⚡ Electricity 2025

The International Energy Agency's report titled "Electricity 2025" analyzes and forecasts global electricity trends, demand, supply, and carbon emissions up to the year 2027. It examines factors such as increasing electrification, the expansion of power systems, and the growing role of renewable energy, while also assessing grid reliability and security. The report highlights specific situations in various countries, including China's rising electricity demand and the growth of data centers, India's management of peak load, and the challenges faced by energy-intensive industries in Europe.

Transcript

Copy Transcript Copied

SPEAKER_00 0:01

Welcome back, everyone, to another episode of Talking Climate Change with Yashnegy. We're diving deep today. Yeah. This is the Electricity 2025 report from the International Energy Agency.

SPEAKER_01 0:15

It's a huge, huge report.

SPEAKER_00 0:17

Really comprehensive, and I I think it's one of those ones that uh, you know, can be a little bit daunting to even to even get through. So what we're gonna try to do today is extract some of the key insights, some of the more surprising things for you.

SPEAKER_01 0:30

Those aha moments.

SPEAKER_00 0:31

Yeah, exactly. So we'll explore where global electricity demand is going, um, what some of the challenges and opportunities are in making sure there's enough supply to go around. And uh and then we'll also look at some of the trends and pricing and just how renewable energy sources are being integrated into the system. So um I think I think this is gonna be a good one. What do you think?

SPEAKER_01 0:54

Oh, yeah. There's a lot in here, and this this report is really interesting because it focuses on electricity. And as we've talked about before, a lot of decarbonization efforts are gonna hinge on, well, electrifying everything. So this report looks at, okay, well, what's gonna happen to electricity demand globally over the next few years? And then on top of that, what are some of the supply challenges, the pricing issues, the reliability questions? It's a really good comprehensive look at what's happening in the electricity sector.

SPEAKER_00 1:23

Aaron Powell Yeah. And I think you know, one of the interesting takeaways is that the demand for electricity is not just growing, it's it's growing pretty rapidly, but maybe not from the places that we would initially think, right?

SPEAKER_01 1:34

Aaron Powell Yeah, that's a great point. Initially, I think when we think about rising electricity demand, we often picture, well, emerging economies as they industrialize, as they develop. But this report kind of throws us a bit of a curveball. It says, yeah, emerging economies, they are driving a lot of that early growth. But as we move forward, advanced economies, so we're talking U.S., EU, places like that, they're going to increase their share of that demand growth.

SPEAKER_00 2:00

Trevor Burrus, Jr.: So it's not just the developing world, right? It's it's everyone's electricity needs.

SPEAKER_01 2:04

Trevor Burrus, Jr.: It's everywhere. It's becoming more of a global phenomenon.

SPEAKER_00 2:07

Trevor Burrus, Jr.: Are increasing. And you know, when we look at specific regions, um, it's interesting how different those growth stories are. So, like you mentioned, emerging economies are a big part of the initial surge. India, in particular, is called out in the report as a major driver of global demand.

SPEAKER_01 2:25

Aaron Powell Absolutely. They say India is going to account for something like 10 percent of the global increase in electricity demand. Right. That's driven by a couple of things. Obviously a booming economy, but also rising air conditioning use. And we talked about this before. As temperatures climb globally, cooling demand is going up, and that's putting a lot of strain on electricity systems. Trevor Burrus, Jr.

SPEAKER_00 2:45

Yeah. Makes sense. Now in advanced economies, it seems like the increase is a bit more sector specific. So for the U.S., um, data centers are playing a huge role in that growing electricity demand.

SPEAKER_01 2:56

Trevor Burrus, Jr.: Totally. I mean, we all love our smartphones, our streaming services, our cloud computing. Right. That all relies on massive data centers, and those things are incredibly energy intensive both to run all the servers and to keep them cool. So that's definitely a big factor in the U.S. Aaron Ross Powell, Jr.

SPEAKER_00 3:12

Yeah. And then for the EU, um the report actually highlights some uncertainty around the future of their energy-intensive industries and how their recovery or lack thereof could really impact overall demand. Aaron Powell Right.

SPEAKER_01 3:26

It's a bit of a question mark. You say, you know, if these industries bounce back strongly, well, that's going to mean more electricity consumption. But if they struggle, it could be a different story.

SPEAKER_00 3:34

Trevor Burrus, Jr.: And you know, it's it's not just a question of where demand is coming from. There's this really fundamental relationship between electricity consumption and economic growth, especially in developing economies, that we need to think about.

SPEAKER_01 3:47

Aaron Powell Absolutely. It's a classic link. As economies grow, industrial activity ramps up, you have more services, all of which need electricity. And then on the flip side, you know, having access to reliable, affordable power is really crucial for development. So it kind of goes both ways.

SPEAKER_00 4:02

Aaron Powell It does. And I think that connection is going to be particularly important over the next few years because the report projects that the industrial sector globally will be the biggest consumer of all this extra electricity that's coming online, like something like half of the new demand. Aaron Powell Yeah.

SPEAKER_01 4:19

Half of all that new demand. And it makes sense. We're seeing trends like increased industrialization and automation.

SPEAKER_00 4:26

Right.

SPEAKER_01 4:26

And those are both very energy-intensive processes.

SPEAKER_00 4:28

Trevor Burrus, Jr. Yeah. And China in particular, you know, they're pushing to electrify their industries as part of their dual carbon goals. And when you couple that with the fact that like their number of industrial robots has basically doubled since 2020, that's a lot of extra demand. Trevor Burrus, Jr.

SPEAKER_01 4:42

It is. It's a huge increase. And they're not alone. We're seeing this trend of automation across a lot of different countries. And it makes sense. Robots can work 2047, they don't need brakes, they're more efficient in a lot of ways. Right. But they do need power. So that's something we need to be mindful of.

SPEAKER_00 4:57

Aaron Powell And it's not just the robots. You know, when we look at China, that incredible growth in their new energy vehicle market is also a major factor.

SPEAKER_01 5:05

Aaron Powell Oh, absolutely. I mean, they registered over 11 million new NEVs in 2024. Yeah. That's a 51% increase from the year before. So that's a ton of electric vehicles hitting the road, and all of them need to be charged.

SPEAKER_00 5:18

Right. And we're also seeing the impacts of weather, particularly those intense heat waves, especially in China, driving up the need for cooling even more.

SPEAKER_01 5:26

Yeah, that's a big factor. They had record-breaking heat in 2024, and that led to a huge spike in what they call cooling degree days. Yeah. Essentially a measure of how much cooling is needed. So yeah, more heat means more AC, more AC means more electricity.

SPEAKER_00 5:39

Aaron Powell Right. And then on top of all this, China's also got these ambitious plans to increase their computing power, this Eastern data and Western Computing Initiative, they're calling it. And that could be a massive future demand driver. Trevor Burrus, Jr.

SPEAKER_01 5:51

Potentially huge. The report talks about how they're investing billions of dollars in these national computing data center projects. So yeah, that's going to require a lot of energy.

SPEAKER_00 5:59

Aaron Powell It is, but it's encouraging that they're also trying to do this in a way that's more efficient and sustainable, right? Focusing on lowering the power usage effectiveness of these data centers and also using more clean energy to power them.

SPEAKER_01 6:13

Aaron Powell Exactly. It's not just about building more, it's about building smarter and greener.

SPEAKER_00 6:16

Right, right. Now shifting gears a little bit to India, they're seeing some really strong growth in their peak electricity load as well. And it sounds like those time of use tariffs that they've implemented are actually having a positive impact. Trevor Burrus, Jr.

SPEAKER_01 6:29

Yeah, it seems to be working. For those who aren't familiar, time of use tariffs basically mean that the price of electricity changes throughout the day.

SPEAKER_00 6:36

Right.

SPEAKER_01 6:36

So it's more expensive during peak hours when demand is high, and cheaper during off-peak hours. And the idea is to encourage people to shift their usage away from those peak times.

SPEAKER_00 6:48

And it looks like it's helping to manage that growing load, which is great. And their government is also trying to encourage this shift even further by specifically trying to move demand from the evening to the daytime.

SPEAKER_01 7:00

Aaron Powell Which is smart because India is really pushing for solar power. And obviously solar energy is most abundant during the day. So if they can get people to use more electricity when the sun is shining, they can maximize that solar generation and reduce reliance on other power sources.

SPEAKER_00 7:14

Which makes perfect sense. But even with all that, the report's still forecasting potential evening power shortages in India by 2027. And that's a little concerning, right? Even with the planned increases in capacity, they're still anticipating some issues.

SPEAKER_01 7:29

Aaron Powell Yeah, it does highlight the challenges they're facing. They're adding a lot of generation, but demand is growing so fast that it's hard to keep up.

SPEAKER_00 7:36

And it's not just a forecasting issue. It sounds like they had to take some pretty extraordinary measures in 2024 just to meet peak demand, like they had to actually bring in imported coal and gas plants just to make sure they had enough power.

SPEAKER_01 7:48

They did. They had to extend support for plants running on imported fuel and minimize maintenance shutdowns to avoid any disruptions. So it definitely shows how tight the situation was.

SPEAKER_00 7:58

Right. Now turning our attention to the US, it seems like the trend towards electric heating, which has been growing rapidly, saw a bit of a slowdown, but the overall direction is still upwards.

SPEAKER_01 8:10

Yeah. The really rapid growth kind of moderated a bit, but it's still trending up. And heat pump sales in particular are bouncing back. So that's a good sign.

SPEAKER_00 8:18

Yeah. And while the shift to EVs is also progressing, it looks like the rate of growth in EV sales slowed down a little bit in 2024 as well. Still growing, but not as rapidly as the year before.

SPEAKER_01 8:30

Exactly. Which suggests maybe we're hitting a point where the early adopters have mostly made the switch.

SPEAKER_00 8:36

Right.

SPEAKER_01 8:36

And now we need to figure out how to get that mass market adoption going.

SPEAKER_00 8:40

Right, right. And another thing that stood out to me in the US section of the report was these significantly revised upward projections for electricity demand in the Western interconnection in Texas. And they attribute this to a whole bunch of different factors.

SPEAKER_01 8:53

Aaron Powell Yeah, they're seeing much higher demand than they initially expected. And it's a combination of things: new industrial facilities, data centers, crypto mining operations, increased electrification in the oil and gas sector, even the emerging hydrogen economy. So it's a lot of different factors all converging at the same time.

SPEAKER_00 9:11

Yeah, it's like a perfect storm of electricity demand.

SPEAKER_01 9:14

Basically. And to add to that, NERC, which is the North American Electric Reliability Corporation, they're also projecting rising consumption and peak demand across the entire U.S. And that's a reversal of a long-term trend. For years it was pretty flat or even declining slightly. Right. But now they're seeing this clear upward trajectory. And again, a lot of it's driven by those commercial and industrial loads, those data centers, and the crypto mining.

SPEAKER_00 9:40

Right. Now let's hop over to the EU. It sounds like weather actually played a bit of a role in their overall electricity consumption in 2024. They had a milder heating season, which meant less demand for heating.

SPEAKER_01 9:50

Exactly. And France was a slight exception. They saw a tiny increase in heating demand, but overall, the EU needed less electricity for heating. And conversely, they also had less need for cooling. So together kind of balanced things out a bit.

SPEAKER_00 10:05

It did. But their economic outlook has also been revised downwards, which is impacting their electricity demand forecasts as well.

SPEAKER_01 10:12

Yeah, the IMF has lowered its projections for GDP growth in the EU, and that's going to have an effect. Weaker economies tend to use less power.

SPEAKER_00 10:21

And on top of that, European energy-intensive industries are facing some pretty serious challenges. High electricity prices, stiff international competition. We're even seeing plant closures and cuts in production.

SPEAKER_01 10:32

Yeah, they're definitely struggling. Electricity prices have come down from those crazy peats in 2022, but they're still much higher than in the US and China. And that's making it really hard for them to compete.

SPEAKER_00 10:43

And the report points out that even after the decline, EU electricity prices for these industries are still roughly twice as high as in the U.S. That's a significant disadvantage.

SPEAKER_01 10:51

Aaron Powell It is. It puts them at a real disadvantage. And it's putting a lot of pressure on these industries to find ways to become more efficient, to reduce their energy consumption, or even to relocate to places with cheaper power.

SPEAKER_00 11:03

And it sounds like the European Commission and some countries are looking at ways to provide some support to these industries, potentially through the EU ETS compensation mechanism.

SPEAKER_01 11:12

Aaron Powell Right. The EU ETS is basically a system that puts a price on carbon emissions. And the compensation mechanism is designed to help energy-intensive industries that are hit hard by those carbon prices. So they're looking at whether those mechanisms need to be adjusted given the current situation.

SPEAKER_00 11:29

Now another interesting thing, at least in terms of how policy can impact demand, is that national EV subsidy policies are having a very direct effect on sales within the EU. Like in Germany and France, where subsidies were reduced, sales went down. But in Belgium, where they kept them in place, sales went up.

SPEAKER_01 11:46

Aaron Powell Yeah, it shows how these financial incentives can really influence consumer behavior. When you make it cheaper for people to buy an EV, they're more likely to make the switch. But when you take those incentives away, well, it becomes a harder sell.

SPEAKER_00 11:59

Makes sense. And then kind of counterintuitively, the report points out that some EU households are actually facing barriers to switching to electricity, even for things like heating, because electricity is often taxed more heavily than natural gas.

SPEAKER_01 12:12

Yeah, it's kind of a weird situation. They're trying to encourage people to use more electricity, but then they're taxing it more than fossil fuels. It's not exactly sending a consistent message.

SPEAKER_00 12:20

Aaron Powell It isn't. But let's chip gears a little bit now and talk about the supply side of things, because ensuring reliability is just as important as managing demand. And one of the biggest trends globally seems to be the just explosive growth of solar PV.

SPEAKER_01 12:36

Oh, absolutely. Solar PV is booming worldwide, setting new records for deployment. And a lot of that's driven by the incredible cost reductions we've seen in solar technology over the past decade.

SPEAKER_00 12:46

Aaron Powell And it's getting to the point where it's not just a niche energy source anymore. I mean, the report says that solar PV actually surpassed coal in terms of electricity generation in the EU in 2024.

SPEAKER_01 12:58

Aaron Powell It did. It was a big year for solar. And it highlights just how quickly things are changing in the energy landscape.

SPEAKER_00 13:04

Aaron Powell They are. And it's not just Europe. The report says that China, the US, and India are all on track to have solar PV contribute around 10% of their total generation mix within the next few years. That's a pretty significant shift. Trevor Burrus, Jr.

SPEAKER_01 13:18

It is. It's a major shift towards a cleaner, more sustainable energy future.

SPEAKER_00 13:22

Aaron Powell And looking specifically at the EU, the report is forecasting that renewable energy as a whole will increase dramatically over the next few years. They say it could actually reach over 56% of their total output by 2027.

SPEAKER_01 13:34

Aaron Powell Which is huge. They're talking about an average annual increase of 7% in renewable generation. And that's going to displace a lot of coal and gas fire generation.

SPEAKER_00 13:42

Aaron Powell It is. But it also brings up this issue of what they call dunkelfloat events. And for our listeners who aren't familiar with the term, it basically refers to periods of low wind and solar output often happening at the same time.

SPEAKER_01 13:55

Aaron Powell Right. It's a German word that literally translates to dark doldrums. And it's something that grid operators are increasingly having to deal with as we rely more and more on these variable renewable sources.

SPEAKER_00 14:08

And the report gives some real-world examples of these events happening in northern Europe in late 2024. And it says that they did lead to some price spikes in the electricity market, but because those grids are well connected and they have dispatchable capacity, they were able to manage the situation okay.

SPEAKER_01 14:25

Aaron Powell Exactly. So it shows that even when you have these dips in renewable generation, if you have a well-designed grid and you have backup power sources that you can ramp up when needed, you can get through these periods without major disruptions.

SPEAKER_00 14:37

And that brings up this distinction between these shorter dunkelflot events and what they call VRE droughts, variable renewable energy droughts. These are longer periods of low renewable output, which obviously require different solutions.

SPEAKER_01 14:51

Right. Short-term dips you can often handle with battery storage or by quickly ramping up other power sources. But when you have these longer droughts, you need more substantial solutions. Things like long-duration storage, like pumped hydro, or even hydrogen-based storage in the future. And you also need to make sure you have enough dispatchable generation capacity to cover those gaps.

SPEAKER_00 15:11

And it's interesting how the report highlights the role that hydropower played in managing a wind drought in the U.S. Pacific Northwest during that really intense polar vortex in January 2024.

SPEAKER_01 15:22

Yeah, it shows the value of having a diverse mix of resources. Hydropower, even though it's a renewable source, it's dispatchable. You can control it. So it can really help to balance out the variability of other renewables like wind and solar.

SPEAKER_00 15:34

Now shifting gears a little bit to pricing, it's interesting to see that wholesale electricity prices in the Nordic countries are actually quite low in 2024. And that's largely attributed to hide hydropower output. So it really shows how an abundance of renewable energy can impact prices.

SPEAKER_01 15:51

Aaron Powell It does. They had a lot of water in their reservoirs, which meant a lot of hydropower generation, and that drove down prices. So it's a good example of how renewables can lead to more affordable electricity. Trevor Burrus, Jr.

SPEAKER_00 16:01

But then we also have this kind of weird phenomenon of negative wholesale electricity prices happening in several regions. And that's something that I think a lot of people still find a bit counterintuitive. Can you explain what's causing that?

SPEAKER_01 16:12

Aaron Powell So negative prices happen when supply exceeds demand. And it's happening more and more in places with a lot of renewable energy, like parts of the EU, the US, Australia. And it often happens when there's a lot of wind and solar generation, but there's also a lot of inflexible generation on the system. So you have these power plants, both renewable and traditional thermal plants, that are still churning out electricity even when prices are negative.

SPEAKER_00 16:36

And it's interesting how this trend of negative pricing is actually creating opportunities for the growth of utility scale energy storage.

SPEAKER_01 16:44

Aaron Powell Absolutely. Because those negative prices make energy arbitrage possible.

SPEAKER_00 16:49

Yeah.

SPEAKER_01 16:49

Essentially, you can charge up your batteries when electricity is really cheap or even free, and then sell it back to the grid later when prices are higher. So it's kind of a buy low, sell high strategy.

SPEAKER_00 17:01

It is. Now let's talk a little bit about grid tariffs because the report says that they're expected to rise globally, and the two main drivers seem to be electrification and the integration of renewables.

SPEAKER_01 17:12

Exactly. Both of those trends are putting a lot of pressure on the grid. Electrification means we're using more electricity overall. And renewables, because they're often located in different places than traditional power plants, require more transmission infrastructure to get that electricity to where it's needed.

SPEAKER_00 17:29

Right. And we're already seeing some of those rising grid costs in places like the US and parts of Europe.

SPEAKER_01 17:34

We are. In the US, for example, the cost of generating electricity has been pretty stable. But the costs associated with the grid, building new transmission lines, upgrading substations, all that stuff, those costs have been going up.

SPEAKER_00 17:46

And it's interesting how different countries approach the allocation of those grid costs. Some are actually offering discounts to industrial consumers to help them stay competitive.

SPEAKER_01 17:54

Aaron Powell Right. Places like Germany and the Netherlands give big discounts to their heavy industries. And the idea is that if their electricity costs are too high, those industries might relocate to places with cheaper power.

SPEAKER_00 18:12

And congestion basically happens when the amount of power flowing through transmission lines exceeds their capacity.

SPEAKER_01 18:18

Right. And to deal with that, grid operators have to take various actions. They might redispatch power generation, which means telling some plants to ramp up and others to ramp down. Or they might even have to curtail renewable energy generation, which means basically telling them to shut off, even though they could be producing electricity. And all of these actions cost money, and those costs are often passed on to consumers through higher tariffs.

SPEAKER_00 18:43

Now let's talk a little bit about reliability because that's becoming an increasingly critical issue as the grid gets more complex. And it seems like extreme weather events are a growing threat to our power systems.

SPEAKER_01 18:53

Oh, absolutely. We're seeing more frequent and intense storms, heat waves, droughts, and all those can disrupt the grid. The report highlights several examples from 2024, like winter storms in the U.S., hurricanes in the Atlantic, even a drought in Ecuador that impacted hydropower generation.

SPEAKER_00 19:10

Aaron Powell And it's not just weather. Fuel shortages and problems with grid infrastructure and maintenance can also lead to outages.

SPEAKER_01 19:16

Definitely. We saw major outages in 2024 caused by fuel supply issues in places like Cuba and by aging infrastructure and poor maintenance in countries like Venezuela and Nigeria. So there are a lot of different vulnerabilities that we need to be aware of.

SPEAKER_00 19:30

And the report really emphasizes that the way we plan for resource adequacy, making sure we have enough generation capacity to meet demand, needs to evolve to better account for these weather-driven scenarios and the possibility of multiple outages happening at the same time.

SPEAKER_01 19:47

Right. The traditional approach of just having a fixed percentage of extra capacity might not be enough anymore. We need to be thinking about a wider range of potential scenarios, including extreme weather events and the possibility of simultaneous outages.

SPEAKER_00 20:01

Aaron Powell And it's encouraging to see that some countries are taking proactive steps to address this. Like China, for example, is requiring their coal-fired power plants to become more flexible so they can better support the integration of renewables.

SPEAKER_01 20:14

Exactly. They're basically retrofitting a lot of their coal plants so they can ramp up and down more quickly and provide grid stability services to balance out the variability of wind and solar. So it's a way of making the most of their existing infrastructure.

SPEAKER_00 20:27

And it's not just about flexibility, China's also actively promoting renewable energy development. They've got new policies in place and even a new energy law that prioritizes renewables.

SPEAKER_01 20:37

They do. They're really pushing for a cleaner energy future. And they're not alone. India also has ambitious targets for renewable energy additions by 2030. And they've launched programs like the PM Surya Gar Rooftop Solar Scheme to encourage more distributed generation.

SPEAKER_00 20:54

Right. And they've also managed to become largely self-sufficient in manufacturing solar modules, which is impressive.

SPEAKER_01 21:00

It is. It gives them more control over their supply chain and reduces their reliance on imports.

SPEAKER_00 21:06

And even Japan, which has been pretty cautious about nuclear power since Fukushima, is considering a potential resurgence for nuclear, along with significantly increasing their renewable energy targets.

SPEAKER_01 21:17

Yeah, they're looking at restarting a lot of their existing nuclear reactors and potentially even building new ones. And they're also talking about making renewables the largest single source of electricity by 2040. So that's a big shift for them.

SPEAKER_00 21:28

And we're also seeing some exciting developments in Southeast Asia with countries like Indonesia, Vietnam, Thailand, and Singapore all ramping up their focus on renewable energy.

SPEAKER_01 21:37

Yeah, they're realizing the benefits of a cleaner energy future, both for their own economies and for the environment. And they're starting to cooperate more on things like cross-border electricity trade, which is really encouraging.

SPEAKER_00 21:49

It is. And even in the US, there's growing support for innovation in small modular nuclear reactors, which could potentially be a big part of their decarbonization strategy.

SPEAKER_01 21:58

Absolutely. SMRs are seen as a potentially safer and more cost-effective way to generate nuclear power. And they could play a significant role in reducing emissions in the U.S.

SPEAKER_00 22:09

So as you can see, there's a lot going on in the world of electricity. It's a complex and rapidly evolving landscape, but there's a lot of positive momentum building towards a cleaner and more sustainable energy future.

SPEAKER_01 22:21

It is. And I think this report really highlights both the challenges and the opportunities that lie ahead. We have a lot of work to do, but there's also a lot of reason for optimism.

SPEAKER_00 22:30

Absolutely. And I think that's a great note to end on. So for our listeners, here's a final thought for you to ponder. Considering all these rapid advancements in renewable energy and energy storage technologies, and the growing global commitment to addressing climate change, what unexpected breakthroughs or shifts do you think could further accelerate our transition to a cleaner and more reliable electricity system in the coming years? It's a fascinating question and one that I think we'll all be grappling with as we move forward.