Global Power Demand Expected to Grow, With Renewables an Increasing Proportion of the Mix

Global electricity demand is expected to more than double from 25,000 terawatt-hours (TWh) to between 52,000 and 71,000 TWh by 2050, due to the growth in emerging markets’ energy needs and electrification across the economy.

According to consulting group McKinsey’s report entitled ‘Global Energy Perspective 2023: Power outlook’, the transport sector is projected to see a steep growth in power demand, driven by passenger electric vehicles, which are expected to reach subsidy-free cost parity with internal combustion engines by around 2025 in China, Europe, and the United States. By 2050, global passenger battery electric vehicle car parc is projected to reach 1.3 billion—almost equal to the total number of all cars today.

The hydrogen and synfuels industries have negligible demand today, but power demand for green hydrogen is projected to scale rapidly, especially after 2030 as the road transport and chemicals sectors boost demand for clean hydrogen.

Within industry, power demand is projected to double by 2050 due to the electrification of low- to medium-heat processes, as well as growth in demand from data centres. Similarly, power demand in buildings is projected to double, driven by increased demand in emerging markets and electrification in OECD countries.

Demand Growth is Driven by Different Sectors Across Geographies

Under all scenarios, power demand is projected to grow across the globe, driven by several factors that differ by region, including population growth, increasing wealth per capita, and electrification. China, India, and North America are projected to represent more than half of the global power demand growth.

Demand growth may be driven by different sectors in different geographies. In North America, green hydrogen is projected to drive most of the growth in the short and long term, spurred by recent government support, while electrified transport is projected to account for around 30% of demand growth to 2030.

China is projected to account for the largest absolute growth in power demand in both the short and medium term, with industrial electrification as the primary driver. In India, industrial growth is projected to account for the majority of the increase in power demand in the country, while the buildings sector is projected to drive around 30% of demand growth, due to higher demand for cooling. In Southeast Asia, buildings and industry are projected to make up over 80% of the total demand growth. Meanwhile, other Asian countries may experience a mixed demand growth led by buildings and industry.

Australia’s demand growth is projected to be relatively small on a global scale, with growth driven by its potential role as an exporter of commodities derived from green hydrogen.

Renewables Projected to More Than Double in the Next 20 Years

Renewables are expected to continue to grow rapidly over the next decades to provide around 45% to 50% of generation by 2030 and 65% to 85% by 2050, depending on the scenario. By 2050, in the Achieved Commitments scenario, emissions could be reduced by up to 72% compared to present levels, driven by rapid deployment of zero- or low-carbon emitting technologies in the global power system.

However, the build-out of renewables could face several bottlenecks, including lack of availability of key materials, infrastructure, and land availability, supply chain issues, and labor shortages, as well as to slow permitting and local resistance. The uptake of nuclear and carbon capture, utilization, and storage (CCUS) technologies could complement renewables build-out, but this depends on the political landscape and future cost and technology development.

Among thermal generating technologies, unabated coal is expected to be phased out gradually. Meanwhile, power generation and capacity build-out from clean, dispatchable plants, including renewable energy resources such as hydro reservoir, geothermal, biomass, concentrated solar power plants with storage, or clean fuels such as hydrogen, are likely to rise due to their importance for grid stability.