Energy Economics: The Cost of Powering Our World

The global energy landscape is in flux, with demand surging and supply evolving. In 2024, energy supply increased by 2%, yet fossil fuels still account for a staggering 86% of the mix.

This dominance highlights the urgent need for change. Electricity demand growth outpaced total energy demand globally, driven by new technologies and industrialization.

Asia Pacific and the Middle East saw electricity generation rise by 5.4% and 5.3%, respectively. These regions are at the forefront of energy consumption shifts.

The International Energy Agency projects global electricity demand to grow at 3.3% in 2025 and 3.7% in 2026. This is faster than the 2.6% average from 2015 to 2023.

Factors fueling this growth include industry expansion, appliance use, and data centers. The electrification of heat and transport adds to the momentum.

In the US, electricity consumption grew 2% in 2024. It is forecast to grow 2% annually in 2025-2026, driven by semiconductor factories and battery manufacturing.

Global data center power demand could rise 17% to 2026 under a high-growth view. By 2030, it might reach over 2,200 TWh, equivalent to India's current total electricity use.

US data center spending is nearing $500 billion by 2026, showcasing the economic weight of this sector. Data centers are gating factors for the AI economy, testing grid sustainability.

Since 2010, renewables and nuclear have avoided 1,371 exajoules of fossil fuels. They also prevented 110 gigatonnes of greenhouse gas emissions.

Renewables have grown over four times faster than total energy demand since 2006. In the last five years, this pace accelerated to five times faster.

Asia Pacific drove 65% of the 2024 global energy demand increase. It accounts for 47% of total demand, with China playing a pivotal role.

China contributed over 58% of global renewable additions in 2024. Asia Pacific is reshaping global energy dynamics through both growth and innovation.

The Rise of Renewables and Economic Shifts

Renewables are set to overtake coal as the world's top electricity source by 2026 at the latest. This marks a historic shift in energy economics.

By 2026, renewables will reach 36% of global power generation. Coal will drop to 32%, its lowest share in a century.

Wind and solar output topped 4,000 TWh in 2024. They are expected to pass 6,000 TWh by 2026, meeting over 90% of electricity demand increase.

From just 1% in 2005, renewables rose to 15% of global generation in 2024. Projections show nearly 20% by 2026, indicating rapid adoption.

Coal generation is declining due to falls in China and the EU. However, increases in the US, India, and Asia partly offset this.

Natural gas generation is rising by 1.3% in 2025-2026. Nuclear power hits record highs from restarts and new reactors.

All major energy sources hit record consumption in 2024 for the first time since 2006. This underscores the world's insatiable appetite for power.

Key trends in this transition include:

• Renewables growing faster than fossils, reducing long-term costs.
• Coal-to-gas switching in some regions, easing emissions.
• Solar and wind becoming more affordable and efficient.
• Battery storage supporting grid stability and renewable integration.

The economic benefits are clear. Lower emissions mean healthier communities and reduced climate risks.

Job creation in clean energy sectors is booming. This boosts local economies and fosters innovation.

Investment Flows and Global Power Dynamics

Global energy investment passed $3.3 trillion in 2025. Two-thirds of this, or $2.2 trillion, went into clean energy.

Clean energy includes renewables, electric vehicles, grids, storage, efficiency, and clean fuels. Cleantech spending grows about 30% over the next five years.

China dominates this investment, spending nearly as much as the US and EU combined. It leads in manufacturing and deployment of clean technologies.

Upstream fossil fuel spending remains stable in real terms. This indicates a gradual shift rather than a sudden transition.

The table below summarizes key energy source trends and projections:

This data highlights the dynamic changes in our energy mix. Economic factors drive these shifts, with costs and policies playing key roles.

Regional dynamics further complicate the picture. Asia Pacific leads in demand growth, while North America and Europe see slower increases.

Policy volatility in the US and Europe affects clean energy adoption. For example, political attacks on wind and solar can stall progress.

Key investment areas to watch include:

• Solar installations surpassing 500 GW AC by end-2025, led by China.
• Battery storage additions, with the US adding ~15 GW in 2026.
• Data centers procuring 27 GW of power purchase agreements through October 2025.
• Sustainable Aviation Fuel capacity increasing by 33% to 8 million metric tons by 2026.

These investments shape the future of energy economics. Global power dynamics are shifting eastward, with Asia at the helm.

The Role of Emerging Technologies

Emerging technologies are revolutionizing energy systems. Data centers and AI are particularly influential, prioritizing economics over green choices.

Sustainable Aviation Fuel (SAF) consumption doubled to 2 million metric tons in 2025. However, it slows in 2026, representing less than 0.5% of jet fuel.

Electrification is accelerating, especially in China. This expands access to low-carbon energy and reduces reliance on fossils.

Geopolitics plays a role, with China dominating clean supply chains. US and EU policy volatility creates uncertainty in markets.

Key technologies driving change include:

• Battery storage: US ~15 GW new in 2026; Germany and Australia 5 GW each.
• Solar power: US adding 26 GW in 2025 and 22 GW in 2026, boosting generation.
• Wind energy: Continued growth, with output surpassing milestones.
• AI and data centers: Testing grid sustainability and driving demand.

These innovations offer economic opportunities. They also present challenges, such as grid integration and resource management.

The world is in energy addition mode, not a clear transition. Fossils underpin growth despite renewables' rise.

Oil consumption growth is below the pre-pandemic average. It increases by 1.3 million barrels per day in 2025 and 1.1 million in 2026.

India is the top growth source for oil demand. This highlights the diverse energy needs across regions.

Practical Steps for a Sustainable Future

Individuals and businesses can contribute to energy economics. By making informed choices, we drive demand for clean energy.

Actions to consider for a greener future:

• Invest in energy-efficient appliances to reduce electricity consumption.
• Support policies that promote renewable energy investments and incentives.
• Adopt electric vehicles or use public transport to cut fossil fuel use.
• Engage in community solar or wind projects to localize energy production.
• Advocate for corporate transparency in energy sourcing and carbon footprints.

These steps not only save money but also reduce environmental impact. Collective effort is essential for progress in this field.

Staying informed about energy policies helps navigate changes. Encouraging innovation through support and investment fosters breakthroughs.

International cooperation is key to addressing global energy challenges. Sharing technologies and best practices can accelerate the transition.

The cost of powering our world is evolving. Renewables lead the charge, but fossils remain entrenched.

By understanding these trends, we can seize opportunities. The future of energy is about prosperity and planet, intertwined through economics.

Final thoughts on embracing change:

• Monitor energy market shifts and adapt strategies accordingly.
• Foster education on sustainable practices in schools and workplaces.
• Celebrate successes in clean energy adoption to inspire others.

This journey requires patience and persistence. Together, we can build a world where energy is both affordable and sustainable.