City blackout. Credit: Alexandra_Koch, Pixabay
The International Energy Agency (IEA) has released its World Energy Outlook 2025, warning that the world’s electricity demand is rising faster than expected due to the boom in electric vehicles, data centres, and the electrified industries.
The report also highlights widening energy inequality and the urgent need for grid investment and clean energy financing.
The IEA’s flagship analysis maps three scenarios: the Current Policies Scenario (CPS), Stated Policies Scenario (STEPS), and Net Zero Emissions Scenario (NZE).
Emerging economies drive demand, but inequality persists
Under the IEA’s ACCESS Scenario, universal electricity access could be reached by 2035, and clean cooking access by 2040, potentially cutting 1.25 gigatonnes of CO₂-equivalent emissions each year and reducing premature deaths from household air pollution by nearly two-thirds.
However, 730 million people still live without electricity, and 2 billion rely on polluting cooking methods. The IEA warns that, “the world is not on track to close this huge gap” without significant new investment.
Achieving universal access would require roughly USD 23 billion per year for electricity and USD 4 billion annually for clean cooking – modest sums compared to global energy spending but critical for human development.
Fossil fuel demand slows
In the CPS, oil and gas demand continues to grow until mid-century, with coal peaking before 2030. Under the STEPS scenario, coal use declines sooner, and oil demand plateaus by the end of the 2020s. Natural gas remains resilient into the 2030s, buoyed by new liquefied natural gas (LNG) exports that ease prices.
In contrast, the NZE Scenario (aligned with the Paris Agreement) sees renewable capacity quadruple by 2035, energy efficiency rise 4 per cent annually, and methane emissions cut by 80 per cent.
Global energy-related CO₂ emissions, which reached 38 gigatonnes in 2024, would fall to 18 gigatonnes by 2035 in the NZE path, limiting temperature rise to 1.65 °C by mid-century before gradually returning below 1.5 °C by 2100.
Data centres and AI
Electricity demand from AI and data centres accounts for less than 10 per cent of global growth, but a far higher share in the United States and Europe. Peak power demand is expected to rise by 40 per cent by 2035, challenging grids that were not designed for such load spikes.
Taryn Fransen, Director of Global Research at the WRI Polsky Centre, said the report “shows both the opportunities and risks of the global energy transition.”
“Power systems could struggle to keep up – but with smart investment in transmission, storage and efficiency, this challenge could become an opportunity,” she told the World Resources Institute.
Fransen urged policymakers to collaborate with major electricity buyers such as tech firms operating data centres, warning that without coordination, “households will face higher bills and more blackouts.”
Critical minerals and supply chain risks
An important new theme this year is the security of supply for critical minerals, which underpin renewable and battery technologies. The IEA notes that mining remains highly concentrated in a few countries, creating vulnerability to market shocks.
The agency calls 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 USD (€4.42 trillion) annually by 2035, up from $3.3 trillion (€3.04 trillion) today.
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