Global Electricity Demand Poised for Acceleration Amidst Market Turmoil

Global electricity demand is poised to accelerate this year, driven by strong underlying growth from industry, electric vehicles, air conditioning, and data centers. Despite recent disruptions to global natural gas markets due to the war in the Middle East, which have pushed up electricity generation costs in many regions, the International Energy Agency (IEA) expects global electricity consumption to increase 3.6% in 2026 and a further 3.8% in 2027.

The IEA's latest Electricity Mid-Year Update forecasts that global electricity demand will reach 30,700 terawatt-hours (TWh) in 2027, up from 28,600 TWh in 2025. The report notes that recent disruptions to liquified natural gas (LNG) flows through the Strait of Hormuz have tested electricity markets around the world, driving natural gas prices in Asia and Europe to their highest levels since the 2022-23 energy crisis.

However, power systems have for the most part weathered the impacts of the crisis so far, with additional LNG supplies, particularly from North America, helping to ease market tightness. The report also highlights that renewable generation is on track to become the world's largest source of electricity generation in 2026, overtaking coal after reaching near parity in 2025.

The IEA warns that weather-related developments may affect electricity demand trends significantly, adding uncertainty to the outlook. A stronger-than-expected El Niño event in 2026 could boost electricity demand further by raising cooling needs while simultaneously reducing hydropower and wind generation in some regions.