pwr_january-2025 - 6

2025's Energy Crossroads:
6 Trends Redefining the Global
Power Sector
Compared to recent years, which have
been characterized by chronic energy
shortages and price volatility, the world
appears to be trundling toward a new
energy market context, defined by an
unprecedented oversupply of oil and
gas coupled with weakening demand for
fossil fuels. While the relief is welcome,
these attributes are setting the stage for
a " buyer's market in the second half of
this decade, " said Dr. Fatih Birol, executive
director of the International Energy
Agency (IEA), at the launch of the 2024
World Energy Outlook (WEO 2024) in
October. That will have nuanced implications
for the power sector including
competitive pressures on renewables,
reduced electricity prices in fossil-fueldependent
markets, and potential challenges
to clean energy investment amid
rising flexibility and grid modernization
needs, he suggested.
All of these are poised to play out as
other intricate and interdependent realities
continue to recarve the world's
energy future, the Paris-based intergovernmental
organization's flagship annual
outlook suggests. The report prominently
highlights new uncertainties embedded
in volatile shifts in power demand
and supply dynamics, an ever-more urgent
need for grid modernization, and
the growing precariousness of supply
chains amid geopolitical tensions.
1. Electricity Demand Is Set to Skyrocket.
Can the Grid Keep Up? Perhaps
the biggest wildcard is how fast electricity
demand is poised to increase. The IEA
notes that since 2010, global electricity
demand has increased on average by
2.7% per year-far more than energy demand,
driven by electrification in households,
commercial buildings,
transport,
and industry.
As it has in past years, the WEO 2024
explores three primary scenarios: a
Stated Policies Scenario (STEPS), which
assumes today's policy settings will endure
and is associated with a 2.4-degreeC
rise in global temperatures by 2100
(with a 50% probability); the Announced
Pledges Scenario (APS), which assumes
all governmental aspirational targets will
be achieved (and limits the warming rise
to 1.7 degrees C); and the Net-Zero by
2050 (NZE) scenario, which maps a nor6
mative
pathway achieving net-zero carbon
dioxide emissions by mid-century,
aligned with limiting warming to 1.5
degrees C. The STEPS outlook notably
is refined with sensitivities such as
electric vehicle (EV) adoption, renewable
deployment, liquefied natural gas (LNG)
demand, data center electricity use, and
efficiency improvements.
In the STEPS, the IEA projects global
power demand will nearly double by
2050-rising a stunning 50,000 TWh from
26,000 TWh in 2023. " From 2023 to 2035
alone, growth averages nearly 1,000 TWh
per year, equivalent to adding another
Japan to global electricity consumption
each year, " it says. Which sector will drive
the most growth varies. While an EV expansion
could raise transportation's rate
of electrification, increased space cooling
and appliance ownership is more certainly
set to drive growth in the building
sector, though that hinges on economic
expansion centered on developing economies
and is tied to climate impacts. Electrification
in industry, meanwhile, could
be driven by electricity-intensive clean
energy technology manufacturing and energy-intensive
industries reliant on hightemperature
heat for processes like steel
and cement production, as well as the demand
for electrolytic hydrogen. While the
use of power to produce hydrogen onsite
for steel, ammonia, and refining industries
could increase demand " very significantly, "
the scale and timing are " highly
uncertain because they are contingent on
how quickly different hydrogen pathways
and uses develop, " the WEO 2024 says.
Over the near term, nascent sectors-
like data centers and digitalization-will
inevitably add an entirely new realm of
demand growth potential, the IEA acknowledges,
though it
is
reluctant to
make tangible projections. " Our assessment
of uncertainties indicates that demand
growth to 2030 could vary from the
STEPS by as much as 170 TWh, " it says.
That could account for " a relatively small
share of total global electricity demand
growth to 2030, although the sector will
be more significant at the national or regional
level in major data center markets, "
it notes.
Energy efficiency also poses a substantial
tempering factor. " A sensitivity analysis
indicates that lower efficiencies could
cause electricity demand for appliances
and cooling in emerging market and developing
economies to be around 340
TWh (5%) higher than in the STEPS by
2035. By contrast, faster adoption of effective
efficiency standards could result in
electricity demand being almost 900 TWh
lower in 2035 in these end-uses than in
the STEPS, " it says.
2. Energy Security Ever-More Dependent
on Electricity. The WEO 2024 notably
draws a critical distinction between
electricity demand and peak electricity
demand, which it emphasizes has become
a cornerstone for energy security.
" There are two core elements of electricity
security: the ability to ensure sufficient
capacity to meet peak demand (adequacy)
and the ability to manage fluctuations
in both demand and renewable energy
supply (flexibility), " it explains. In all the
1. Peak electricity demand by driver and region in the Stated Policies Scenario (STEPS), 2023-
2035. Note: Other EMDE = emerging market and developing economies other than China. Peak
demand is the average level of demand for the 100 hours of the year with the highest demand.
Source: International Energy Agency (IEA)
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