Top 5 Takeaways From IEA World Energy Outlook 2025: Energy Transition at an Inflection Point

The International Energy Agency's (IEA) World Energy Outlook 2025 arrives at a critical juncture in global energy transition, offering a comprehensive analysis of where the world's energy system is headed. 

Released against a backdrop of geopolitical tensions, record-breaking temperatures, and unprecedented technological advancement, this year's report presents a sobering yet complicated picture of the energy landscape through multiple scenarios.

Here are five key takeaways from the latest World Energy Outlook report that energy stakeholders, policymakers, and industry professionals need to understand.

#1 Age of Electricity Has Arrived, Infrastructure Lags

Electricity is becoming the dominant energy carrier, growing four times faster than overall energy demand. The WEO 2025 confirms we have entered what the IEA calls the "Age of Electricity." 

The report projects that the Global electricity will rise by approximately 40 percent by 2035 in both the Stated Policies Scenario (STEPS) and Current Policies Scenario (CPS), reaching over 50 percent growth in the Net Zero Emissions by 2050 (NZE) Scenario.​

This explosive growth is driven by a combined effect of multiple forces. In advanced economies, electric vehicles (EVs) and data centres are pushing demand upward. In emerging and developing economies, rising incomes are fueling demand for appliances and air conditioning. 

Notably, the data centre electricity consumption is expected to triple by 2035. The investment in data centres is reaching USD 580 billion in 2025, surpassing the USD 540 billion being spent on global oil supply.​

However, the new challenge has emerged with the widening infrastructure gap. While investments in electricity generation have surged by almost 70 percent since 2015 to reach USD 1 trillion per year, annual grid spending has risen at less than half that pace to USD 400 billion. This mismatch is creating congestion, delaying connections of new generation sources, and pushing up electricity prices. 

Furthermore, the curtailment of wind and solar output is rising, and incidents of negative pricing in wholesale markets are becoming more frequent.​

#2 Critical Minerals Supply Chains: Prime Energy Security Concern

A single country, China, dominates refining for 19 out of 20 strategic minerals, with an average market share of around 70 percent.

The WEO 2025 elevates critical minerals to the forefront of energy security concerns. The report identifies high market concentration as the key risk. The minerals in question, including rare earth elements, lithium, cobalt, and nickel, are vital not only for power grids, batteries, and electric vehicles but also for AI chips, jet engines, defense systems, and other strategic industries.​

As it stands, more than half of these strategic minerals are subject to some form of export controls. When China restricted exports of certain rare earth magnets, many automotive manufacturers in the United States and Europe struggled to secure supplies, with some forced to cut utilisation rates or temporarily shut down factories.​

The scale of economic impact can be staggering. The IEA analysis shows that a 10 percent disruption in rare earth magnet exports could affect the production of 6.2 million conventional cars, or almost 1 million industrial motors, or 230,000 civilian aircraft, or the construction of over 650 hyper-scale AI data centres.​ 

Alarmingly, diversification efforts are moving too slowly. Between 2020 and 2024, most growth in refined production of key energy minerals came from leading suppliers, resulting in increased geographic concentration - particularly for nickel and cobalt. The average market share of the top-three refining nations rose from around 82 percent in 2020 to 86 percent in 2024.​

Furthermore, by 2035, the average share of the top-three refined material suppliers is projected to decline only slightly to 82 percent.

Urgent action is needed on two fronts: enhancing preparedness against potential disruptions in the near term, and building up new partnerships and projects to diversify supply chains more quickly over the longer term.

#3 Oil Peaks Around 2030, LNG Faces a Supply Glut

Global oil demand reaches approximately 102 million barrels per day (mbd) around 2030 in the STEPS before beginning a gradual decline.

The trajectories for fossil fuels differ markedly across the IEA's scenarios, but even in the STEPS, which reflects current policy directions, significant shifts are underway. 

Oil demand is projected to peak around 2030 at 102 mbd before starting a slow decline, returning to approximately 100 mbd by 2035. This peak is driven primarily by the electrification of road transport, particularly in China, where half of passenger car sales are already electric, rising to 90 percent by 2035.​ The largest declines reflect oil's displacement in passenger cars (down 2.6 mbd) and the buildings sector (down 1.3 mbd).​

However, not all oil sectors are in decline. Petrochemical feedstock use increases by 3.3 mbd to 2035, and aviation demand grows by 2.2 mbd. 

Natural gas presents a more complex picture. There is now 300 billion cubic metres (bcm) of new annual LNG export capacity scheduled to start operation by 2030, a 50 percent increase in available global LNG supply. Around half is being built in the United States, with a further 20 percent in Qatar.​ The critical question is where all this LNG will go.

In the STEPS, LNG demand increases by 200 bcm between 2024 and 2030 - smaller than the increase in available export capacity. This puts downward pressure on prices but results in an overhang of around 65 bcm of available LNG capacity in 2030. The surplus is gradually worked off by 2035 as lower prices enable uptake in price-sensitive markets, particularly India and Southeast Asia.​

Notably, the Coal demand peaks before 2030 at around 6,100 million tonnes of coal equivalent (Mtce), and decline to under 4,900 Mtce by 2035, a 20 percent drop. The dynamics of coal markets are determined by a handful of Asian economies.

#4 Climate Goals Missed - 1.5°C Overshoot Now Inevitable

Annual global energy-related CO2 emissions reached a record 38 gigatonnes (Gt) in 2024, and a pathway limiting warming to 1.5°C without significant overshoot has slipped out of reach.

The WEO 2025 says that the updated NZE Scenario reflects the harsh reality that continued high emissions in recent years and sluggish deployment in some areas mean that emissions reductions to 2030 are slower than in previous editions. Overshoot of the 1.5°C target is now inevitable.​

In the NZE Scenario, peak warming exceeds 1.5°C for several decades, only returning below 1.5°C by 2100 thanks to a very rapid transformation of the energy sector and widespread deployment of CO2 removal technologies that are currently unproven at large scale. Peak warming reaches approximately 1.65°C around 2050.​

Despite the challenging picture, options to reduce emissions substantially remain well understood and often cost-effective. The STEPS gets close to achieving the COP28 target of tripling renewables capacity by 2030, with a rise to 2.6 times 2022 levels..

#5 China’s RE Dominance Continues, Surplus Issue

Solar PV and wind met one-fifth of electricity generation in advanced economies in 2024, rising to two-fifths by 2035 in the STEPS. 

China remains the manufacturing powerhouse and largest market. China continues to account for 45-60 percent of global renewable deployment over the next ten years across the scenarios and remains the largest manufacturer of most renewable technologies. In 2024, China held over 80 percent of global manufacturing capacity at every stage of the solar PV supply chain.​

This dominance has created substantial surplus capacity. Global manufacturing capacity for PV modules was two times higher than actual production in 2024, and three times higher for battery cells. This overcapacity has driven solar PV prices to historic lows in 2024, almost 45 percent lower than in 2023, as fierce competition between Chinese manufacturers pushed margins into negative territory.​

Trade tensions are intensifying. China's exports of clean energy technologies have increased by around four times since 2019 and now account for nearly 5 percent of China's total goods exports. This has triggered concerns in numerous countries, leading to raised trade barriers targeting energy technologies such as EVs and solar PV. In response, Chinese companies have pledged around USD 230 billion in clean energy-related manufacturing investments overseas.​