Electricity demand worldwide is projected to experience a slower growth rate in 2023 due to the global energy crisis and an economic slowdown affecting advanced economies, according to the International Energy Agency (IEA)’s latest Electricity Market Report.
THE DEMAND
The report’s July update indicates a decline in electricity demand in the United States by nearly 2% this year, while Japan’s demand is expected to fall by 3%, and the European Union’s demand is set to drop by 3%, similar to the decrease in 2022. This will result in the EU’s largest slump in demand on record, taking consumption levels back to those seen in 2002.
Global electricity demand is anticipated to increase by slightly less than 2% in 2023, down from the 2.3% growth rate observed in 2022. However, the IEA’s projections indicate that demand growth will pick up again in 2024, rebounding to 3.3%, assuming an improving global economic outlook.
THE GROWING DEMAND
The rise in global electricity demand is being supported by the electrification of energy systems to reduce emissions, the growing use of indoor cooling in response to rising temperatures, and robust demand growth in emerging and developing economies. China’s demand is projected to grow at an average annual rate of 5.2% over the next two years, while India’s demand is estimated to grow at an average annual rate of 6.5%.
Despite the increase in demand, the strong deployment of renewables is expected to meet all additional growth in global electricity demand over the next two years. By 2024, renewables are projected to contribute more than one-third of global electricity generation, potentially surpassing electricity generation from coal.
FOSSIL FUEL
At the same time, electricity generated from fossil fuels is expected to decline over the next two years. Electricity generated from oil is set to fall significantly, while coal-fired generation will slightly decrease in 2023 and 2024, following a 1.7% rise in 2022.
The IEA highlights the significance of the energy transition, as electricity generated from fossil fuels is projected to fall in four out of six years between 2019 and 2024, indicating a global shift towards clean energy sources.
The report also delves into the forces driving the decline in electricity demand in the EU, attributing a substantial part of the reduction to energy-intensive industries grappling with high energy prices in the aftermath of Russia’s invasion of Ukraine. Despite energy prices falling from previous highs, the EU’s energy-intensive industries continue to face challenges in 2023.
The declining electricity consumption in advanced economies, combined with the increasing role of renewables, signifies a gradual transition towards more sustainable energy systems. However, addressing challenges such as the global energy crisis, economic uncertainties, and the need for supportive policies remains crucial to achieving a resilient and clean energy future.