Key Takeaways

• Global electricity demand is projected to rise 3.6% in 2026, with renewables expected to surpass coal as the leading source of power.
• Solar energy is anticipated to grow significantly, becoming the second-largest source of renewable electricity.
• Coal usage is increasing due to high gas prices, but renewable growth and nuclear energy are likely to limit future emissions increases.

Electricity Demand on the Rise

Global electricity consumption is set to increase significantly, with the International Energy Agency (IEA) forecasting a growth rate of 3.6% in 2026, following a 3% increase in the previous year. Demand is expected to escalate from 28,600 terawatt-hours (TWh) in 2025 to 30,700 TWh by 2027, driven primarily by rising industrial activity, air conditioning, appliance use, electric vehicle (EV) charging, and data centers.

Renewable Energy’s Growing Role

Renewable sources are projected to meet a larger share of this demand. With an expected rise of over 8% in renewable electricity generation this year, the share of renewables in the global power mix is anticipated to grow from 33% in 2025 to 37% by 2027. Notably, solar energy is driving much of this growth, with generation expected to increase by approximately 600 TWh in 2026, surpassing wind to become the second-largest renewable source after hydropower.

This expansion is particularly crucial as countries seek to diversify their energy supply amid fluctuations in natural gas markets, exacerbated by geopolitical tensions such as the war in the Middle East. The disruptions to liquefied natural gas (LNG) shipments have pushed gas prices to unprecedented levels, prompting some regions to implement emergency measures and switch from gas to coal to manage electricity costs.

Regional Demand Trends

China’s electricity consumption is expected to rise by 5.5% in 2026, fueled by manufacturing and expanding EV infrastructure. India is anticipated to experience a rebound in demand to around 7%. Meanwhile, electricity use in the US and the European Union is projected to grow nearly 2%. In the US, data centers have emerged as significant contributors to this demand, a stark contrast to the relatively stable consumption patterns observed over the last two decades.

However, in price-sensitive markets across Asia, such as Pakistan and Bangladesh, higher gas prices and supply disruptions are constraining electricity consumption. Weather patterns also pose potential challenges; the IEA warns that a stronger-than-expected El Niño could drive up demand due to increased air conditioning usage while simultaneously diminishing hydropower and wind generation in some areas.

Emissions and Pricing Outlook

Global carbon emissions from electricity generation are projected to see a moderate increase of about 1% in 2026 before stabilizing in 2027. The surge in coal generation, spurred by high gas prices, threatens to increase emissions in the short term. Nevertheless, ongoing growth in renewables and nuclear energy is expected to mitigate emissions increases moving forward.

The LNG disruptions are evident in wholesale electricity prices, which surged by over 30% year-over-year in the EU and Japan during the second quarter of 2026. While US prices remained stable, India witnessed a modest increase of less than 10%. In contrast, an increasing share of renewables is creating more instances of negative wholesale electricity prices, highlighting the necessity for improved grid flexibility to accommodate intermittent wind and solar power.

To manage this variability, solutions such as battery storage and demand response are becoming increasingly essential. The IEA emphasizes the need for power systems to enhance their adaptability to align with fluctuating demand and supply dynamics as the energy landscape evolves.

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