Global Electricity Demand Projected to Grow by 3.6% in 2026: Renewables Surpass Coal
Global Electricity Demand Projected to Grow by 3.6% in 2026: Renewables Surpass Coal
The International Energy Agency (IEA) has published the Electricity Mid-Year Update 2026, an update to the Electricity 2026 report released last February, which revises upwards the estimates for global electricity demand growth for the current year and for 2027.
The document analyzes trends in demand, generation by source, CO2 emissions, and wholesale electricity prices in major global markets, in a context marked by tensions over liquefied natural gas (LNG) supplies related to the crisis in the Strait of Hormuz. According to the Agency's estimates, global electricity consumption is set to grow by 3.6% in 2026, up from the 3% recorded in 2025, and further rise to 3.8% in 2027. If these forecasts are confirmed, global electricity consumption will reach 30,700 terawatt-hours (TWh) in 2027, compared to 28,600 TWh in 2025. The growth is driven by structural factors such as industrial expansion, greater prevalence of household appliances, increasing adoption of electric vehicles, air conditioning systems, heat pumps, and the expansion of data center capacity.
The report emphasizes how the major global economies have so far withstood the loss of LNG supplies transiting through the Strait of Hormuz, thanks to new liquefaction projects launched primarily in North America and increased production from other exporters. Nonetheless, the temporary reduction of about 20% in global LNG supply has generated strong price volatility, bringing natural gas prices in Asia and Europe to highs not seen since the 2022-2023 energy crisis, thereby pushing several Asian and European countries to replace gas with coal.
Geographic Details
Geographically, China is expected to see an acceleration in electricity demand growth to 5.5% in 2026 (up from 5.2% in 2025), supported by manufacturing activity and electric vehicle charging. In India, after a slowdown to 1.6% in 2025 due to an early monsoon, strong recovery is expected at 7% in 2026. In the United States, consumption is expected to rise by almost 2%, driven by data centers, air conditioning, and the industrial sector, while in the European Union the growth is estimated at 2%, supported by electrification and a colder winter in the first quarter, in addition to summer heatwaves.
In contrast, countries like Bangladesh and Pakistan, heavily reliant on LNG imports and more exposed to price fluctuations, have had to adopt rationing measures that have curtailed electricity consumption.
The document also highlights how a stronger-than-expected El Niño phenomenon in 2026 could further increase global demand, raising cooling needs in various regions while simultaneously reducing hydro and wind power generation in areas like Latin America and Southeast Asia, leading to greater reliance on coal and gas.
Renewables Surpass Coal in Electricity Generation
On the supply side, 2026 marks a historic transition: electricity generation from renewable sources is set to surpass that from coal, after reaching substantial parity in 2025. Global renewable production is expected to grow by over 8% in 2026, increasing its share in the global generation mix from 33% in 2025 to 37% by 2027. The share of variable renewable sources (solar photovoltaic and wind) is also expected to rise, from 17% to 21% during the same period.
Solar photovoltaic continues to be the main driver of global electricity generation growth, with an expected increase of about 610 TWh in 2026, a level largely in line with the record of 2025. This will allow photovoltaics to surpass wind during the year, becoming the second renewable source by generation volumes after hydropower. China continues to account for about half of the global increase in photovoltaic production, while the contributions from India and other Asian economies are expected to rise from about 10% in 2025 to 17% in 2026. Conversely, generation from natural gas is expected to remain relatively stable in 2026 globally, due to high fuel prices: it would be the third year in the last decade without significant growth, following the pandemic-related decline in 2020 and the energy crisis of 2022 triggered by the Russian invasion of Ukraine.
In contrast, coal generation is expected to increase by 1.4% in 2026, driven precisely by the replacement of more expensive gas, weather factors, and increased use of coal plants in some regions to compensate for the growing decline in renewables. Nuclear production is expected to grow at a moderate pace in 2026 (less than 1%), hampered by delays in bringing new reactors online and maintenance outages, before accelerating to over 4% in 2027 thanks to new facilities in China and India and the full recovery of production in France and the United States.
CO2 Emissions on the Rise, but EU Leads the Decline
Carbon dioxide emissions related to electricity generation are expected to increase by over 1% in 2026, after remaining largely stable in 2025. The increase is mainly attributed to the replacement of gas with coal in various regions, along with weather factors that favored generation from coal and oil during the first half of the year. For 2027, the Agency instead forecasts a substantial plateau in emissions, thanks to the combined contribution of renewables, nuclear, and natural gas in meeting the growing demand, at the expense of coal.
The largest absolute increase will occur in China, with emissions expected to grow by about 2% in 2026, linked to strong demand growth and lower-than-expected wind production. In India, emissions are expected to rise by about 3% in 2026, following a 3.5% decline recorded in 2025. In contrast, the United States is expected to see a 3% contraction in emissions from the electricity sector in 2026, while the European Union is expected to record the most significant absolute decline, amounting to 5% in 2026 and even 16% in 2027, bringing emissions from the European electricity sector to less than half of 2017 levels.
Despite the increase in absolute emissions, the carbon intensity of global electricity generation is projected to decline, from 435 grams of CO2 per kilowatt-hour in 2025 to 410 g CO2/kWh in 2027, thanks to the growing penetration of low-emission sources.
Electricity Prices Rise Due to Gas
The report devotes significant attention to the trend in wholesale electricity prices, which have risen in several markets since March due to the surge in LNG prices related to the crisis in the Strait of Hormuz. In the second quarter of 2026, average spot prices in the European Union and Japan increased by over 30% year-on-year.
The United States remained relatively immune to the shock, with average prices in the second quarter remaining stable compared to the previous year, while in India, the increase was kept below 10%, given the marginal role of LNG in the local generation mix. In contrast, Australia saw wholesale prices fall by about 45%, supported by strong renewable generation and the rapid expansion of battery storage capacity, which reduced reliance on gas plants during peak hours.
In detail, in the first half of 2026, the average price in the European Union stood around $105 per megawatt-hour, a 15% increase year-on-year, with rises of 18% in Italy and 17% in Germany; France, thanks to better availability from the nuclear fleet, recorded largely stable prices. In the Nordic countries, prices more than doubled (about 130%) due to insufficient water reserves and unfavorable wind conditions. In Japan, spot prices in the second quarter rose by about 30% year-on-year, while the increase in the first half in the United States was 10%, driven mainly by January spikes linked to the winter storm Fern.
The document also notes how the phenomenon of negative prices remains widespread in many markets, indicating insufficient system flexibility. In Spain, the share of hours with negative prices rose to 17% in the first half of 2026, up from 10% the previous year, due to strong renewable production; in South Australia and California, such episodes affected about 20% of hours, a level similar to 2025, while in Sweden and Finland, the share dropped from 6% to 2%, thanks to strengthened flexibility measures on both the supply and demand sides. During the European heatwaves in June, price differentials between midday lows and evening peaks reached $600 per megawatt-hour in several markets, highlighting the growing value of flexible resources like battery storage.