IEA (2019), World Energy Outlook 2019, IEA, Paris https://www.iea.org/reports/world-energy-outlook-2019
Electricity is at the heart of modern economies and it is providing a rising share of energy services. Demand for electricity is set to increase further as a result of rising household incomes, with the electrification of transport and heat, and growing demand for digital connected devices and air conditioning.
Rising electricity demand was one of the key reasons why global CO2 emissions from the power sector reached a record high in 2018, yet the commercial availability of a diverse suite of low emissions generation technologies also puts electricity at the vanguard of efforts to combat climate change and pollution. Decarbonised electricity, in addition, could provide a platform for reducing CO2 emissions in other sectors through electricity-based fuels such as hydrogen or synthetic liquid fuels. Renewable energy also has a major role to play in providing access to electricity for all.
In the Stated Policies Scenario, global electricity demand grows at 2.1% per year to 2040, twice the rate of primary energy demand. This raises electricity’s share in total final energy consumption from 19% in 2018 to 24% in 2040. Electricity demand growth is set to be particularly strong in developing economies. Government policies, market conditions and available technologies collectively set a course for electricity supply to shift towards low-carbon sources, with their share increasing from 36% today to 52% in 2040 in the Stated Policies Scenario.
In the Sustainable Development Scenario electricity plays an even larger role, reaching 31% of final energy consumption. In the Sustainable Development Scenario, electricity is one of the few energy sources that sees growing consumption in 2040 – mainly due to electric vehicles – alongside the direct use of renewables, and hydrogen. The share of electricity in final consumption, less than half that of oil today, overtakes oil by 2040. Accelerated efforts on renewables, nuclear power and carbon capture technologies rapidly decarbonise electricity supply, compensating for the sharp decline of coal-fired power generation and reducing power sector CO2 emissions by three-quarters by 2040.
In the Sustainable Development Scenario, renewables provide two-thirds of electricity supply worldwide by 2040: solar PV and wind together provide 40%, with a further 25% from dispatchable renewables, including hydro and bioenergy. Nuclear power expands and close to 320 GW of coal and gas-fired capacity is equipped with CCUS. Unabated coal-fired power is almost completely phased out by 2040, addressing the largest single source of CO2 emissions, while gas-fired power remains an important source of flexibility.
In the Sustainable Development Scenario, power sector investment is nearly $1.2 trillion per year on average to 2040, some 60% higher than recent spending levels. In this scenario, power sector investment accounts for two-thirds of total energy supply investment, compared with almost half today. Annual spending on renewables doubles.