino event in 2026 will raise demand for cooling in many regions, thereby boosting electricity demand.

"El Nino weather pattern also typically affects electricity supply by reducing hydropower and wind generation, especially in regions such as Latin America and Southeast Asia, leading to greater reliance on coal and gas to prevent shortfalls," the report mentioned.

Renewables to Outpace Coal

The report further noted that electricity generation from renewables will outpace that from coal in 2026 after reaching parity last year. "Global generation from renewables is forecast to grow by more than 8% in 2026. Its share in the electricity generation mix is set to rise from 33% in 2025 to 37% by 2027," the report stated. (ANI)

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