Electrification

The rapid growth and increasing economic importance of electricity have major implications for economic competitiveness, energy security, and climate mitigation. Its central and growing role in energy systems and economies means we have entered the Age of Electricity.

Electricity demand increased by more than 3% per year from 2015 to 2025 – twice as fast as overall energy demand growth. This results from increasing demand for cooling, appliances, manufactured goods, digital services and artificial intelligence (AI). It also reflects rapid expansion of the electrification of transport, with electric vehicles (EVs) accounting for nearly 25% of new car sales in 2025, up from less than 1% in 2015. The effects of the conflict in the Middle East may further boost demand for electric technologies.

Today, electricity accounts for around 23% of total final energy consumption. Electric technologies are highly efficient at converting final energy into useful energy services, such as mobility, lighting, heating and cooling. An electric vehicle is two-to-four times more efficient than an internal combustion engine one, for example. For this reason, electricity accounts for a larger share of the useful energy services actually enjoyed by consumers. Electricity also disproportionately powers high value sectors like advanced manufacturing, digital services and artificial intelligence. As a result, electricity powers economies activities that account for nearly half of GDP.   

Around 40% of total energy supply serves as an input to electricity generation: this includes coal and natural gas; renewable resources such as hydropower, wind and solar; and nuclear energy. The production of electricity through the combustion of fuels – primarily fossil fuels – involves substantial losses in the form of waste heat (typically in the order of 50-65%). Further losses occur in the conversion of final energy into useful energy. For example, around three-quarters of the energy consumption in the transport, mostly oil, sector is lost as waste energy. Electric technologies are much more efficient, and so electricity plays a large role in delivering the useful energy services that consumers benefit from.

The electrification rate varies widely across sectors and countries. In the buildings sector, the rate of electrification is high and has risen fast, increasing from around 25% in 2000 to nearly 40% in 2025. This is primarily due to rapid growth in the number of appliances and air conditioners, powered almost exclusively by electricity. In the industry sector, electrification rates have risen rapidly since 2010, driven by the electrification of non-energy-intensive sectors, alongside the faster growth of already electrified sectors, such as advanced manufacturing. In the transport sector, electricity has historically played a limited role outside the rail sector. However, the fast-growing adoption of electric road vehicles has led to the share of electricity in transport energy consumption rising from 1% in 2015 to nearly 2% in 2025, and its share of useful energy services rising to 4%, reflecting its efficiency benefits. The low level of electrification in transport reflects the fact that, despite rapid growth in sales, electric vehicles still account for a small share of the large stock of vehicles on the road. It also reflects the difficulty of electrifying long-distance aviation and shipping.

Electrification presents a significant industrial opportunity, and revenues from electrification-related sectors account for one-fifth of the growth in global industrial revenues since 2020. More than half of these revenues come from companies headquartered outside China, highlighting that electrification-related industrial leadership is more diverse than often understood. Risks come from concentration and supply bottlenecks in specific areas, notably the supply of critical minerals. Once deployed, however, many electrification technologies provide long-lived domestic energy supply, reducing continuous import needs.

Electrification rates rise across all three end-use sectors in the High Electrification Scenario (HES), in aggregate increasing to 35% in the HES by 2035 compared to today. The transport sector is at present much less electrified than the buildings and industry sectors, and it sees the largest relative rise, with the electrification rate increasing in the HES from 2% today to 13% by 2035. In buildings, electrification is led by the uptake of heat pumps in regions with significant heating needs. In addition, the electrification of cooking is advanced by the deployment of induction cookstoves. In industry, electric technologies are competitive today for several applications in many countries, including the production of low- and medium-temperature heat in non-energy-intensive industries and the generation of mechanical energy. The HES sees those technologies adopted much more widely.

There is substantial cost-effective potential for electrification based on today’s technology costs, energy prices and financial conditions. About half of residential fuel consumption and half of oil-based road transport could be electrified competitively, and almost 40% of fossil-fuel-based low- and medium-temperature heat in industry. If the cost-competitive potential for electrification were exploited to the full, the global electrification rate would reach 33%, up from 23% in 2025.

The competitive electrification potential of each region is shaped by the structure of energy consumption, reflecting factors such as levels of industrialisation, vehicle ownership and average temperatures. It is also affected by regional economic conditions, including fuel prices, equipment cost and access to finance. Full exploitation of today’s cost-competitive potential results in an electrification rate higher than today’s level in all regions: the increases range from around 5 percentage points in the Middle East to almost 15 percentage points in Europe and India.

Electricity requires large, expensive infrastructure to generate, transport and distribute it. As a consequence of these factors, electricity is almost always more expensive per unit of final energy consumption than fuels like natural gas or petrol. However, technologies that consume electricity are often substantially more efficient than their conventional equivalents. A heat pump uses the input energy to harvest more energy from the ambient air, meaning that the ratio of output energy service to input energy consumption is higher than one (typically it is three to five). By contrast, a gas boiler converts chemical energy in the input fuel to heat with an efficiency of less than one.

The result of these interactions is that electricity is often more expensive than other fuels on a final energy basis in terms of kWh delivered, but is more effective in delivering useful energy services to consumers for every kWh delivered. Globally on average, USD 100 spent on electricity can power a car up, 3 times further than an ICE vehicle fuelled with USD 100 of gasoline. Similarly, USD 100 spent on electricity for a heat pump provides on average 42 days of heating, compared to a USD 100 of fuel delivering only 30 days of heating for gas boilers.

In the HES, major fuel importing regions see large reductions in imports by 2035. In the HES, importing countries reduce their oil imports in 2035 by 15 million barrels per day (mb/d) from today’s level, mostly as a result of transport electrification. In addition, electrification in buildings and industry avoids annual natural gas imports of 120 billion cubic metres (bcm) by 2035. Avoided annual coal imports of 100 million tonnes of coal equivalent (Mtce) are proportionally smaller than those for oil and gas because much of end-use coal demand is concentrated in industrial applications, some of which are difficult to electrify.

In the HES, reduced imports save advanced economies and China USD 300 billion per year by 2035 at 2025 import prices, and other emerging market and developing economies over USD 100 billion. These savings are equivalent to nearly 30% and over 25%, respectively, of the 2025 fuel import bills for these two regional groupings. The largest reduction comes from lower oil import bills.

Electrification requires substantial upfront investments, but these can be balanced against lower fuel costs. Some electrification investments may require policy support to lower upfront costs or facilitate access to affordable capital. In the HES, the lower operating costs of electric technologies mean that energy bills across the world are lower in 2035 than today.

Electrification lowers total energy sector carbon dioxide emissions in all the cases analysed in this report. Paired with an accelerated transition to low-emissions sources, the HES reduces end-use emissions by 40% by 2035, and total energy sector emissions by more than half from their level in 2025. This requires, however, a substantial scale up of low emissions electricity generation.