Why Global Energy Demand is Rising—And Why It Won’t Slow Down
by Dan Roscoe, CEO of Roswall
Global energy demand is experiencing an unprecedented surge, a trend that shows no signs of abating.
While advancements in artificial intelligence and digital technologies are often highlighted as primary drivers, the reality is that a confluence of factors is propelling this increase. This surge in energy consumption is not merely a temporary phase but a reflection of deeper systemic transformations. Factors such as economic growth, urbanization, and technological advancements are interwoven, creating a complex landscape where energy demand is both a driver and a consequence of global development.
Recognizing and analyzing these interconnected elements is essential for crafting effective strategies to manage and sustain our energy future.
Economic Growth and Industrial Expansion
Energy consumption is closely tied to economic development. Rapid industrialization in emerging markets such as China, India, and other parts of Asia is significantly fueling demand. As these nations expand their manufacturing capabilities and infrastructure, the need for electricity to power factories, logistics, and services escalates correspondingly. According to the International Energy Agency (IEA), about 85% of additional electricity demand through 2026 is set to come from outside advanced economies, with China contributing substantially.
Urbanization and Population Growth
The global population continues to rise, leading to increased electricity consumption in homes, businesses, and public services. The emergence of megacities intensifies energy requirements for transportation, lighting, water supply, and digital infrastructure.
Moreover, efforts to expand electricity access in developing nations are bringing millions onto the grid, further amplifying demand. The U.S. Energy Information Administration (EIA) projects that global energy consumption and associated CO₂ emissions will increase through 2050, driven by population growth and higher living standards.
Electrification of Transportation, Industry and Heat
The shift towards electric vehicles (EVs) is replacing traditional gas-powered cars, contributing to higher electricity consumption. Industrial sectors, including manufacturing, steel, and chemical production, are transitioning from fossil fuels to electric-powered processes. Additionally, the move towards clean hydrogen and other sustainable fuels necessitates substantial energy inputs, further driving demand. The IEA notes that the world's demand for electricity is rising at its fastest rate in years, driven by robust economic growth and increasing uptake of technologies that run on electricity, such as EVs and heat pumps.
Transitioning from fossil fuel-based heating systems to electric heat pumps is essential for decarbonizing residential and industrial sectors. This shift leads to increased electricity consumption, contributing to the overall rise in global energy demand. Despite heat pumps offering significant energy efficiency benefits, increases in inclement weather and rising global temperatures could elevate energy needs due to heightened heating and cooling requirements. The IEA's Electricity 2024 report highlights that emerging and developing economies are the engines of global electricity demand growth.
Climate Change and Extreme Weather
Rising global temperatures are driving higher demand for air conditioning and cooling systems. Conversely, extreme cold events increase electricity use for heating. More frequent and intense storms disrupt power grids and necessitate more robust energy infrastructure, all of which contribute to escalating energy consumption.
Additionally, climate change can affect energy production by altering electricity generation, increasing electricity demand, and reducing water supplies. These combined factors underscore the intricate relationship between climate change and energy consumption, highlighting the need for adaptive strategies in energy infrastructure planning.
The Digital Economy and Always-On Connectivity
The proliferation of data centers, cloud computing, and continuous digital operations consume substantial amounts of electricity. While AI and automation are notable contributors, they are part of a broader trend encompassing smart homes, Internet of Things (IoT) devices, and decentralized energy systems, all of which further increase energy use. The exponential growth of data centers is another key factor influencing electricity demand. The emergence of artificial intelligence and the global uptake of generative AI services mean more data centers are needed, leading to increased electricity consumption.
Renewable Energy Growth—But Fossil Fuels Still Play a Role
Renewable energy sources such as solar, wind, and hydro are expanding rapidly. However, the pace of demand growth often outstrips the adoption of clean energy. Consequently, many regions continue to rely on coal, gas, and oil to ensure energy security.
Modernizing power grids and investing in energy storage solutions are critical to meeting demand without exacerbating emissions. The IEA's World Energy Outlook 2024 indicates that global electricity demand is expected to double by 2050, primarily driven by significant energy transitions in countries like China.
What Comes Next?
As energy demand continues its upward trajectory, the imperative to meet this need sustainably becomes more pressing. Governments and businesses must scale up clean energy production, enhance efficiency, and modernize grids. Balancing growth with sustainability is a formidable challenge that will shape the future of energy. While clean energy is set to become the largest source of power by the mid-2030s, current policies are insufficient to reach net-zero emissions by 2050, underscoring the need for increased investment and policy support.
At Roswall, we are committed to navigating these complexities by investing in innovative solutions and fostering collaborations that drive a sustainable energy future.