IEA: Why Global Grid Investment Must Rise by 2030

Every new EV on the road, every heat pump replacing a boiler and every AI search adds a drop to the rising tide of electricity demand that is starting to test the limits of the world's ageing, ailing power systems.

The IEA has warned that the global demand for electricity is on track to grow by more than 3.5% every year for the next five. This growth rate means electricity demand will expand at least 2.5 times faster than overall energy demand during the period.

In order to cope, the IEA believes that investments in electricity grids will have to increase by 50% by turn of the next decade.

"At a moment of significant uncertainty across energy markets, one certainty is that global electricity demand is growing much more strongly than it did over the past decade," says Keisuke Sadamori, the IEA's Director of Energy Markets and Security.

"In this Age of Electricity, the increase in global power consumption through 2030 is set to be equivalent to adding more than two European Unions."

Data centres and EVs fuel expansion

The surge in electricity consumption can be attributed to a few major developments in the global economy. Industrial electrification, the uptake of EVs and the rise of AI are driving much of the growth.

Elsewhere, the rise in demand for air conditioning in warming climates is also a huge drain on energy. The UNEP estimates that cooling now accounts for 20% of all the world's electricity demand.

Emerging and developing economies are still the main driving force behind the growth in demand for electricity but the world's largest economies are experiencing rising consumption after 15 years of stagnation. These developed markets will contribute to one fifth of the total increase in power demand through to 2030.

Renewables and nuclear reach 50% share

The IEA's report finds a great deal of hope in the rapid growth of renewables. This shift is being driven by record deployment of solar photovoltaic capacity while nuclear power output has also risen to a new record level.

By 2030, renewables and nuclear are together set to generate 50% of global electricity, up from 42% today. Natural gas-fired output is also expected to grow through 2030, supported by rising electricity demand in the United States and the continuing shift from oil to gas for power generation in the Middle East.

Coal-fired generation will lose ground globally as renewables expand, returning to 2021 levels by the end of the decade. As a result, global carbon dioxide emissions from electricity generation are expected to remain roughly flat between now and 2030.

But while the increase in clean energy supplies is positive, it means little if power grids around the world are not modernised at the same time.

"This surge in demand and shift in the power mix underscores the urgent need for expanded grid infrastructure and greater system flexibility to integrate capacity and maintain reliable, resilient systems," says Brendan Reidenbach, Energy Analyst at the IEA.

Grid bottlenecks threaten expansion

The transformation of the power sector faces a significant infrastructure challenge. More than 2,500 gigawatts worth of projects, including renewables, storage and data centres, are currently stalled in connection queues worldwide.

Analysis in the report suggests that deploying grid-enhancing technologies and implementing regulatory reforms could unlock up to 1,600 gigawatts of queued projects in the near term. These measures would enable more flexible grid connections and usage, allowing existing infrastructure to be used more efficiently.

"Meeting this demand will require annual investment in grids to rise by 50% by 2030," Keisuke says.

"Expanding flexibility will also be crucial as power networks continue to evolve – so will a strong focus on security and resilience."

Concerns about flexibility and affordability

Installations of utility-scale battery storage have risen sharply, providing an important source of short-term flexibility for power systems. Markets including California, Germany, Texas, South Australia and the UK have all experienced strong growth in utility-scale battery capacity deployment in recent years.

The report also highlights that electricity affordability remains a key concern for policymakers. Household electricity prices in many countries have risen faster than incomes since 2019 whilst elevated prices are putting pressure on industries and businesses.

Policymakers are consequently focusing on policies, market designs and regulations that deliver not just additional investment but also greater flexibility and efficiency across all parts of the power system.

The report emphasises that greater efforts are needed to improve the security and resilience of power systems worldwide, which face rising risks from ageing infrastructure, extreme weather events, cyberthreats and other emerging vulnerabilities. Modernising system operations and strengthening the physical protection of critical infrastructure will be essential to countering these threats, according to the IEA.