Electricity Demand Is Surging, The Grid Isn’t Ready: IEA

By Tsvetana Paraskova of OilPrice.com

• International Energy Agency says global electricity demand is growing at its fastest pace in 15 years, set to rise more than 3.5% annually through 2030.

• While renewables, nuclear, and natural gas are expanding rapidly, grid infrastructure is becoming the key bottleneck, with over 2,500 GW of power and load projects stuck in connection queues worldwide.

• Grid investment must rise about 50% above current levels to keep pace, with BloombergNEF and Goldman Sachs warning that persistent grid constraints could trigger power shortages and even undermine the U.S. position in the global AI race

Global electricity demand is rising at the fastest pace in 15 years and will continue to do so at least until the end of the decade as AI infrastructure, advanced manufacturing, and electrification have ushered in The Age of Electricity, the International Energy Agency (IEA) says.

Global power demand is expected to grow by more than 3.5% per year on average through the end of the decade, the agency said in its new Electricity 2026 report.

Renewables, nuclear, and natural gas are the big winners of the electricity demand boom, but the rise in all these power-generating sources would not mean anything if they struggle to connect to the grid.

Power Demand Surge

Global electricity demand increased by 3% annually in 2025, following growth of 4.4% in 2024, the IEA said in the report.

Between 2026 and 2030, the annual average growth rate would be 3.6%, driven by higher consumption from industry, electric vehicles (EVs), air conditioning, and data centers, according to the agency.

While emerging economies, including China, India, and the Southeast Asian region, will drive 80% of the additional power demand by 2030, advanced economies see growth in electricity demand after 15 years of stagnation, the IEA said. Artificial intelligence, data centers, and advanced manufacturing support the return to growth in power demand in advanced economies.

U.S. electricity demand rose by 2.1% in 2025 and is expected to grow by nearly 2% annually through 2030. The rapid expansion of data centers will drive half of the increase, the agency noted.

EU demand is forecast to increase by around 2% per year through 2030, and many other advanced economies – such as Australia, Canada, Japan, and South Korea – are also expected to see faster electricity demand growth through 2030.

Grid Investment Lagging Behind Power Generation Boom

As demand grows, developers of new capacity, especially renewables and natural gas, face constraints in connecting to the grids. Regional and country-specific trends are not the same, but the need for rapid and efficient expansion of grids is a pressing global issue. Without increased system flexibility and rapid grid expansion, the Age of Electricity could roll out slower than expected.

Today, global investments in grids are about $400 billion per year. If the world is to meet the expected growth in power demand through 2030, it would need to boost annual grid investment by about 50% from $400 billion, according to the IEA.

The Age of Electricity will also need “a significant scaling up of grid-related supply chains,” the IEA said.

Currently, more than 2,500 gigawatts (GW) worth of projects – renewables, storage, and projects with large loads such as data centers – are stalled in connection queues worldwide.

A total of 1,600 GW of queued projects could be integrated in the near term through grid-enhancing technologies and regulatory reforms that enable more flexible grid connections and usage, the agency reckons.

But increased flexibility and grid expansion need more investment than the current spending.

Last year, grid investment was on track to top $470 billion for the first time, up by 16% from 2024, a December analysis from BloombergNEF found.

The U.S. accounted for a quarter of global grid spending with the highest investment level in 2025, at $115 billion. China and the EU/UK followed as other major contributors, each with around 20% of the global sum, according to the report.

However, rising equipment costs compounded by high inflation have started to affect overall spending figures, BNEF said, adding that increased spending “will not fully eliminate ongoing grid-infrastructure bottlenecks, meaning delays to new generation and demand connections are likely to continue in the coming years.”

“We’ve seen that even with increased investment, there are significant barriers to meeting the needs of new generation and power demand on time,” Peter Wall, Head of Grids Research at BloombergNEF, said.

“With data centers and industrial electrification driving sharp increases in power demand, investors need to factor in how essential timely grid expansion is for not only connecting new demand but also connecting all of the generation we will need to ensure a secure and reliable supply to this demand after over a decade of stagnation.”

Additional grid investment is hampered by supply chain and labor constraints, BloombergNEF notes.

In the U.S. specifically, the aging grid infrastructure in key regional U.S. markets cannot cope with all requests, with grid investments lagging behind soaring power demand.

At the current rate of interconnection requests and grid capacity, the U.S. could face a power crunch by 2030, Samantha Dart, Goldman Sachs’ co-head of global commodities research, said at a conference last month.

“We aren’t adding enough capacity,” Dart said in January at the Goldman Sachs Energy, CleanTech and Utilities Conference in Miami.

Nearly all power grids in the U.S. may lack critical spare capacity by the end of the decade. If the issue with grid constraints remains unaddressed, China could pull ahead of the U.S. in the AI race, Dart noted.