The global demand for electricity is projected to double by 2050 compared to 2020 levels, primarily fueled by population growth, industrialization, and the increasing adoption of complex technologies such as artificial intelligence (AI).
This surge in electricity demand is driving a significant increase in the need for renewable energy sources.
Renewable Energy Capacity Expansion
To support the green transition and meet the growing energy demands, countries are actively working to expand their renewable energy capacity.
However, the rapid growth of complex technologies could further accelerate demand beyond current projections.
NextEra Energy’s Perspective on Demand Growth
John Ketchum, CEO of NextEra Energy, a major U.S. energy firm, predicts a tripling of renewable energy demand over the next seven years, driven by the expanding use of AI.
In the second quarter of 2024, NextEra added 3,000 MW of renewable and storage projects to its backlog, with 28% of those deals aimed at powering Google’s data centers.
Ketchum believes that the bulk of future growth demand will be met by a combination of renewables and battery storage.
Unprecedented Demand Growth for Utilities
NextEra Energy estimates that power demand for data centers, manufacturing, and the electrification of the economy will grow at a rate roughly four times faster in the coming decades compared to the previous two.
This sentiment is shared by various energy intelligence companies, as global demand for electric vehicles (EVs), industrial power, and data centers surges.
The pressure to decarbonize and transition away from fossil fuels has intensified the need for a rapid increase in renewable energy capacity to avoid economic stagnation due to power shortages.
Challenges Facing Utilities
Rebecca Kujawa, CEO of NextEra Energy Resources, acknowledges the unprecedented nature of this demand growth, stating that it is larger than anything the industry has seen before. She emphasizes that it will take time for utilities to fully adapt and meet this escalating demand.
Key Drivers of Renewable Energy Demand Growth
Several sectors are contributing to the surge in renewable energy demand. The electrification of transportation, including trains, buses, trucks, and cars, is a major factor.
This shift necessitates a transition from fossil fuels to renewable electricity. The global EV market, which accounted for 2% of the automobile market in 2022, is projected to reach 50% by 2035, signifying a massive change in energy demand for transportation.
Industrial Decarbonization and Green Hydrogen
Global industrialization also plays a significant role in increasing renewable energy demand as heavy industries strive to decarbonize their operations.
Green hydrogen is gaining traction as a fossil fuel substitute, with the market projected to grow at a CAGR of 31% between 2024 and 2032.
By 2030, global green hydrogen deployment is estimated to reach 150 GW, equivalent to 63,750 tons per day, driven by government pressure on industries to reduce emissions.
Data Centers and AI
The proliferation of data centers, essential for powering new technologies, is another major growth area.
The increasing use of AI services like Chat-GPT is expected to rapidly drive up global power demand.
Energy consumption by data centers is projected to double by 2026 and continue to rise, prompting significant investments in green energy capacity by major tech companies.
Climate Change and Power Demand
Climate change is exacerbating the demand for power for cooling and heating. The growing middle class in emerging economies further increases the need for air conditioning.
In colder regions, governments are encouraging the adoption of electric heat pumps over gas boilers, further boosting renewable energy demand.
Conclusion
The convergence of global sector growth and decarbonization efforts is set to dramatically increase renewable energy demand in the coming decades.
As this demand intensifies, governments worldwide are racing to expand their renewable energy capacity to support a transition away from fossil fuels.
However, the rapid pace of development in certain industries, particularly those relying on data centers, necessitates an even faster expansion of green energy capacity to prevent economic disruptions due to a shortage of clean power supply.