i

Important security note: Warning of attempted fraud in the name of DWS

We have detected that fraudulent individuals are misusing the "DWS" trademark and the names of DWS employees on the internet and social media. These fraudsters are operating fake websites, Facebook pages, WhatsApp groups and Mobile Apps. Please be aware that DWS does not have any Facebook Ambassador profiles or WhatsApp chats. If you receive any unexpected calls, messages, or emails claiming to be from DWS, exercise caution and do not make any payments or disclose personal information. We encourage you to report any suspicious activity to info@dws.com, including any relevant documents and the original fraudulent email. Additionally, if you believe you have been a victim of fraud, please notify your local authorities and take steps to protect yourself.

07-Oct-24

Did you know... Renewables are expected to overtake coal as the largest source of global electricity next year?

  • Topics Covered
  • Europe Leads the Global Energy Transition
  • Clean Energy to Account for Near Half of Global Output
  • Investing in the Future of Energy
5 min to read

The demand for global electricity is expected to surge by more than 10% over the next three years, with renewable sources of energy expected to keep the world’s lights on. 

According to the International Energy Agency’s (IEA) latest analysis, worldwide electricity demand is set to grow by an average of 3.4% each year until 2026.[1] Growth in clean energy—including renewables—is predicted to not only meet but exceed this increasing demand.

The IEA’s January Electricity 2024 report forecasts that renewables will overtake coal as the largest source of global electricity supply as soon as next year and account for 37% of production by 2026.[1] Renewables are expected to more than offset rising demand for electricity in some of the globe’s most robust economies such as the United States and the European Union.  

In the short-term, this growth will be partly driven by a recovery in hydropower supply, which has been negatively affected by droughts in critical regions in 2023. In the longer-term, it will be supported by continued investment and favorable policy changes in countries  seeking to embrace and foster increased utility of alternative energy sources.

Next year alone, the amount of energy supplied by renewable sources globally will increase by as much as 14%, contributing to a predicted average annual growth of 9% in renewable energy generation until 2026.[1]

Europe Leads the Global Energy Transition

The European Union (EU) is set to maintain the highest rate of relative decline in CO2 emissions from power sources.[1]

Over the next three years, emission intensity in Europe is set to fall by an average 13% per year.[1] This comes as clean electricity generated by renewables or nuclear power is set to surpass three-quarters of total output in the region by 2026, up from its current level of around 67%.[1]

The share of renewable electricity generation in Europe is predicted to rise from 45% to 55% over the same timeframe. Giving further impetus to this transition, the EU formally set a 42.5% target for the share of renewable energy consumption among its members by 2030, up from current levels of around 32%.[1]

While Europe has so far led the way in the green transition from a global standpoint, recent technological and policy developments in the United States are also having a notable impact, with CO2 emissions from power sources in the country forecasted to fall by 5% annually.[1]

The US government’s 2022 Inflation Reduction Act (IRA) and Bipartisan Infrastructure Law (BIL) set aside $110 billion for clean energy manufacturing and infrastructure projects, including the allocation of more than $70 billion to electric vehicle production— one of the leading fronts of the renewable revolution.[1]

The IEA anticipates wind and solar power will drive 10% annual growth in renewable generation between 2024 and 2026 in the US, despite uncertainty around certain projects, with these energy sources expected to surpass coal-fired generation in 2024.[1]

In both North and South America more broadly, the US accounts for two-thirds of electricity production and consumption, and renewable generation is forecast to grow annually by 7% until 2026.[1]

Clean Energy to Account for Near Half of Global Output 

By 2026, global electricity output from renewables and nuclear energy will reach almost half of all total output, as nuclear energy continues to play a more pivotal role in the energy transition.

Nuclear energy is set to reach a record high of power generation in 2025, with supply rising 2.7% in 2023 and expected to increase on average by about 3% per year between 2024 and 2026, due to more initiatives stemming from technological advances, as well as ongoing research and development.[1]

At the 2023 COP28 climate change conference, more than 20 countries committed to triple their nuclear power capacity output by 2050. Much of this growth is expected to take place in Asia, which is predicted to contribute 30% of the world’s nuclear power by 2026.[1]

Several European countries, including The Netherlands, Sweden, Finland and Slovenia have also announced plans to maintain or expand their nuclear capacity in a collective effort to boost output for utility. 

France, Europe’s largest provider of nuclear energy, announced plans in 2022 to construct six new European Pressurized Reactors (EPR).  Earlier this year, the French Energy Minister announced plans to construct eight additional reactors, with aspirations to complete around 2026.  

Investing in the Future of Energy

The rapid expansion of the global renewable energy sector may present a unique investment opportunity. With renewables due to become the dominant source of global electricity, coupled with significant government investments in clean energy infrastructure, investors have a prime opportunity to engage with a market at the forefront of technological innovation and environmental sustainability.

As countries worldwide commit to reducing carbon emissions and enhancing their renewable capacity, the sector offers not only growth potential but also the opportunity to contribute to a crucial global shift towards sustainable energy solutions. Now is the time to consider renewable energy as a key component of a diversified investment portfolio, taking advantage of the sector's expected growth and its pivotal role in shaping the future of global energy consumption.

At Xtrackers by DWS, we want to inspire you to take your financial future into your own hands. Discover more here.

At Xtrackers by DWS, we want to inspire you to take your financial future into your own hands.

Discover More

1. Electricity 2024 Report, January 2024

CIO View