The age of electricity

Electricity has powered human progress for centuries, yet it still makes up only about 20% of global energy use.[1] Despite years of climate urgency, electrification has lagged behind what’s needed to meet the Paris goals. But a new force is stepping in — one that feeds on electrons and is growing at breakneck speed: AI.

Could this finally ignite the long-awaited electricity revolution? Or will it derail the energy transition?

From fossils to electrons: a transition in motion

Electricity’s share of global energy consumption has inched up from 15% in 2000 to around 20% today, with power demand rising twice as fast as overall energy use over the past decade.[2] Progress is real but still insufficient for Net Zero.

Electrification is central to the energy transition because it is the most easily decarbonized form of energy. Although falling renewable costs and supportive policies are driving gains, hard-to-abate sectors — cement, steel, glass — remain slow to electrify due to technical and economic hurdles.

Transport tells a mixed story. Passenger cars are rapidly electrifying, with EV sales expected to surpass 20 million units in 2025 (about 25% of global sales).[3] If this momentum continues, car-related emissions could align with Net Zero by 2030, one of the few areas on track. But aviation, shipping, and long-haul freight lag far behind.

Renewables have been the main engine of electrification, growing from 20% to 33% of global electricity generation in less than a decade. The International Energy Agency (IEA) expects renewables to reach 20% of final energy consumption by 2030, up from 15% today.[4] Yet decarbonization overall is slow, particularly in industry and transport, where geopolitical and competitiveness concerns still outweigh climate goals.

With climate diplomacy losing momentum, a new wild card has emerged: artificial intelligence. Its rapidly rising electricity needs could disrupt the energy landscape—potentially accelerating the transition or complicating it.

Will AI transform the electricity transition into a revolution?

Artificial intelligence is still emerging, but it is already reshaping global electricity systems. Its rapid growth is increasing power demand — especially from data centres — and transforming how energy is produced and consumed. This surge poses challenges for energy markets and may hinder progress toward climate goals, with long-term impacts still uncertain.

In 2024, data centres used around 415 terawatt-hours (TWh) of electricity (about 1.5% of global consumption).[5] The IEA projects this demand to more than double by 2030 to 945 TWh, and their estimate is conservative compared to those of other forecasters. Longer-term estimates suggest data centre demand could soar to 3,500 TWh by 2050, comparable to current total consumption in India and the Middle East combined. The forecast consensus is clear: AI will be the fastest-growing driver of electricity demand in the early 21st century.

The rapid expansion of AI is driving an unprecedented surge in global electricity demand, requiring massive and accelerated investments not only in new power generation but also in power grids and energy storage to maintain system resilience and flexibility. Unlike the past two decades — when energy demand growth came mainly from emerging markets — AI-driven data centre construction is now pushing demand sharply higher in developed economies, especially the US. The IEA forecasts global electricity demand to grow by more than 3% annually for the rest of this decade.

This shift is transforming power markets. As renewable energy penetration grows, electricity systems are moving from fuel-cost-driven pricing to models which reflect the high upfront investment, stressing the need for backup capacity, grid stabilization, and mechanisms such as capacity payments. These measures, along with grid congestion and the need for infrastructure upgrades, will likely raise electricity prices for consumers and increase the economic attractiveness of battery storage.

The race by hyperscalers to secure huge amounts of electricity through long-term power purchase agreements (PPAs) is pushing up power prices and accelerating renewable deployment. About half of the power capacity additions to power up hyperscalers by 2035 is expected to come from renewables.[6] These investments will have cost impacts. While policy choices will determine how much households pay, the IMF warns that if renewable and transmission expansion is insufficient to cope with the growth of data centres, US electricity prices could increase as much as 8.6% by 2030.[7]

Now the trillion-dollar – and trillion-watt! -- question: will AI accelerate, or further derail, the energy transition?

AI will undoubtedly increase electricity demand and strain current systems, necessitating major upgrades. And adding 700 TWh, or close to 1000 TWh by 2030, comes with a significant carbon price tag, depending on how carbon-intensive the electricity generation choice is. Yet AI could also improve efficiency and reduce overall energy use — counterbalanced by potential rebound effects (Jevons paradox), where efficiency gains lead to even higher consumption. Ultimately, the net impact will depend heavily on political decisions, regulatory frameworks, and infrastructure development.

Powering up: how can utilities charge ahead in the electricity revolution?

Utilities are transitioning from traditional power suppliers to key coordinators of the electrified economy, generating power, expanding and managing grids, and balancing supply and demand over the short and long-term. Once largely overlooked in equity markets, the utilities sector is now viewed as a critical pillar of the AI growth story and has benefitted from the AI boom. Will the honeymoon continue?

Although rising electricity demand — driven especially by data centres and AI — has supported the sector overall, utility subsectors will not benefit equally.

While share prices of European utilities with high exposure to power prices have rallied on enthusiasm around data-centre demand, the ability to continue to benefit will depend on value chain and regional positioning. Europe is unlikely to encounter the level of power shortages emerging in the US but could face peak-demand stress, which could boost the need for flexible generation (including gas) and for energy-storage solutions. We see the potential of continued earnings and dividend generation in the sector over the period to 2030. The growth has been coming and will continue to come from regulated utilities (and integrated companies, likely driven by their regulated power network activities), led by power network developers which are now seeing the fruit of a surge in capex that began several years ago.

We still see three building blocks of the energy transition:

• Renewables remain the main driver of the energy transition in our view, led by China – because they should be the fastest and cheapest option to add power to the grid. Global clean-tech investment reached $2.2 trillion in 2024, twice the level of fossil-fuel investment. A record 585 gigawatt (GW) of renewable capacity was added globally in 2024, 64% from China.[8] The IEA expects 4,600 GW more between 2025–2030, double the pace between 2019 and 2024, with solar PV (utility plus distributed) accounting for ~80%, again mostly from China. Europe has maintained its target of 42.5% renewables in its energy mix by 2030, and the IEA forecasts installed capacity could increase from 849GW today to 1,600GW by 2030. Despite the rollback of the Inflation Reduction Act in the US, the PPA market remains strong, supporting new renewables development.
   
• Grid infrastructure is essential to support electrification and rising penetration of renewables. Massive investment is required to expand, modernize, digitalize, and optimize networks. The rule of thumb that $1 in renewables requires $1 in grids is far from being met today. Expectations of a long “network supercycle” have boosted valuations for grid-focused utilities, especially in Europe. Supported by strong balance sheets and favourable regulation, utilities are significantly increasing grid capex, driving 8–10% CAGR in regulated asset bases through 2030. This is projected to accelerate the CAGR in regulated earnings from their historical single digit levels to double-digit from 2025 through 2030E.[9]
   
• Energy storage markets are hitting new records in 2025, fuelled by soaring demand from data centres and industry. Storage is essential for renewable integration, grid stability, and demand-response flexibility. Rapid progress in long-duration solutions is making grid-scale storage commercially viable, with deployment set to accelerate. Breakthroughs in supercapacitors could enable hybrid systems post-2030, positioning storage as a major catalyst for the next decade of the energy transition. The way companies manage flexibility with reliable storage solutions will reveal the real differentiators within the sector. Integrated utilities once limited to pumped-hydro storage now see energy storage as a promising medium-term growth opportunity.

A pivotal moment in the energy transition?

The surge of AI and the accelerating rollout of renewable energy mark a pivotal moment in the global energy transition. Together, they have the potential to shift electrification from a slow structural trend to a true industrial revolution — one driven by unprecedented demand, massive infrastructure needs, and rapid technological change. But unlocking this potential will require overcoming significant constraints, from grid bottlenecks to energy security and financing. Among the most pressing is the secure supply of critical minerals, essential both for AI hardware and for renewable technologies, that will continue to reshape both geopolitics and industrial strategies. Ultimately, the success of the electricity revolution and its ability to deliver economic progress while delivering on climate goals will hinge on governments’ capacity to build a long-term industrial vision and to steer the AI revolution towards the better good.

[1] World Energy Outlook 2025 – Analysis - IEA
[2] World Energy Outlook 2025 – Analysis - IEA
[3] World Energy Outlook 2025 – Analysis - IEA
[4]  Solar, geothermal, etc are part of consumption figures, but not part of generation figures.
[5] Energy and AI – Analysis - IEA
[6] Energy and AI – Analysis - IEA
[7] Power Hungry: How AI Will Drive Energy Demand
[8] Renewable capacity statistics 2025, IEA.
[9] Figures from Bloomberg NEF. Grid capex is projected to rise 15-16% globally in 2024-2025, and compound by more than 10% annually through 2030.