Electrification could cut global import bills by over $500B yearly: IEA

Greater electrification could cut the world’s energy import bills by more than $500 billion every year, the International Energy Agency (IEA) said in a new report prepared ahead of this year’s U.N. climate talks in Antalya, Türkiye.

In line with COP31’s target of increasing the share of electricity in global final energy consumption to 35% by 2035, the acceleration of electrification could reduce the annual energy import bill of energy-importing countries by over $500 billion at 2026 prices, the agency said.

IEA prepared a special report titled “Electrification” in the context of a strategic partnership between the COP31 Presidency and the IEA, at the request of Türkiye and Australia.

The report discusses the opportunities that could arise from increasing the share of electricity in global final energy consumption to 35% by 2035 and the steps that need to be taken to achieve this goal.

According to the report, the share of electricity in global final energy consumption currently stands at about 23%. IEA analyses show that, considering 2025 technology costs, energy prices and financing conditions, this ratio could be cost-effectively increased to approximately 33% with existing technologies.

The biggest potential for electrification is in the transport sector. With lithium-ion battery prices having fallen by 90% since 2010, it is currently estimated that about half of road transport demand, which is currently reliant on oil, can be electrified at competitive costs.

It is noted that roughly half of the global demand for space heating in buildings and about 40% of energy consumption in industrial applications requiring low and medium temperatures could be cost-effectively electrified.

EVs reduce oil demand

The report states that today, electric cars, motorcycles, trucks and buses are eliminating daily oil demand equivalent to approximately 2.3 million barrels.

Under current policies, it is projected that electric vehicles could prevent about 10 million barrels of daily oil demand by 2035. In the IEA’s “High Electrification Scenario,” this figure could reach 18 million barrels per day.

In the same scenario, it is reported that the annual energy import bill of energy-importing countries could decrease by about a quarter, or $400 billion, compared with 2025. Based on higher 2026 energy prices, annual savings are projected to exceed $500 billion.

Faster growth of grids required

If electricity shares in final energy consumption reach 35%, the annual increase in global electricity demand is expected to reach about 1,400 terawatt-hours (TWh) by 2035 – a rate roughly double the previous decade’s growth.

According to the IEA, investments in electricity generation, grids, storage and flexibility need to progress together to meet increasing demand securely and cost-effectively. In the High Electrification Scenario, grids need to expand and modernize 40% faster by 2035 compared to the last 10 years.

The report forecasts that global investments in end-use electrification could nearly triple by 2035, reaching $1 trillion. Thanks to the higher efficiency of electric technologies, average household energy bills could decrease by about 15% compared to today.

The report indicates that, if current policies continue, the global electrification rate will reach about 30% by 2035. It highlights that, to achieve the 35% target, network and generation investments must be accelerated, access to financing must be improved and policies supporting electrification technologies must be strengthened.

DAILYSABAH