The Covid-19 crisis has underlined the importance of a reliable, affordable and secure electricity supply that is able to accommodate sudden changes in behaviour and economic activity while continuing to support vital health and information services. The electricity sector will play a key role in supporting economic recovery, and an increasingly important long-term role in providing the energy that the world needs. Over time it looks set to evolve into a system with lower CO2 emissions, a stronger infrastructure base and enhanced flexibility.

In the Stated Policies Scenario (STEPS), global electricity demand recovers and surpasses pre-Covid-19 levels in 2021. Electricity demand growth in India outpaces other regions to 2030, after which growth is most pronounced in Southeast Asia and Africa. China sees the largest absolute increase in demand, accounting for over 40% of the global growth to 2030. Electricity demand growth globally outpaces all other fuels. Electricity meets 21% of global final energy consumption by 2030.  

In advanced economies, electricity demand recovers to pre-crisis levels by 2023 and then rises by 0.8% per year through to 2030, driven by the electrification of mobility and heat. In developing market and emerging economies, rising levels of ownership of household appliances and air conditioners, together with increasing consumption of goods and services, underpin strong growth, exceeding pre-crisis levels by 2021. A handful of countries including Ghana, Kenya, Senegal, Ethiopia and Rwanda are on track to achieve universal access to electricity by 2030, but in the STEPS – 660 million people still lack access in 2030 – including 33% of all people in Africa.

Renewable sources of electricity have been resilient during the Covid-19 crisis and are set for strong growth, rising by two-thirds from 2020 to 2030 in the STEPS. Renewables meet 80% of global electricity demand growth during the next decade and overtake coal by 2025 as the primary means of producing electricity. By 2030, hydro, wind, solar PV, bioenergy, geothermal, concentrating solar and marine power between them provide nearly 40% of electricity supply. China leads the way, expanding electricity from renewables by almost 1 500 TWh to 2030, which is equivalent to all the electricity generated in France, Germany and Italy in 2019.

Solar PV becomes the new king of electricity supply and looks set for massive expansion. From 2020 to 2030, solar PV grows by an average of 13% per year, meeting almost one-third of electricity demand growth over the period. Global solar PV deployment exceeds pre-crisis levels by 2021 and sets new records each year after 2022 thanks to widely available resources, declining costs and policy support in over 130 countries. Our analysis of solar PV financing costs indicates that, despite monetary policy measures, the weighted average cost of capital edged up in 2020 after years of going down. Even so, policy support frameworks enable very low financing costs, making new solar PV more cost effective than coal- and gas-fired power in many countries today, including in the largest markets (United States, European Union, China and India). For projects with low cost financing that tap high quality resources, solar PV is now the cheapest source of electricity in history.

Global coal-fired generation recovers from an 8% drop in 2020, but never returns to its 2018 peak. Coal’s share of global electricity generation falls to 28% in 2030 in the STEPS, down from 37% in 2019 and 35% in 2020. Challenging market conditions contribute to 275 GW of coal-fired capacity retirements by 2025 (13% of the 2019 total), including 100 GW in the United States and 75 GW in the European Union, where 16 out of 27 EU member states aim to phase out all unabated coal. However, global coal retirements are nearly offset by new additions through to 2025, with 130 GW of capacity under construction, mostly in China, India and Southeast Asia. As a result, global CO2 emissions from the power sector edge above 13 Gt by 2024 and stabilise to 2030 but never return to pre-crisis levels. However, emissions fall by 38% from 2020 to 2030 in the Sustainable Development Scenario.

Flexibility is the cornerstone of electricity security in modern power systems. Electricity networks have a central part to play in unlocking flexibility from power plants, energy storage and demand-side resources. Revenue for many transmission system operators are set to decline in 2020, which could present an electricity security risk if they do not quickly recover. In the STEPS, grids are modernised, expanded and digitalised, and grid investment reaches $460 billion in 2030, two-thirds more than in 2019. Over the next ten years, 2 million km of transmission and 14 million km of distribution lines are added in the STEPS, 80% more than the network expansion over the past decade.