Electricity generation

Think of all the appliances and electronics you depend on every day for work, recreation and basic comfort. Computers, smartphones, air conditioning, microwaves, washing machines – these things all depend on electricity to work. And as the number of homes and businesses across the world grows, so does the need for power. Over the period of the Outlook, the fuel for electricity generation will account for about 55 percent of demand-related energy growth. The fuels we use to power our world are also changing, with natural gas emerging as the No. 1 source of electricity generation by 2040.

Today, OECD and Non OECD countries consume approximately the same levels of electricity, but that relationship will change significantly as Non OECD electricity demand surges by 150 percent by 2040

As developing countries grow and expand their economies, their need for energy increases. Over the Outlook period, about 85 percent of growth in electricity demand will occur in the Non OECD economies.

One of the emerging drivers of demand globally relates to digital warehouses. The New York Times reports that on a worldwide basis, these data facilities use about 30 billion watts of electricity, roughly equivalent to the output of 30 nuclear power plants. Data centers in the United States are estimated to account for one-quarter to one-third of that load.

Natural gas, nuclear and renewables grow to meet rising electricity demand, while coal and oil use declines

The fuels used to meet the world’s growing demand for electricity are changing. Gas will see strong growth, increasing 85 percent and approaching one-third of fuel inputs for electricity generation by 2040. The use of nuclear power doubles over the Outlook period, with strong capacity growth in China and other developing countries as they seek to diversify their electricity supply. Renewables – biomass, wind, solar, hydro and geothermal – become a larger part of the fuel mix, although their contribution remains relatively small at less than 10 percent.

Natural gas and nuclear become the most economic fuels for generating power

The economics of electricity are influenced by a number of factors, including technology, environmental impacts, public policies, capital investment costs and fuel prices. These factors considerably change the landscape in determining the most economic fuels for generating electricity.

The United States represents a good example of how these variables can impact fuel demand for electricity. Coal faces a significant challenge from policies to reduce greenhouse gas emissions; wind and solar face challenges related to economics and reliability considerations; and nuclear faces unique considerations regarding public perceptions of safety. At the same time, new gas-fired generating units use very efficient technologies and are easy to build at a reasonable cost, flexible to operate and supported by abundant gas supplies. As a result, gas is increasingly viewed as the most economical fuel choice for electricity generation for the United States.