By Diana @Adobe Stock

Global electricity demand is set to rise, driven by electric vehicles, heat pumps, air conditioning, and data centers, as highlighted in The Oxford Institute for Energy Studies paper Global Electricity Demand: What’s Driving Growth and Why It Matters? While this growth strains power grids, electrification can improve efficiency, reducing overall energy demand relative to economic growth. They write:

Global electricity demand is projected to experience robust growth in the coming years. This surge is attributed to increased economic activity, heightened use of air conditioning during intense heatwaves, and the growing adoption of technologies such as electric vehicles and heat pumps. Notably, more than half of the increase in electricity demand in 2023 was driven by five key technologies: electric vehicles (EVs), heat pumps, electrolysers, air conditioning, and data centres.

EVs are becoming a significant driver of global electricity demand. EVs already account for 20% of new car sales worldwide, with China leading this transformation. This continued growth can be attributed, in part, to the ongoing advancements in battery technology and declining battery prices, making EVs more accessible to more consumers. Projections show that electricity consumption in transport could grow by 10% annually through 2050. The growing electricity demand from EVs leads to a new dynamic in electricity demand and points to the need for proactive energy policies that integrate transport and electricity planning. […]

The paper discusses the drivers and implications of global electricity demand growth. Key points include:

  1. Drivers of Growth:
    • Increased economic activity.
    • Adoption of technologies like electric vehicles (EVs), heat pumps, and data centers.
    • Rising use of air conditioning due to heat waves.
  2. Regional Perspectives:
    • North America: Significant demand increase due to advanced manufacturing and data centers.
    • Europe: Complex outlook with potential industrial relocation due to high power prices.
    • Asia: Fastest growth driven by economic development and population growth.
    • Africa: Rapid demand growth but from a low base, with significant access challenges.
  3. New Demand Drivers:
    • Data centers, AI applications, and cryptocurrency mining are emerging as major electricity consumers.
  4. Implications:
    • Energy security and the need for renewable energy sources.
    • Electricity costs influence industrial competitiveness.
    • Environmental impact depends on the energy mix used.

The projected doubling or tripling of global electricity demand by 2050 implies that electricity will become the foundation for new industrial, transport, and service sectors, with new sources of demand growth emerging rapidly from data centres, AI applications, cryptocurrency mining, and electrolysers, in addition to the already significant demand from transport, heating and cooling, and industry. This surge in electricity demand has profound implications for the global energy landscape.

The shift from fossil fuels to electricity-driven systems enhances energy security by reducing dependence on volatile fuel markets, yet introduces new vulnerabilities tied to the global competition for critical minerals like lithium and cobalt, essential for renewable technologies. At the same time, the increasing digitalisation of power systems exposes grids to cyber risks, as interconnected and automated technologies create potential entry points for malicious attacks that could disrupt entire economies. Electricity costs are emerging as a critical determinant of industrial competitiveness, with countries offering abundant, low-cost renewable power poised to attract energy-intensive industries, while high-cost regions, such as the EU, face industrial decline and reliance on imports. Urban electricity systems are under growing strain as data centres, AI infrastructure, and other clustered demands threaten to overwhelm local grids, necessitating targeted investments in smart technologies and resilient infrastructure. Meanwhile, the rapid rise of renewables signals a decoupling of electricity demand growth from greenhouse gas emissions, with solar and wind poised to dominate global generation by mid-decade. However, this transition is not without challenges, as intermittent renewable output drives market volatility, price instability, and the need for significant reforms to incentivise flexibility and ensure grid reliability. Furthermore, uncertainty in electricity demand projections must be considered because demand is influenced by several factors that are inherently unpredictable or vary over time. Finally, the benefits of electrification remain unevenly distributed, with regions like Africa still grappling with significant access deficits, in stark contrast to rapid progress in Southeast Asia and India.

Read more here.