Fatih Birol, the executive director of the International Energy Agency (IEA), said that the world has left behind the age of coal, oil and gas and is now firmly in “the age of electricity.”
Speaking at the Cop31 UN climate summit in Turkey, Birol said that electricity generation capacity is projected to increase by about 12,000 gigawatts over the next decade, more than two times more than the about 5,000 gigawatts added in the last 10 years.
Strategic Implications for Global Energy Markets
- Capacity Expansion: Global electricity demand is growing three times faster than total energy demand, driven by AI datacentres, the electrification of the transportation sector, and the rapid growth in air conditioning.
- Policy Divergence: A resolution to derive 35% of final energy worldwide from electricity by 2035 is on the table, which faces potential roadblocks from nations like Saudi Arabia and Russia, which are said to be opposed, and may utilize the convention by which consensus is needed to pass decisions to hold the rest to ransom.
- Economic Competitiveness: The shift is framed as a hedge against fossil fuel price volatility and supply shocks, with Birol stating that electrification is good for energy security and the competitiveness of countries.
The Shift Toward Electrification
Global energy structures are changing. While electricity now fulfils about a quarter of most energy needs, three-quarters of final energy worldwide is supplied by fossil fuels. Birol said global electricity was increasingly generated by renewable sources and that process would speed up even faster over the next decades.
The data on transport electrification is particularly notable. Outside China, sales of electric cars have risen by 60% in the last nine months, the IEA has found. Electric trucks are expected to displace much oil, according to Birol.
AI and Air Conditioning Drive Electricity Generation Expansion
The expansion of electricity generation is a response to drivers including AI and datacentres, the electrification of the transportation sector, and air conditioning, which Birol said is the most important one in terms of volume.
“There is always a debate about this in the UK, but in fact the single most important reason why UK electricity prices may be on the high side is reliance on imported gas,” Birol said, pointing to the United Kingdom as a case study.
| Metric | Previous 10 Years | Projected Next 10 Years |
|---|---|---|
| Electricity Capacity Addition | 5,000 Gigawatts | 12,000 Gigawatts |
| EV Sales Growth (Non-China) | 5% (5 years ago) | one-third (This year) |
Geopolitical Hurdles to Energy Policy
Despite the progress, the transition faces potential friction. The Cop31 summit in Antalya involves governments from 185 countries, and because consensus is needed for decisions, a small number of countries can hold the rest to ransom. While the Turkish and Australian governments are jointly presiding over this year’s summit, opposition from some governments remains a variable.
“We will still use oil and gas, but the dominant source of energy is becoming electricity,” Birol told the Guardian. He said the “staggering” progress would continue even if the resolution was not adopted. The economic incentive for electrification includes the fact that most energy from fossil fuels is wasted as heat, so when these activities are electrified, only about half of the energy needs to be replaced.
Future Market Trajectory
The transition to an electricity-dominated economy is driven by increasing demand. As people in countries like India and Nigeria—where air conditioning access is fewer than 20% and about 5% respectively—buy air conditioners due to the increasing effects of climate change, the demand for power will grow. Birol maintains that the issue is making electricity affordable for people.
“If the electrification pledge comes out [of Cop31] and the countries decide that the world’s energy future is electric, then it will definitely lead to a secure, more affordable and more livable planet,” Birol said.
Disclaimer: The information provided in this article is for educational and informational purposes only and does not constitute financial advice.
