The global electricity industry is heading for a historic turning point that could reshape energy investment, fuel markets and electricity planning, with renewable energy expected to overtake coal as the world’s largest source of electricity generation by the end of 2026, a development that raises fresh questions about gas-rich economies such as Nigeria seeking to balance energy transition with energy security and economic growth.

According to the International Energy Agency (IEA) in its latest Electricity Mid-year Update, renewable electricity generation is projected to expand by more than eight per cent this year, increasing its share of global electricity production from 33 per cent in 2025 to 37 per cent by 2027, underlining the accelerating shift away from fossil fuel-dominated power systems.

The report projects global electricity demand to rise by 3.6 per cent this year, up from three per cent growth recorded in 2025, before increasing further to 3.8 per cent in 2027.

Consequently, global electricity consumption is forecast to increase from 28,600 terawatt-hours (TWh) in 2025 to 30,700TWh by 2027, driven by expanding industrial production, rising adoption of electric vehicles (EVs), increasing use of air conditioning and household appliances, as well as the rapid growth of energy-intensive data centres.

The outlook has significant implications for countries such as Nigeria, which is pursuing a gas-led energy transition while simultaneously seeking to expand electricity access, industrialisation and export earnings from its vast natural gas resources.

Although the report projects renewables to become the dominant source of global electricity generation, it also underscores the continuing importance of natural gas in supporting power systems during the transition, particularly as countries seek reliable electricity supplies amid rising demand.

According to the IEA, global electricity markets have continued to experience volatility following disruptions to liquefied natural gas (LNG) shipments through the Strait of Hormuz arising from the conflict in the Middle East.

The disruptions pushed natural gas prices in Asia and Europe to their highest levels since the 2022-2023 energy crisis, increasing electricity generation costs and forcing several countries to adopt emergency energy-saving measures.

Although additional LNG supplies, particularly from North America, have eased supply pressures, elevated gas prices have encouraged utilities across parts of Europe and Asia to increase coal-fired electricity generation, highlighting the challenges of managing the energy transition during periods of supply disruption.

Despite the temporary return to coal in some markets, the IEA said the rapid expansion of renewable energy has strengthened energy security by diversifying electricity supplies and reducing dependence on imported fossil fuels.

Solar photovoltaic (PV) technology remains the biggest contributor to the growth in electricity generation.

The agency projects global solar generation to increase by around 600TWh this year, matching the record annual increase achieved in 2025, with similarly strong expansion expected in 2027.

The IEA added that solar power is expected to overtake wind generation in 2026 to become the world’s second-largest renewable source of electricity after hydropower.

The report identified China and India as the principal drivers of future electricity demand growth.

Electricity demand in China is projected to increase by 5.5 per cent in 2026, supported by continued manufacturing expansion and investments in electric vehicle charging infrastructure, while demand in India is forecast to rebound by seven per cent after weather-related weakness last year.

For Nigeria and other African economies pursuing economic growth alongside decarbonisation, the report reinforces the need to balance investments in renewable energy with reliable power infrastructure capable of meeting rapidly rising electricity demand while strengthening long-term energy security.

Among advanced economies, electricity demand is expected to grow by about two per cent in both the United States and the European Union.

By contrast, higher fuel costs and LNG supply disruptions are expected to constrain electricity consumption in price-sensitive importing countries, including Pakistan and Bangladesh.

The IEA also warned that weather remains a major uncertainty for global electricity markets.

According to the agency, a stronger-than-expected El Niño event in 2026 could increase electricity demand by raising cooling requirements while simultaneously reducing hydropower and wind generation in some regions, increasing reliance on thermal power plants.

The report projects carbon dioxide emissions from global electricity generation to rise by around one per cent in 2026 as elevated natural gas prices support increased coal-fired generation.

However, emissions are expected to stabilise in 2027 as expanding renewable energy capacity and stronger nuclear power generation offset additional fossil fuel use.

The LNG market disruption has also translated into higher electricity prices.

According to the report, average wholesale electricity prices in the European Union and Japan increased by more than 30 per cent year-on-year during the second quarter of 2026, while prices in the United States remained broadly stable and those in India rose by less than 10 per cent.