What's Happening?
The International Energy Agency (IEA) has released its World Energy Outlook, highlighting a significant projected increase in global household electricity consumption by 2035. According to the IEA's Stated Policies Scenario, which reflects current policy
commitments, average household electricity use could rise by about 25% globally. This increase is primarily driven by the growing use of air conditioning, household appliances, electric vehicle (EV) charging, and electric space heating. In advanced economies, electricity demand is expected to rise by approximately 15%, largely due to transport electrification. In emerging markets, the demand growth could be even faster, around 30%, as rising incomes and higher temperatures push cooling demand upward. The report also notes a structural shift in electricity system costs towards capital-intensive grids, renewables, and storage, making affordability increasingly sensitive to policy and financing choices.
Why It's Important?
The projected increase in household electricity use has significant implications for both consumers and the energy industry. As electricity becomes a larger share of daily energy use, households may become more sensitive to price changes, impacting affordability. The shift towards capital-intensive infrastructure like renewables and storage could lead to higher upfront costs, although these may be offset by efficiency improvements and reduced reliance on fossil fuels. For policymakers, the challenge will be to design policies that manage these transitions while keeping energy affordable. The report suggests that in advanced economies, efficiency improvements and reduced spending on oil and natural gas could lower total household energy bills. However, in emerging markets, rising electricity use could push bills higher unless mitigated by efficiency gains and fuel switching.
What's Next?
As the world moves towards increased electrification, stakeholders will need to address the challenges of rising electricity demand and the associated costs. Policymakers may need to implement strategies that promote energy efficiency and support the transition to renewable energy sources. The energy industry will likely focus on expanding renewable capacity and deploying battery storage to meet the growing demand. Additionally, addressing supply-chain constraints and carbon pricing will be crucial to managing cost pressures. The IEA's outlook suggests that well-designed policies could help stabilize or even reduce real energy costs, particularly in emerging markets.
