Global electricity demand is expected to grow at the fastest annual pace in seventeen years, supercharged by data centers and air conditioning. A gradual increase in temperatures and the more sudden uptick in the adoption of generative AI technologies is pushing up power usage around the world. This is spurring a return to power markets by traders looking to capitalize on high levels of volatility and a widening “spark spread”.
The US is no exception to these trends. In fact, the expansion of domestic electricity demand is likely to outpace the global rate in 2024. To support this change in trajectory, a new wave of capex from US utility providers will need to be deployed throughout the remainder of the decade.
Related ETF: The Utilities Select Sector SPDR Fund (XLU)
New data from the International Energy Agency (IEA) projects global electricity demand to grow at a rate of 4% in 2024. That figure would mark a significant increase from just 2.5% in 2023, accelerating to the fastest pace of expansion since 2007. The upscaled growth rate is expected to be sustained throughout 2025 with yet another year of 4% growth on tap. The IEA tied a significant chunk of the additional electricity needs to increasing data center development and air conditioning installations. The former is tied to the quickening adoption of artificial intelligence (AI) applications while the latter is more closely related to rising temperatures across the globe.
Both of these trends have been palpable in the US, where a June heat wave sent nationwide electricity usage to an all-time high of 502,670 megawatts (MW) in a single hour, and the operation of data centers (including cryptocurrency mining hubs) across just 10 states was responsible for virtually all new commercial power sales over the past half decade. MRP has previously highlighted the anticipated boom in electricity demand coming down the line from the accelerating adoption of generative AI applications, as well as heightened usage by the automotive, manufacturing, and digital asset sectors. Since 2004, industrial use of electricity has not exceeded an estimate of roughly 1.0 trillion kilowatt hours. Similarly, commercial electricity usage has…
To read the complete Intelligence Briefing, current All-Access clients, SIGN IN All-Access clients receive the full-spectrum of MRP’s research, including daily investment insights and unlimited use of our online research archive. For a free trial of MRP’s All-Access membership, or to save 50% on your first year by signing up now, CLICK HERE
