IEA forecasts faster global power demand amid LNG shock
The International Energy Agency expects global electricity demand to grow faster in 2026 and 2027, even as a temporary disruption to liquefied natural gas (LNG) flows raises generation costs and tests energy security in major markets.
In its Electricity Mid-Year Update 2026, published July 23, the IEA forecast global electricity-demand growth of 3.6% in 2026 and 3.8% in 2027, compared with 3% growth in 2025. These are forecasts, not final results.
Why electricity use is accelerating
The IEA attributes the increase to overlapping structural trends, including industrial activity, wider appliance ownership, air-conditioning demand, heat pumps, electric vehicles and expanding data-center capacity. Global electricity consumption is projected to reach 30,700 terawatt-hours in 2027, up from 28,600 terawatt-hours in 2025.
The growth is uneven. China’s electricity demand is forecast to rise 5.5% in 2026, supported by manufacturing activity and electric-vehicle charging. India’s demand is forecast to rebound to 7% after weather-related weakness in 2025. U.S. demand is expected to increase by close to 2%, led in part by data centers, air conditioning and industry. European Union demand is also forecast to grow about 2%, supported by electrification, colder winter weather early in the year and cooling needs during heatwaves.
By contrast, the IEA says some price-sensitive LNG-importing markets, including Bangladesh and Pakistan, have adopted conservation measures that curtailed electricity consumption.
How the LNG disruption reached power markets
The IEA says the temporary loss of LNG flows through the Strait of Hormuz removed nearly 20% of global LNG supply and produced significant price volatility. Gas prices in Asia and Europe reached their highest levels since the 2022-23 energy crisis, although prices later moderated from their March highs.
The gas-market outlook assumes that the Strait fully reopens in the third quarter of 2026 and that operations at undamaged regional facilities are restored by early in the fourth quarter. That is an assumption in the IEA forecast, not a completed outcome. The duration and reliability of the reopening remain important risks.
Additional LNG from North America and other exporters has helped ease market tightness, but higher gas prices have still changed how some power systems meet demand. The IEA expects gas-fired generation to remain broadly flat in 2026 while coal-fired output increases in several Asian and European markets as utilities switch fuels.
The price effects have differed sharply by region. Average spot wholesale electricity prices in the European Union and Japan rose by more than 30% year over year in the second quarter of 2026. U.S. wholesale prices were broadly unchanged, while prices in India rose by less than 10%. Australia’s average wholesale price was about 45% lower, which the IEA links to strong renewable generation and rapidly expanding battery storage.
Wholesale electricity prices are not the same as household electricity bills. Retail effects depend on contracts, taxes, subsidies, network charges and regulation. Higher generation costs can nevertheless feed into bills, cooling expenses and industrial prices. Gas-market stress can also affect fertilizer production and, indirectly, food costs.
Why renewables can overtake coal while coal use rises
The IEA projects that renewables will become the largest source of global electricity generation in 2026 after reaching near parity with coal in 2025. Renewable generation is forecast to grow by more than 8% this year, with renewables’ share of global generation rising from 33% in 2025 to 37% by 2027.
Solar photovoltaic generation is expected to add about 600 terawatt-hours in 2026 and overtake wind as the world’s second-largest renewable source after hydropower.
That projection does not mean fossil fuels disappear. Electricity demand is rising quickly enough that new renewable generation does not immediately replace every unit of coal- or gas-fired power. When LNG becomes scarce or expensive, utilities can turn to coal to keep electricity flowing. The result can be a cleaner global generation mix overall alongside a short-term increase in coal generation.
The IEA also forecasts that power-sector carbon dioxide emissions will rise by about 1% in 2026 before flattening in 2027. The projected increase reflects fuel switching from gas to coal and weather-related increases in coal- and oil-fired generation during the first half of the year. The agency expects renewables, nuclear power and natural gas to help displace coal globally in 2027.
What could stabilize the outlook
The next pressure points include the reopening and reliability of the Strait of Hormuz, LNG deliveries from suppliers outside the Gulf, summer and winter weather, the possibility of a stronger-than-expected El Niño, nuclear-plant availability and further coal switching.
The IEA says grid flexibility will become increasingly important as renewable generation expands. Battery storage, demand response, transmission upgrades, stronger price signals and more efficient use of existing infrastructure can help systems manage periods of surplus renewable power, sharp evening demand peaks and sudden fuel-price shocks.
Nuclear generation is also expected to increase in 2026 and accelerate in 2027 as new reactors come online and delayed projects are completed, although maintenance outages and construction delays limit near-term growth.
For consumers and businesses, the practical test is whether power systems can absorb rising electricity use without passing every fuel and weather shock directly into prices. The IEA’s next updates will show whether LNG flows normalize, renewable additions keep pace, coal switching persists and the 2026-27 forecasts hold.
Sources
- IEA: Electricity Mid-Year Update 2026 executive summary
- Reuters: Global power demand to accelerate in 2026 and 2027
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