Soaring energy demands from artificial intelligence and widespread electrification will prolong reliance on fossil fuels through the end of the decade, the International Energy Agency said Wednesday.
In its annual World Energy Outlook report, the IEA revealed that electricity demand has doubled over the last 10 years, setting up a new age of electricity. This increase in demand has been primarily led by China, as well as data centers, electric vehicle development, industrial consumption, and AI.
It is only expected to continue to soar, with the IEA estimating that between 2024 and 2035, demand will grow six times as fast as overall consumption, requiring a broad electricity generation makeup still led by coal and natural gas for at least the next five years. The IEA, a Paris-based intergovernmental agency, has advocated a faster transition to green energy.
“In previous World Energy Outlooks, the IEA made it clear that the future of the global energy system is electric – and now it is visible to everyone,” IEA Executive Director Fatih Birol said. “In energy history, we’ve witnessed the Age of Coal and the Age of Oil — and we’re now moving at speed into the Age of Electricity, which will define the global energy system going forward and increasingly be based on clean sources of electricity.”
The IEA pointed to growing spending on clean energy, particularly in China, as the driving force of this new era. The agency said that in less than 10 years, China is expected to see solar power generation that could alone exceed the entire electricity demand of the United States. Globally, around 560 gigawatts of new renewables capacity was added in 2023.
This puts the world on track to reach a capacity of nearly 10,000 gigawatts in 2030, but just short of the United Nations’s targets to triple renewable energy capacity. As a result, the IEA said, the pace isn’t fast enough to meet power demand and net-zero targets.
This means the phase-out of coal and fossil fuels may take longer than anticipated. However, IEA said demand for fossil fuels may peak by 2030, further paving the way for clean energy.
Birol explained that the IEA is expecting to see a surplus of oil and natural gas within the next five years, which could drive down prices and allow for more investments in clean energy.
“The breathing space from fuel price pressures can provide policymakers with room to focus on stepping up investments in clean energy transitions and removing inefficient fossil fuel subsidies,” Birol said. “This means government policies and consumer choices will have huge consequences for the future of the energy sector and for tackling climate change.”
However, the agency admitted these predictions may be dependent on geopolitical tensions. In recent weeks, those in the oil and gas industry grew concerned over possible supply reductions as Israel weighed a retaliatory strike on Iran’s oil facilities, driving up prices.
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On Tuesday, Israeli officials reportedly told the U.S. that the nation would not strike Iran’s nuclear or oil sites, sending prices back down.
The IEA predicts that by 2035, solar and nuclear energy will generate most of the world’s electricity to meet demand, with coal and natural gas still close behind.