Global electricity demand is rising rapidly: Where is Europe headed?
Why is Asia emerging as the hub for energy-intensive industries while Europe grapples with the aftermath of the energy crisis? How is global electricity demand reshaping economic power dynamics, and why is the EU struggling to adapt to new structural trends? The answers extend beyond price differences, with Europe’s economic and social future at stake.
Introduction
While the European Union shows signs of recovery following the 2022 energy crisis, the situation remains fragile. The 1.4 per cent increase in electricity consumption in 2024 only moderately offsets the cumulative decline of nearly 6 per cent experienced in the previous two years. Meanwhile, high electricity prices in the EU persisted in 2024: the industrial average was 110 dollars/megawatt-hour (MWh), compared to 45 dollars/MWh in the United States, 75 dollars/MWh in China, and approximately 60 dollars/MWh in India. Such pronounced differences in electricity pricing may lead to persistent structural disadvantages for Europe in the global economic arena.
The latest IEA report on the global electricity outlook for 2025 shows that the energy demand in economies is growing and increasingly decoupling from traditional GDP growth. In China and the USA, a new structural transformation is driving electricity consumption.
While the rise of renewables is promising, developing backup systems is also essential. The April 2025 Spanish-Portuguese blackout highlights the unpredictability of renewable-based systems lacking sufficient storage capacity. Electricity has recently come to the fore and become one of the most critical economic indicators. Only economies able to provide predictable, affordable, and secure energy can remain competitive in the long term. This is particularly true with the digital sector, data centres and AI applications recently becoming the chief electricity-intensive industries.
Regional demand trends and structural transformations
The structural transformation of global electricity demand has accelerated in recent years. This transformation is not only quantitative but also qualitative: the temporal patterns, the spatial concentration, and the structure of energy consumption are changing radically. The growing scale of evening peak loads and weather-dependent generation leads to complex system management challenges in nearly every region.
Moreover, the energy intensity of economies is increasingly reflecting industrial restructuring, the rise of digitalisation, and the growing demand for heating and cooling due to climate change. Consequently, as the consumption for heating and cooling is GDP independent, electricity demand today does not always correlate with GDP growth.
In China, electricity demand growth has consistently outpaced economic growth since 2018. As Figure 1 illustrates, during COVID in 2020, both GDP and electricity demand growth declined, while by 2023, electricity demand had increased dynamically by 6.8 per cent, far surpassing the GDP growth rate of 5.2 per cent. Economic momentum in China is increasingly concentrated in energy-intensive industries, including electric vehicles, battery technologies and solar panel production.
The production of these “new energy products” – as they are referred to in China – is estimated to have consumed more than 300 terawatt-hour (TWh) of electricity in 2024. For comparison, this is roughly the amount of electricity consumed by Italy in one year. Accordingly, the Chinese energy sector invested approximately 273 billion dollars in solar- and wind-energy projects in 2023 – an amount 30 per cent higher than Hungary’s GDP in the same year. While the International Monetary Fund forecasts an average GDP growth of around 4 per cent over 2025-2027 in China, electricity demand is expected to be stronger, reaching 6 per cent. This implies that the country’s electricity demand will grow by three times the total annual consumption of Canada over this period.
India has also witnessed rapid growth: in 2024, a 5.8 per cent annual increase in electricity demand was registered, while peak loads set historic records in several states. This is due not only to economic expansion but also to the spread of residential air conditioning, resulting particularly from longer and more intense summer periods. The rising prevalence of residential air conditioning has caused substantial periodic load surges, creating growing concerns over grid reliability. India tries to ease the load with new storage capacities and dynamic tariff models, but structural network development is inevitable. According to forecasts, electricity demand in the country is expected to grow at an average rate of 6.3 per cent annually between 2025 and 2027.
In the United States, a new historic record for electricity consumption was also set in 2024, primarily due to the rapid expansion of the technology sector. Over the last year, electricity consumption by data infrastructure – including cloud platforms and AI systems – expanded at a rate of 10-12 per cent, underscoring the sector’s intensifying demand. In certain US states – particularly in those with a high concentration of tech giants – this expansion accounted for more than a third of the total annual increase in electricity consumption.
Electricity prices vary significantly across states, but nationally, they trended downward in 2024. However, periodic, localised price increases occurred, particularly in California and the northeastern region, mainly during extreme weather events. The temporal structure of the load has also shifted: the difference between daytime and evening peaks is growing, driven by the intermittent nature of solar power generation and non-working day consumption patterns.
This type of load shifting requires technological and market adaptation, for which several US states have already introduced time-based pricing and increased energy-storage capacities. According to long-term forecasts, the share of technology in consumption will continue to rise, exerting pressure on prices and capacity planning. Electricity demand in the US is expected to grow at an average rate of around 2 per cent annually from 2025 to 2027.
In the EU, electricity demand in 2024 increased by only 1.4 per cent, significantly below the 2-3 per cent annual average growth rate of the previous decades. This growth was only a partial correction for the total 6 per cent decrease in demand of 2022 and 2023, meaning that the demand level in 2024 was still lower than in 2021. A key factor behind the stagnating demand is the subdued performance of energy-intensive industries, notably in the aluminium, steel and chemical industries, which were significantly impacted by persistently high electricity prices.
These industries are closely tied to the automotive sector: aluminium and steel play a key role in vehicle manufacturing, while battery production, essential for electrified mobility, also requires significant energy. A prime example of this trend from the chemical industry is BASF, which, with its fertiliser and chemical raw-material production, also engages in energy-intensive activities.
Regional electricity prices and changes in competitiveness
The price sensitivity of the EU’s electricity market has gradually increased since 2019, becoming more pronounced in many member states by 2022. As seen in Figure 2, industrial electricity prices in EU member states rose dramatically in 2022: in Italy, they reached 300 dollars/MWh, while in Germany, they were around 160 dollars/MWh. By 2024, these prices had moderated – they were around 160 dollars/MWh in Italy and 95 dollars/MWh in Germany – but they still significantly exceeded the 2019 levels.
In contrast to Europe’s volatile price movements, India’s industrial electricity prices fell by approximately 20 per cent in 2024, from 75 dollars/MWh in 2019 to 60 dollars/MWh, the lowest in six years. This significant decrease was possible because the growing demand was offset by stable coal and hydroelectric generation. In China, however, a slight increase is observed: between 2019 and 2021, prices ranged from 50 to 60, and between 2022 and 2024, from 70 to 75 dollars/MWh. These price movements, however, show significantly smaller fluctuations compared to the volatility in Europe. The EU average in 2024 was around 110 dollars/MWh, which is 1.5-2.5 times higher than electricity prices in the USA (45 dollars/MWh), China (75 dollars/MWh), and India (60 dollars/MWh).
The USA plans to expand its solar-power capacity by 37.5 gigawatts (GW) and its wind-power capacity by 8.9 GW in 2025, in addition to the existing 220 and 153 GW, respectively. With the existing production efficiency (capacity utilisation), these power plants alone will cover 2.1 per cent of current consumption, almost matching the previously mentioned 2 per cent demand growth.
The 16.2 GW of battery storage capacity planned to be installed in 2025 will ensure that a significant portion (over 40 per cent) of the renewable energy produced (mainly solar power) is released to the market across the day, preferably not during the lowest electricity price hours. With renewable investments and the expansion of energy storage capacities, electricity market prices in the USA are not expected to change significantly.
If the continent is able to continue installing new renewable resources and storage and regulation capacities at a similar pace in the coming years, it can ensure long-term price stability on its electricity market.
The EU plans to install 70 GW of solar and 19 GW of wind power capacity in addition to the existing 338 and 223 GW, respectively. With its renewable power plants to be installed in 2025, it will be able to produce 4.4 per cent of the 2024 consumption, meaning the market could return to the 2021 consumption level with current price conditions. Furthermore, in a favourable scenario, price reduction and the phaseout of a significant amount of coal-fired capacity could be assisted by the nearly 20 GW planned capacity of gas-fired power plants currently under construction. Thus, the EU’s room for manoeuvre to meet demand growth, decarbonization, and price competitiveness could increase and develop in a more balanced direction.
Chinese renewable-energy capacity expansions are expected to have a supply-increasing effect of 6.6 per cent, which will alone offset the 6 per cent increase in demand. However, India would need over 60 GW of new renewable capacity to cover the expected 6.3 per cent demand growth from renewable sources. This is not impossible, taking into account the capacity expansions in the EU, the USA, and China, but it would be a significantly ambitious growth compared to India’s 30 GW increase in 2024. Therefore, the Indian market is likely to cover demand growth from other sources, such as fossil or hydroelectric power.
Positions, pathways, and implications
The electricity-price gap between Europe and other regions is becoming an increasingly decisive factor in the international competitiveness of energy-intensive industries. This is particularly discernible today, as global value chains are increasingly shifting to regions where energy supply is more predictable and cost-efficient in the long term. The USA, China, and India are currently in a more favourable position in this race due to their lower industrial electricity costs. For European industry, this means that persistently high energy prices can significantly influence production costs and indirectly limit opportunities for participation in global competition.
This competitive disadvantage is particularly significant for countries where the share of renewable energy is low or is coupled with insufficient balancing capacity. Daily fluctuations from renewable energy sources, combined with high regional prices, can be mitigated by adopting flexible energy storage or expanding balancing capacities. It is important to highlight that high energy prices can also indirectly lead to wider socio-economic consequences, particularly in terms of employment and investment prospects in energy-intensive regions.
The downsizing or shutdown of industrial operations may trigger layoffs, capital flight, and compelled shifts in regional industrial structures. Consequently, unemployment may rise, local income generation may decrease, public services may weaken, and the outmigration of young workers may accelerate, threatening the long-term social cohesion of these regions.
Beyond their economic and social impacts, high electricity prices are also likely to trigger profound structural transformations in the energy markets, with differing dynamics. The USA and China are expected to have the opportunity to reduce fossil fuel-based energy production and maintain current price levels thanks to the expansion of renewables. In contrast, India does not have the same flexibility: to sustain current electricity prices, it must significantly expand solar and wind capacity beyond 2024 levels. Alternatively, India could stimulate electricity-market demand by increasing reliance on fossil resources.
On the other hand, the EU market follows a different trajectory: due to the significant renewable and gas-power-plant capacity planned for 2025, supply growth is expected to outpace demand. Therefore, the expansion of renewables and gas power plants, along with the consumption decrease of recent years, offers a significant opportunity for the EU electricity market in both decarbonization and competitiveness. Nevertheless, it is worth noting that progress in one of the three possible directions (coal plant closures, renewed consumption growth, or price reductions) can only occur at the expense of the others.
In conclusion, technological knowledge, industrial capacities, and policy tools are available; the question is how effectively and swiftly Europe can mobilise them. However, the continent must remember that electricity is not only an essential tool for decarbonization but also becoming an increasingly significant factor in global competitiveness.
Consequently, the future of the electricity market has also become a structural and societal issue, and countries capable of aligning competitive pricing, supply security, and decarbonization will be the best positioned in this battle. This is also a powerful reminder that an economy can only function efficiently and sustainably if companies have access to affordable energy sources – a recognition also emphasised by the UN’s Sustainable Development Goal 7: “Affordable and clean energy” for all.
This post is a reprint of an article written by our colleague, which was originally published on August 21, 2025, in the online journal CEEnergy News.
