.png){kind=small}
The Next Phase of the Energy Transition Will Be Electrified
The global energy system is entering what the International Energy Agency (IEA) calls the “Age of Electricity.” Global energy demand continues to rise, but electricity demand is growing considerably faster, driven by expanding industries and households, as well as three powerful new sources of consumption: AI and data centers, electric vehicles (EVs), and rapidly growing demand for air conditioning. Against this backdrop, the COP31 Presidency and the IEA convened the COP31-IEA High-Level Energy Transition Dialogue to explore how electrification can become a central pillar of the next phase of global climate action. One proposal from this was the “35 by 35” objective, which sought to increase electricity’s share of global final energy consumption from just over 20% today to 35% by 2035. The ambition is significant; however, the discussions made clear that electrification is increasingly becoming not only a decarbonization strategy but also an economic and energy security strategy.
ELECTRIFICATION IS MORE THAN SWITCHING ENERGY SOURCES
The logic behind electrification is increasingly compelling. Electric vehicles can reduce exposure to volatile oil markets; heat pumps and electric cooking can lower dependence on imported fuels; and electrified industrial processes can improve efficiency while supporting new industries. Yet the dialogue also emphasized that electrification cannot be viewed as a standalone technological transition. Electricity demand is already rising rapidly, and meeting future demand will require clean generation capacity to expand alongside grids, transmission networks, energy storage, and flexible power systems. Otherwise, demand may grow faster than the infrastructure needed to serve it. The discussion therefore highlighted a broader lesson: installing more solar panels and wind turbines is necessary, but insufficient. Governments must plan electricity systems as integrated architectures, connecting generation with transmission, distribution, storage, digitalization, buildings, transportation, and industry.
AN ELECTRIFIED WORLD MUST ALSO BE AN EQUITABLE ONE
Perhaps the most important challenge raised during the dialogue was the uneven ability of countries to finance this transformation. While advanced economies can mobilize capital for grids, storage, and renewable energy relatively easily, developing economies often face high borrowing costs caused by currency, political, regulatory, and sovereign risks. In some high-risk markets, the cost of capital for utility-scale renewable projects can exceed 20%, even when the underlying technology is economically viable. If left unresolved, electrification could become another source of development inequality, with wealthy countries adopting cleaner and cheaper technologies while poorer countries struggle to finance even basic energy access. Solutions discussed included stronger power-sector planning, credible power purchase agreements, local-currency financing, foreign-exchange risk mitigation, guarantees, and political risk insurance. Experts agreed that the energy transition could not be called global if access to affordable capital and technology remains concentrated among a small number of economies.
Electrification can strengthen energy security, lower emissions, improve access, and create new industries, but only when clean power, efficient buildings, modern grids, finance, and development needs are considered together. Now that the world is preparing for COP31 in Antalya, the defining question is perhaps whether the transition can happen quickly enough and fairly enough to deliver prosperity and resilience for all.
Comments