In OECD regions, end-use efficiency improvements contributed to keeping the three-year average growth in electricity generation below 1% per year from 2013 to 2019, before OECD generation dropped in 2020 as a result of the economic impacts from the COVID-19 pandemic. Generation growth resumes by 2023 and stays around 1% per year for the remainder of the projection period in the Reference case. It is only marginally higher or lower in the High and Low Economic Growth cases, respectively. The projected growth rate is higher than in the past decade as the price of electricity declines relative to other energy sources, as well as end-use sector shifts from fossil fuels consumption to consumption of electricity generated from lower-cost renewable sources.
Historically, non-OECD regions have experienced higher levels of electricity generation growth than OECD regions, as a larger share of the non-OECD population gained access to electric services. However, non-OECD regions also experienced a steep decline in electricity generation following the economic impacts of the COVID-19 pandemic. After a quick return to pre-pandemic levels, electricity generation growth in non-OECD regions remains faster than in OECD regions, but it slows throughout the projection period, in part because the share of the population without access to electricity decreases over time, leading to market saturation.
Globally, incremental electricity generation comes largely from renewable resources, beginning in 2025. As renewables—particularly solar and wind—become cost-competitive, the IEO2021 Reference case projects that all post-2020 electricity generation growth in OECD regions will come from those sources and that they will displace an increasing share of existing non-renewable, mostly fossil fuel-based, sources. In non-OECD regions, we project that electricity generation from renewable sources account for about 90% of generation increases from 2020 to 2050. Because electricity generation grows at almost twice the rate in non-OECD regions than in OECD regions in the Reference case, the non-OECD regions add over two times the generation from renewable sources compared with the OECD regions.
This projected growth in renewables is uncertain and may largely depend on changes to regulatory policies and market rules, large and cost-effective supply chains to support renewable installations, and a sufficient amount of conventional generation technologies or storage to back intermittent renewable capacity.
Although renewables have become cost-competitive with new fossil fuel generation, in OECD regions where electricity demand growth is slower than in non-OECD regions, renewable generation has less opportunity to grow without policies to encourage it. Policy incentives in OECD Europe in the form of a carbon cap and trade system are designed to facilitate generation from new renewable sources and displace existing non-renewable generation.8 In addition, individual countries within the region have plans to phase out nuclear generation, further contributing to the decline of existing non-renewable generating resources. Although worldwide nuclear generation increases by 15% throughout the projection period, nuclear generation in OECD regions decreases by almost one-third, half of which occurs in OECD Europe.
As coal-fired and nuclear generation decreases by almost one-third relative to 2020 levels, and natural gas-fired generation stays relatively flat, the share of renewables in the OECD Europe region increases from much less than half of the generation mix in 2020 to almost three-quarters by 2050. This increase occurs as the use of non-renewable energy resources shifts from being the primary source of electricity toward serving as reliability support for the rising amounts of renewable energy.
As larger amounts of intermittent generating capacity are incorporated into a region's electrical grid, a range of generating sources will be built or maintained to provide backup for solar and wind resources because their outputs can vary. Solar generation occurs only during daylight hours, regardless of the location of the installation site. The regularity of this resource, along with typically diurnal electricity demand is better supported by battery storage with a discharge capability of several hours. In contrast, wind generation tends to vary widely throughout the day and season, requiring the use of more conventionally fueled resources that are not energy constrained, such as natural gas turbine plants.
An example of these differences can be seen in India, where by 2050, we project intermittent generation—mostly solar—will account for two-thirds of the electricity generation mix. To accommodate that trend, about 330 gigawatts (GW), or about half of the world's projected battery storage capacity in 2050, will be required to support a system with such a high level of solar power generation. In contrast, Canada has vastly different solar resources because of its high latitude and limited sunlight in the winter and fall months, making wind more economic to build and operate than solar. By 2050, intermittent generation—almost exclusively from wind resources—accounts for about 25% of Canada's electricity generation mix. To ensure grid reliability with the growth in wind generation, natural gas-fired generating capacity will likely become the more economic choice.
8More information on how we model climate policies is available in our companion article, Climate Considerations in the International Energy Outlook (IEO2021).
In non-OECD regions, we project that 90% of increases in electricity generation over 2020 to 2050 will come from renewable sources.