Electricity Consumption Decline in Advanced Economies to Impact Global Demand in 2023
Global electricity demand is still expected to grow by slightly less than 2% in 2023
Electricity demand in the European Union (EU) is expected to reach its lowest level in two decades, marking a significant decline of 3% in 2023, according to the latest “Electricity Market Report” by the International Energy Agency (IEA).
The report attributes this drop to the ongoing effects of the global energy crisis and an economic slowdown impacting advanced economies.
However, while electricity demand is expected to ease worldwide in 2023, overall global electricity demand growth is predicted to increase strongly in 2024.
The agency said the United States anticipates a nearly 2% decline in electricity demand this year and Japan a 3% fall.
Combined with the 2022 reduction, the 3% drop represents the EU’s most substantial slump in electricity demand on record, potentially leading to consumption levels not seen since 2002.
This is despite strong growth in electrification with a record number of electric vehicles and heat pumps sold.
Europe’s energy-intensive industries have not yet recovered from last year’s production slump, as evidenced by the staggering 6% year-on-year decline in total EU electricity demand during the first half of 2023.
The substantial demand declines in advanced economies contrast sharply with the growth observed in emerging economies such as China and India.
Despite the decline in advanced economies, global electricity demand is still expected to grow moderately by slightly less than 2% in 2023, down from 2.3% in 2022.
Nevertheless, the IEA’s projections indicate that with an improving world economic outlook, demand growth will rebound to 3.3% in 2024.
Strong Growth in China and India
Factors contributing to rising global electricity demand include the electrification of energy systems, efforts to reduce emissions, increased indoor cooling needs due to climbing temperatures, and robust demand growth in emerging and developing economies.
For instance, after a moderate 3.7% year-on-year increase in electricity demand in 2022, China is expected to witness an average annual demand growth rate of 5.2% over the next two years, closely resembling its 2015-2019 average.
In India, the strong post-pandemic recovery and intense heat waves drove electricity demand up by 8.4% in 2022. The country is projected to experience an average annual growth rate of 6.5% through 2024, significantly surpassing its 2015-2019 average.
Renewables to Surpass Coal Generation
The deployment of renewables is proving crucial in meeting the additional electricity needs. Renewables will fulfill all the additional growth in global electricity demand over the next two years.
By 2024, renewables are expected to account for over one-third of global electricity generation, and it is possible that, depending on weather conditions, 2024 may be the first year in which renewables generate more electricity worldwide than coal.
In 2023, as demand growth slows down, the increase in renewable generation alone is projected to meet the additional demand. This trend is expected to continue in 2024, despite a predicted acceleration in demand growth, the report said.
At the same time, electricity generation from fossil fuels is anticipated to decrease over the next two years. Electricity generated from oil is projected to experience a significant decline, while coal-fired generation will slightly decrease in 2023 and 2024, following a 1.7% increase in 2022.
Keisuke Sadamori, the IEA’s Director for Energy Markets and Security, emphasized the growing need for electricity worldwide and urged policymakers and the private sector to capitalize on the momentum of renewables’ increasing share in electricity generation.
In June, the IEA said global renewable capacity additions are set to soar by an unprecedented 107 GW to over 440 GW in 2023. This growth is driven by expanding policy support, concerns over energy security, and the improved competitiveness of renewable energy compared to fossil fuel alternatives.
In the same month, the IEA forecasted a slowdown in India’s utility-scale solar projects in 2023 and 2024 due to a module shortage, lower auction volumes, and supply chain challenges.