- Electricity could cost-effectively supply 33% of global energy by 2035, compared with 23% today, according to the International Energy Agency.
- Faster electrification could reduce annual fuel import bills by more than $400 billion and sharply cut oil and gas demand.
- A parallel renewables assessment says the world must install about 1.2 TW annually through 2030, almost twice the record capacity added in 2025.
Electrifying transport, heating and industrial processes has become an energy security strategy as well as a climate policy, with high fossil fuel prices strengthening the economics of switching to electricity, the International Energy Agency has concluded.
The IEA’s new Electrification report finds that existing technologies could cost-effectively increase electricity’s share of final energy consumption from 23% in 2025 to 33% by 2035, even using energy prices from before the latest Strait of Hormuz disruption.
A more ambitious high-electrification scenario would take the share to 35%, the target being discussed ahead of COP31. The analysis was commissioned by Türkiye and Australia in their respective COP31 presidency roles.
The opportunity spans several sectors. The IEA estimates that around half of residential fuel use, half of oil-based road transport and nearly 40% of fossil fuelled low and medium-temperature industrial heat could already be electrified competitively.
Electric vehicles are between two and four times as energy efficient as internal-combustion vehicles, while heat pumps typically produce three to five units of heat for each unit of electricity consumed.
Security gains carry infrastructure costs
The IEA describes the shift as an “Age of Electricity”, reflecting demand growth driven by cooling, data centres, advanced manufacturing, electric vehicles and heat pumps.
In its high-electrification scenario, advanced economies and China save approximately $300 billion annually on fuel imports by 2035, while other emerging and developing economies save more than $100 billion. Oil imports fall by 15 million barrels a day from current levels and annual gas imports by around 120 billion cubic metres.
End-use emissions from transport, buildings and industry fall 40% by 2035 when electrification is accompanied by faster deployment of low-emissions power.
The analysis does not, however, imply that electrification is frictionless. Electric equipment usually has higher upfront costs and electricity networks require large, long-lived investments. Concentrated critical mineral supply chains, cyber risks and extreme weather also become more consequential as economies depend more heavily on power.
Those constraints are reinforced by a separate IRENA-led assessment released during New York Climate Week. It calculates that renewable capacity reached around 5.15 TW at the end of 2025, after a record 693GW was added during the year. Reaching the COP28 goal of 11.2 TW by 2030 now requires more than 6 TW in five years, or roughly 1.2 TW annually.
Required investment during 2026-30 is put at approximately $8.6 trillion. Grid and flexibility investment may need to rise from $525 billion in 2025 to as much as $1 trillion annually.
Electrification depends on power economics
For the UK, the reports strengthen the strategic case for electric vehicles, heat pumps and industrial electrification. Reducing gas and oil consumption would lower exposure to geopolitical disruption more reliably than attempting to insulate consumers through additional domestic fossil fuel production.
But the benefits will not arrive automatically. Electrification can reduce total energy consumption while still increasing customer bills if electricity remains expensive relative to gas, connections are delayed or households face prohibitive equipment costs.
The reports therefore shift attention towards the less visible parts of the transition: distribution networks, planning, storage, flexible demand and finance. Renewable generation is becoming abundant and relatively cheap in many markets. The increasingly scarce commodities are grid capacity, firm connections and affordable capital.
