Electricity market: these turning-points will occur in 2025

Global electricity demand is steadily increasing, by an average of almost 3% per year since 2010 alone. China is now responsible for around one third of global electricity demand. There, electricity demand has increased by around 6% annually until 2023. Figure 1 impressively underscores China's position, with per capita electricity consumption exceeding that of the European Union since the end of 2022.

While growth in construction-related industries such as glass and cement slowed somewhat in 2023, the service sector and other industrial sectors provided continued momentum. The latter includes areas such as the manufacture of photovoltaic (PV) modules, electric vehicles and the processing of related materials.

In addition to China, demand for electricity is also growing rapidly in India, albeit from a lower level. The main drivers here are sustained rapid economic growth and robust demand for air conditioning. Together with increasing electrification, the International Energy Agency (IEA) expects electricity demand in China and India to grow by between 6% and 7% from 2024 to 2025. Despite the strong percentage growth in both countries, China will account for the largest share of demand growth in volume terms over the next three years.

Electricity demand in China, India, the USA and the EU, 1991–2025e

Milestone 1: More electricity from renewables than from coal

In 2025, an important milestone will be reached in terms of decarbonising electricity generation: according to the IEA, the share of renewable energies in global electricity supply rose to 30% by 2023 and is expected to reach 35% by 2025. At the same time, the energy agency expects dependence on coal to decrease, with its share falling from 36% to 33% over the same period, meaning that it is likely to fall behind renewable energies.

Solar and wind energy are at the forefront of this technological change. Their combined share is expected to increase from 13% in 2023 to 15% in 2024 and 18% in 2025. The IEA expects that wind and PV generation together will provide an additional 750 terawatt-hours (TWh) in 2024 and more than 900 TWh a year later. The annual increase in 2025 is equivalent to the total electricity demand of France and Italy. By way of comparison, on a global scale, electricity generation from renewable energies roughly corresponds to China's electricity demand.

Global development of the various electricity generation technologies, 2014-2025

Milestone 2: Additional electricity demand for the first time only from low-carbon power generation

In the past, the additional global demand for electricity could not be met without fossil fuels. In particular, new fossil fuel power plants were built in countries such as China and India. This is where we will probably see another turning point in 2025: as Figure 3 shows, the average additional global electricity generation capacity comes exclusively from renewable energies and nuclear energy. According to the IEA, coal-fired power generation will decline slightly worldwide. It is noteworthy that this statement also applies to China alone. In 2025, China will generate around 700 TWH more electricity than in 2024, and this is expected to be achieved using low-carbon technologies alone.

A key driver of this development is cost. In 2022, the levelised cost of electricity (LCOE) for new power plants in China was around 45 US dollars per megawatt-hour (MWh) for onshore wind and 50 US dollars per MWh for solar PV. By comparison, coal-fired power generation was significantly more expensive at 65 US dollars per MWh (source: IEA World Energy Outlook 2023).

Annual global change in the various power generation technologies, 2019–2025e

Conclusion:

In summary, it can be said that the increasing demand for electricity over the past few years has, on the whole, been covered by new capacities in renewable energies. The growth in China's demand for electricity is comparable to the increase in renewable energies in absolute growth figures. Over the past ten years, China's demand for electricity and the global supply of renewable energies have each increased by around 5,000 TWh. This is a remarkable achievement from a climate protection perspective.

However, if the power generation sector is to be decarbonised, further efforts are needed to reduce the operating hours of existing fossil fuel power plants – even though in many cases they will continue to be needed as reserve capacity for times when renewable energies are not available (dark and windless periods). In the future, low-carbon energies will not only have to cover the additional demand, but also replace the existing fossil fuel power plants. This is the only way to reduce CO₂ emissions, which is urgently needed if the Paris climate protection target is still to be achieved.