After years of stagnation in key developed markets, power demand is rising again at a pace not seen in decades as data centers, electrification, and industrialization drive a surge in electricity consumption.
The Age of Electricity, as the International Energy Agency (IEA) put it in its 2026 Electricity report, is gathering pace, changing long-term assumptions and forecasts about power markets in all regions, and posing new challenges for policymakers, power generators, and grid operators.
One common feature in the Age of Electricity is that power demand is rising everywhere in the world, driven by higher electrification rates and the AI and data center boom. But different countries and regions have taken different pathways to meet higher electricity demand, reshaping their regional power markets in different ways, analysts at Wood Mackenzie say.
Booming Power Demand
In the United States, electricity consumption set a new record high last year and is on track for new all-time highs this year and next, as the AI boom has ended America’s decade of stagnant power use.
Despite a pause in connecting new data center projects in Texas to the grid, the West South Central region will still account for the largest regional share of growth in total electricity sales, totaling nearly 20% of nationwide growth in 2026 and almost 40% in 2027, according to the EIA’s forecast in the Short-Term Energy Outlook (STEO) for September.
WoodMac’s analysts forecast 3.2% annual electricity sales growth in the U.S. through 2035, two-thirds of which will come from data centers. With the backing of the Trump Administration, gas remains a popular choice and will meet 52% of the increased power generation through 2035.
However, gas investment costs have hit a record high, and bottlenecks in gas turbine deliveries are complicating decisions to rely too much on gas-powered generation.
“The need for electrons must be balanced against the risk of stranded assets,” Wood Mackenzie’s power and renewables market analysts say.
“The tension between speed to power and affordability are spurring reforms across regional US power markets,” they added, but noted that state policy responses remain fragmented and there is no silver bullet to solving the challenge.
Power demand in Europe is also rising, due to the same global factors plus another major driver—the European Union’s decarbonization policies and drive to boost the share of renewables as a way to protect against geopolitical challenges to energy security, such as the lack of LNG supply from Qatar because of the Iran war and the disrupted traffic through the Strait of Hormuz.
The Asia-Pacific region is set to see the biggest power demand growth of any region, driven by industrialization, economic expansion, and urbanization in China, India, and Southeast Asia, according to Wood Mackenzie.
The APAC region will account for nearly three-quarters of overall global demand growth to 2035, WoodMac says.
Grids Aren’t Ready for the Power Demand Surge
Despite the fact that the pathways to meeting rising power demand diverge among regions, another common thread has emerged in recent years. It’s that the grids are not ready to handle the surge in electricity loads.
Global power demand is expected to grow by more than 3.5% per year on average through the end of the decade, the International Energy Agency (IEA) said in its Electricity 2026 report.
Global electricity demand is rising at the fastest pace in 15 years and will continue to do so at least until the end of the decade as AI infrastructure, advanced manufacturing, and electrification have ushered in The Age of Electricity, the IEA says.
As demand grows, developers of new capacity, especially renewables and natural gas, face constraints in connecting to the grids. Regional and country-specific trends are not the same, but the need for rapid and efficient expansion of grids is a pressing global issue. Without increased system flexibility and rapid grid expansion, the Age of Electricity could roll out at a slower pace than expected.
Today, global investments in grids are about $400 billion per year. If the world is to meet the expected growth in power demand through 2030, it would need to boost annual grid investment by about 50% from $400 billion, according to the IEA.
“A lack of grid capacity is emerging as a critical bottleneck in many regions, driving higher levels of congestion and slowing the deployment of new electricity generation, storage and demand,” the agency said in the report.
“Grid connection queues have reached record levels worldwide.”
In other words, today’s grids are not ready to handle tomorrow’s electricity needs.
“Meeting this demand will require annual investment in grids to rise by 50% by 2030,” Keisuke Sadamori, IEA Director of Energy Markets and Security, said earlier this year.
“Expanding flexibility will also be crucial as power networks continue to evolve – so will a strong focus on security and resilience.”
This post appeared first on https://oilprice.com