Why Surging Electricity Demand Could Redefine the Global Energy Transition

The global energy transition has been at the centre of climate policy debates for over a decade. While countries pledge ambitious carbon reduction goals, the demand for electricity is rising faster than anticipated. This surge is being driven by new technologies such as artificial intelligence, expanding digital infrastructure, growing urbanisation, and increased demand for cooling in hotter climates. According to the Financial Times, progress on cutting emissions remains mixed, with many nations struggling to balance sustainability goals with the reality of rising energy needs.

The New Drivers of Electricity Demand

Artificial intelligence is among the biggest contributors to soaring electricity demand. Training large AI models requires significant computing power, and data centres alone consume vast amounts of electricity. Beyond AI, the spread of electric vehicles, digital services, and air conditioning in developing regions adds further pressure on global energy systems. As populations grow and incomes rise, the demand for reliable and affordable electricity is expected to continue climbing.

Mixed Progress on Emission Reduction

Despite global commitments, emission reduction has been uneven. Many developed economies have made progress by shifting from coal to renewables and natural gas. However, some developing nations, which face rapidly growing populations, continue to rely heavily on coal and fossil fuels. The challenge lies in balancing the need for economic growth with climate responsibility. This uneven progress creates risks of widening global inequalities in energy access and sustainability outcomes.

Renewable Energy Expansion and Its Limits

Renewable energy sources such as solar and wind have expanded rapidly, with falling costs making them more competitive than fossil fuels in many markets. Yet, renewables face limitations, particularly in terms of intermittency and the need for large-scale storage solutions. While battery technologies are improving, the scale of storage required to ensure 24/7 reliability is still expensive. As a result, many countries continue to rely on fossil fuels as backup, slowing down the overall transition.

The Role of Nuclear Energy

Nuclear power is re-emerging as an important element of the energy transition. Unlike renewables, it can provide stable, carbon-free electricity around the clock. Countries such as France and China are investing heavily in nuclear technology, while others are exploring small modular reactors as a flexible solution. However, public concerns over safety, cost overruns, and waste management continue to be obstacles to nuclear expansion.

Energy Efficiency as a Solution

Improving energy efficiency is often described as the "first fuel" in addressing climate change. From better building insulation to more efficient appliances and industrial processes, efficiency measures can significantly reduce demand growth. However, adoption rates remain uneven, and the upfront costs of implementing energy-efficient technologies discourage widespread uptake in developing economies.

The Geopolitical Dimension

Energy transition is not only an environmental challenge but also a geopolitical one. Countries rich in oil and gas face uncertainty about their long-term economic models, while nations leading in renewable technologies and battery production stand to gain influence. Access to critical minerals like lithium, cobalt, and rare earth elements is also reshaping global alliances. This geopolitical reshuffling adds another layer of complexity to the already difficult transition.

Cooling Demand and Climate Change

One of the less discussed but increasingly important drivers of electricity demand is cooling. As global temperatures rise, more households and businesses require air conditioning. In countries such as India, Southeast Asia, and parts of Africa, the demand for cooling could become one of the largest sources of electricity consumption in the coming decades. This creates a paradox: the very need to adapt to climate change increases the energy load, which if powered by fossil fuels, worsens the problem.

Investment and Financing Challenges

Trillions of dollars in investment will be required to meet growing energy demand while reducing emissions. While renewable projects attract significant financing, the pace is still not fast enough to match demand growth. Developing economies, in particular, face challenges in securing affordable financing for clean energy projects. Without adequate international support, these regions may continue relying on coal and gas, slowing the global transition.

The Way Forward

The energy transition needs a holistic rethink. Meeting rising electricity demand while cutting emissions requires a combination of solutions: scaling up renewables, expanding nuclear power, investing in energy efficiency, and developing reliable storage technologies. International cooperation will be essential, especially in financing clean energy for developing nations. If these steps are not taken urgently, the world risks falling short of climate goals while facing energy shortages in the future.

Conclusion

The global energy transition is at a crossroads. On one hand, electricity demand is surging due to AI, digitalisation, and cooling needs. On the other, emission reduction progress is inconsistent and often inadequate. The challenge is to align energy security with sustainability. As the Financial Times notes, the world must rethink its strategies to ensure the energy transition is not only about replacing fossil fuels but also about building resilient, equitable, and climate-friendly systems.