As Energy Demand Risks Rise, Diversification and Cooperation Are More Urgent Than Ever

According to The "World Energy Outlook 2025" report, that energy security has become a focal point of geopolitical tensions and a pillar of economic security.

Amid the complexities of global energy security and the diversity of its sources and technologies, the World Energy Outlook 2025 report by the International Energy Agency (IEA) sheds light on key options, challenges, and opportunities for governments, stressing that diversification and cooperation among nations have become essential to address uncertainty and increasing market volatility.

Shifts in Power Centers in Energy Markets

The agency notes that emerging countries led by India and Southeast Asian nations, along with countries in the Middle East, Africa, and Latin America, will drive global demand shifts over the next decade. After China had been the main driver of oil, gas, and electricity demand growth since 2010, these emerging economies are now forming new market dynamics, although none are replicating the intensive energy growth seen in China.

New Risks Beyond Oil and Gas

Risks are no longer confined to oil and gas, as supply chains for critical minerals have become a growing concern. One country alone dominates the refining of 19 out of 20 strategic energy minerals, holding a market share of nearly 70%. These minerals are essential for battery production, electrical grids, electric vehicles, smart chips, and even defense systems.

The report indicates that geographic concentration in refining has increased since 2020, particularly for nickel and cobalt, necessitating stronger government responses to ensure supply security.

Statements from the IEA Executive Director

Fatih Birol, the executive director of the agency, stated:

"Modern history has not seen a period where energy security tensions encompass such a large number of fuel types and technologies simultaneously. We need the same spirit of cooperation that the agency was founded upon after the 1973 oil shock."

He added that government strategies should consider the interconnectedness of energy security goals, the cost of living, economic competitiveness, and climate change, noting that the report's scenarios provide a data-driven framework for discussions about the future.

The Age of Electricity and Artificial Intelligence

The agency confirms that electricity has become the cornerstone of modern economies, with demand growing at a pace far exceeding total energy consumption across all scenarios.

Investment in electricity generation and electrical uses now constitutes half of the total global energy investment, even though electricity accounts for only 20% of final energy consumption.

The agency explains that the surge in artificial intelligence and data centers has raised demand unprecedentedly even in advanced economies. Investment in data centers is expected to reach $580 billion by 2025, surpassing global spending on oil production at $540 billion - a symbolic shift towards the "age of electricity."

The Gap Between Electricity Production and Infrastructure

Despite a 70% increase in investment in electricity generation since 2015, spending on transmission and distribution networks has not kept pace, posing a challenge to supply security.

The report highlights the urgent need to accelerate the development of networks, storage, and electrical flexibility systems to meet rising demand.

Renewable and Nuclear Energy Regains Momentum

All scenarios indicate faster growth for renewable energy, led by solar power, with 80% of the increase in energy consumption expected by 2035 occurring in areas with high solar irradiance.

The report also notes a strong resurgence of nuclear energy after two decades of stagnation, as global nuclear capacity is expected to increase by at least a third by 2035, driven by investments in small modular reactors and new technologies.

Oil and Gas Markets: Temporary Abundance but No Guarantees

The report forecasts a short-term surplus in oil and gas supplies, with prices remaining in the range of $60 to $65 per barrel despite geopolitical tensions.

It also points to a boom in liquefied natural gas (LNG) projects, with an expected 300 billion cubic meters per year of new capacity coming online by 2030, half of which will be in the United States and 20% in Qatar.

However, the agency warns that this abundance does not equate to security, as markets remain vulnerable to geopolitical fluctuations and sudden demand changes.

The Ongoing Gaps: Energy Access and Climate Action

The report shows that the world is still far from achieving universal energy access and climate goals.

Approximately 730 million people live without electricity, and nearly 2 billion use harmful cooking methods.

The report outlines a timeline aiming to secure electricity for all by 2035 and clean cooking by 2040 using liquefied petroleum gas (LPG).

Temperature Increases Exceeding 1.5 Degrees Celsius

Even in ambitious scenarios, the report indicates that global warming will exceed 1.5 degrees Celsius before mid-century, necessitating the energy sector's preparedness for new security risks stemming from rising temperatures.

Nonetheless, achieving net-zero emissions by 2050 could reduce temperatures back below this threshold in the long term.

Energy Security Amid Climate and Cyber Threats

The agency warns of increasing exposure of energy infrastructure to climate risks and cyberattacks, with 2023 data showing that over 200 million homes worldwide were affected by power outages, with 85% of incidents linked to damage in electrical networks.

The report emphasizes that enhancing the resilience of electrical systems has become a strategic necessity, not merely a technical option.

EcoPulse24 Summary

The World Energy Outlook 2025 report confirms that the world is entering a new phase of interdependence in energy, where artificial intelligence, rare minerals, and climate intersect in a single equation.

As countries race to secure their needs, it appears that diversification, international cooperation, and investment in renewable electricity are the keys to ensuring a stable and secure energy future.