A major narrative I’ve been monitoring throughout 2025 is the topic of electricity—where and how demand is increasing, its pricing, and its connection to the trending subject of AI.
Recently, the International Energy Agency unveiled the most recent version of the World Energy Outlook, the annual assessment that evaluates the current global energy climate and forecasts what lies ahead. It offers intriguing insights and several unexpected statistics about electricity, grids, and climate change. So, let’s explore some figures, shall we?
We’re in the era of electricity
Worldwide, energy demand is generally on the rise as populations grow and economies expand. However, electricity is taking center stage, with demand anticipated to surge by 40% over the next decade.
China has been the primary driver of electricity growth over the last decade, and this trend will persist. Yet, emerging economies beyond China are set to capture a much larger share going forward. While developed economies, including the US and Europe, have experienced stable demand over the last ten years, the advent of AI and data centers is expected to increase demand in these regions as well.
Air-conditioning is a significant contributor to rising demand. Growing economies will enhance access to air-conditioning; income-related AC expansion is predicted to add around 330 gigawatts to global peak demand by 2035. Additionally, rising temperatures will contribute another 170 GW during the same period. Collectively, that represents an increase of over 10% from 2024 levels.
AI is a localized phenomenon
This year, AI has been an inescapable topic for all of us. One statistic that stood out to me from this report: By 2025, data center investments are projected to exceed $580 billion. This surpasses the $540 billion allocated to the global oil supply.
It’s not surprising, then, that the energy requirements of AI are drawing attention. A key observation is that these needs differ significantly across various regions of the globe.
Data centers currently account for less than 10% of the anticipated increase in total electricity demand from now until 2035. While this is notable, it pales in comparison to sectors such as industry and appliances, including air conditioners. Even electric vehicles will impose more demand on the grid than data centers.
However, AI will undoubtedly be the driving force for the grid in certain regions. In the US, data centers are projected to constitute half of the growth in total electricity demand between now and 2030.
As previously discussed in this newsletter, data centers pose a unique challenge due to their tendency to cluster, which leads to concentrated demand in specific communities and on certain grids. Half of the data center capacity currently in development is located near large urban areas.
Anticipate a coal transition
As we demand more from our grid, the primary element that will determine the implications for climate change is the source of the electricity we consume.
At present, global grids are still predominantly powered by fossil fuels, meaning that every increment of electricity growth is accompanied by greenhouse-gas emissions contributing to global warming. Nonetheless, this is gradually shifting.
In the first half of this year, solar and wind have emerged as the top sources of electricity, surpassing coal for the first time. Coal consumption could peak and start its decline by the end of this decade.
Nuclear may help replace fossil fuels: After two decades of stagnation, the global nuclear capacity could increase by a third over the next decade. Solar is also expected to continue its rapid ascent. Of the anticipated electricity demand growth over the coming decade, 80% will occur in areas with high-quality solar exposure—signifying that they are optimal for solar energy production.
Ultimately, there are numerous ways in which the world is progressing positively in energy. Yet, we remain far from swift enough. Global emissions are once again projected to reach record levels this year. To mitigate warming and avert the most severe consequences of climate change, we must overhaul our energy infrastructure, including electricity, and we must act more swiftly.
This article is from The Spark, MIT Technology Review’s weekly climate newsletter. To receive it in your inbox every Wednesday, sign up here.
