Global Power Demand Surges in 2025 Despite Slower Economic Growth

Electricity demand is surging globally, even as broader economic growth moderates, driven by climate-related pressures and persistent structural shifts in power consumption patterns. According to the International Energy Agency’s mid-year electricity update, global power demand is expected to grow 3.3% in 2025 and 3.7% in 2026, a notable acceleration compared to the 2.6% average between 2015 and 2023.

The demand boom follows a 4.4% increase in 2024, spurred by heatwaves, electrification trends and rising digital infrastructure needs. And while some of the world's largest economies have seen their industrial activity slow, electricity use remains elevated, a sign that extreme weather, structural energy shifts, and the digital economy are altering traditional consumption patterns.

In Latin America, these global dynamics are playing out in distinct ways. The region’s total electricity generation reached 165TWh in March 2025, marking a 5% year-on-year increase and the highest monthly figure in a year, according to data from OLADE. Hydropower remained the dominant source at 47.1%, followed by natural gas at 27.4%, but fossil fuel generation increased as hydro and wind output weakened, weighing on the region’s overall energy renewability.

Mixed Drivers Across Regions

China and India continue to drive global demand, albeit at a slightly reduced pace. China is set to account for half of global electricity demand growth this year, even as its annual increase moderates to 5% from 7% in 2024 due to slower industrial activity. In India, growth is expected to ease to 4% from 6% in 2024 before picking up again in 2026.

Meanwhile, electricity consumption in the United States is projected to expand by 2.3% in 2025, more than double the average annual increase over the past decade. The United States is seeing continued load growth driven in part by the proliferation of large-scale data centers. The European Union, on the other hand, is still in recovery mode, with power demand set to rise a modest 1.1% in 2025 after significant declines in previous years.

Clean Energy Gains Ground; Fossil Fuels’ Role Persists

Renewables are leading the charge to meet growing demand. Wind and solar PV generation are expected to account for more than 90% of the net increase in electricity demand globally this year, crossing the 5,000TWh threshold. The IEA projects that solar and wind will contribute nearly 20% of global electricity by 2026, a fivefold rise in just a decade.

Crucially, renewable electricity generation is expected to overtake coal-fired output as early as this year, with coal’s share dropping below 33% for the first time in over a century. Still, not all regions are following the same path. While coal use is falling in China and Europe, it is rising in the United States, India, and several Asian markets. Globally, coal-fired generation is forecast to decline only marginally in 2025 before dropping 1.3% in 2026.

Gas-fired generation, meanwhile, is on track to reach a new high, with a 1.3% increase this year led by fuel switching in the Middle East and growing demand in Asia. Nuclear is also gaining ground, boosted by restarts in Japan and new reactors coming online across China, India, South Korea and others. Global nuclear output is expected to grow by 2% annually through 2026.

Uneven Costs and Impacts on Industry

The rise in electricity prices has been uneven across global markets. Wholesale prices in the United States and EU jumped 30-40% in the first half of 2025, fueled by higher gas costs. Still, prices in the EU remained nearly twice as high as those in the United States and 50% higher than in China, maintaining pressure on energy-intensive industries.

In contrast, countries such as India and Australia saw power prices drop by as much as 15%, underscoring the diverging cost pressures faced by different regions depending on their generation mix, subsidy policies, and market structure.

Latin America: More Power, Lower Renewability

In Latin America and the Caribbean, hydroelectric generation continues to dominate but is proving increasingly volatile. March saw a marked increase in fossil-based generation amid a drop in hydro and wind output, which contributed to a fall in the region’s “renewability index” to 62%, among the lowest monthly levels in the past year.

Mexico is one of the countries with the lowest renewable shares in the region, alongside Guyana, Haiti, Cuba and the Dominican Republic, all of which reported renewability indices below 25% according to OLADE. The shift reflects changing weather patterns, fossil resilience in the regional energy mix, and in some countries, slow progress in regulatory or investment environments.

Despite the rise in fossil-fired generation, energy inflation across Latin America remained subdued in early 2025. Monthly energy inflation dropped to zero in May from 0.17% in April, the lowest level since September 2024, as 12 out of 20 countries recorded flat or negative energy price growth. Year-on-year, however, regional energy inflation rose slightly to 1.55% in May, although this figure was still well below May 2024’s 3.07% level. The decline in global oil prices, down 24% year-on-year to US$63.62/b, contributed to this easing pressure.

Looking Ahead

With global temperatures continuing to rise and economies pushing further into energy hungry technologies like artificial intelligence, electricity demand is unlikely to decrease in the coming years. In Latin America and especially Mexico, the growing role of gas and other fossil fuels in the power mix poses a long-term sustainability challenge, states IEA, even as the region continues to benefit from abundant hydropower resources and growing solar and wind capacity.

For now, the world is consuming more electricity than ever before, a trend likely to intensify as the energy transition, climate adaptation, and technology convergence pick up speed. Whether emissions plateau or begin to fall depends on how quickly renewables can scale, how reliably fossil fuels are displaced, and how countries, Latin America included, adapt their power systems to a shifting energy landscape.