World Energy Outlook Report 2025

Source: International Energy Agency (IEA), World Energy Outlook 2025

International Energy Agency (IEA)

• The IEA, an autonomous intergovernmental organisation, analyses data on energy use and requirements and provides policy recommendations and solutions to countries for sustainable energy growth.
• The IEA’s World Energy Outlook report, published annually, captures the world’s energy trends and transitions and predicts future trajectories.

World Energy Outlook Report 2025

Energy security in a volatile world

Why energy has become a national security issue

• Energy security now extends beyond oil & gas to include:
  • Critical minerals (lithium, cobalt, rare earths)
  • Electricity grids (cyber risks, weather shocks)
• Energy disruptions affect → Economic stability, Defence systems, Digital infrastructure (AI, data centres)

Present global contradictions

• Geopolitical instability exists alongside:
  • Oil market surplus
  • Subdued oil prices
• Countries adopt divergent strategies:
  • Import-dependent nations → renewables & efficiency
  • Resource-rich nations → traditional fuel security

📌 UPSC Angle:
Energy security is no longer just “fuel availability” → it is geopolitics + technology + supply chains.

Climate action losing momentum, risks rising

• 2024:
  • Hottest year on record
  • First year with global temperature >1.5°C above pre-industrial
• Despite this:
  • Slower momentum on emissions reduction
  • Weakening of international commitments

📌 UPSC Insight:
Mismatch between climate urgency and policy action → fertile ground for GS-III & Essay questions.

Global energy demand: still rising

• Renewables added at record pace (23rd consecutive year)
• Yet all fuels hit record highs: Oil, Natural gas, Coal, Nuclear
• Since 2019:
  • Coal demand grew 50% faster than gas, mainly due to China
• Result:
  • Energy-related emissions continue to rise

WEO scenario framework

Core Scenarios in WEO-2025

Scenario	Meaning
CPS	Current Policies Scenario – only existing policies
STEPS	Stated Policies Scenario – includes announced but not fully implemented policies
NZE	Net Zero Emissions by 2050 – normative pathway
ACCESS	Universal electricity & clean cooking access

📌 Note:
WEO scenarios are not forecasts, but decision-pathway tools.

Common Findings Across All Scenarios

Four structural shifts

1. Energy security now depends on critical minerals
2. Arrival of the “Age of Electricity”
3. Shift in demand centre to India & emerging economies
4. Rising role of renewables + comeback of nuclear

Critical Minerals: The New Energy Vulnerability

Key facts

• One country dominates refining of 19 out of 20 strategic energy minerals
• Average refining market share: ~70%
• Minerals critical for:
  • EVs, batteries, power grids
  • AI chips, defence systems, jet engines
• >50% of strategic minerals subject to export controls (as of Nov 2025)

Policy implication

• Market forces alone cannot diversify supply
• Requires:
  • Strategic stockpiles
  • New international partnerships
  • Domestic processing capacity

📌 UPSC Link:
Critical minerals = Energy security + Strategic autonomy (India context).

Infrastructure Resilience & Climate Risks

• Energy disruptions affected 200 million households annually
• Causes:
  • Droughts → hydropower & thermal output loss
  • Floods, storms, wildfires → plant shutdowns
• 85% of incidents involved transmission & distribution grids
• All scenarios exceed 1.5°C by ~2030, diverging only after 2035

The Age of Electricity

Electricity demand growth

• CPS & STEPS: +40% by 2035
• NZE: +50% by 2035

Demand drivers

• Cooling (ACs)
• Electric mobility
• Data centres & AI
• Electrified heating & manufacturing

Investment trends

• Electricity supply + electrification = 50% of global energy investment
• Annual electricity generation investment: ~USD 1 trillion
• Grid investment: ~USD 400 billion (lagging badly)

📌 UPSC Insight:
Generation without grids → congestion, curtailment, blackouts.

Data Centres, AI & Energy

• Electricity use by data centres:
  • Expected to triple by 2035
• Investment in data centres (2025):
  • USD 580 billion (higher than oil supply investment)
• Concentration:
  • USA, China, EU (>85% of additions)
• Strains already congested grids

Shift in Global Energy Demand Geography

• Post-China phase:
  • Growth led by India, Southeast Asia, parts of Africa & Latin America
• By 2035:
  • 80% of energy demand growth in high-solar-irradiation regions
• Explains:
  • Rapid solar uptake
  • Rising cooling demand

Renewables: Continued Rise

• Renewables grow fastest in all scenarios
• Solar PV leads
• China:
  • 45–60% of global RE deployment
  • Dominant manufacturer of solar panels & batteries
• Global surplus:
  • Solar manufacturing capacity > 2× deployment
  • Battery capacity ~3× deployment

📌 UPSC Angle:
China’s dominance → opportunity for affordability + concern for supply dependence.

Nuclear Power Comeback

• Nuclear included in strategies of 40+ countries
• >70 GW under construction (highest in 30 years)
• SMRs emerging:
  • ~30 GW interest, mainly for data centres
• Global nuclear capacity to increase ~33% by 2035

Diverging Pathways for Fossil Fuels

Coal

• Future written in Asia
• STEPS & NZE → steady decline
• CPS → slower decline due to grid constraints

Oil

• Near-term surplus
• CPS requires 25 mb/d new supply by 2035
• EVs:
  • 25% of new car sales in 2025
  • 50% by 2035 (STEPS)

Natural Gas & LNG

• 300 bcm new LNG capacity by 2030
• US (~50%), Qatar (~20%)
• Likely LNG overhang (~65 bcm) in 2030
• India & South Asia absorb part due to affordability

Energy Access: A Development Priority

• 730 million people without electricity
• ~2 billion without clean cooking
• ACCESS Scenario:
  • Universal electricity by 2035
  • Clean cooking by 2040
• LPG main transition fuel for cooking
• ~80 million people/year gain electricity access to 2035

Emissions & Climate Outlook

• Energy-related CO₂ emissions (2024): 38 Gt (record)
• CPS → ~3°C warming by 2100
• STEPS → ~2.5°C
• NZE:
  • 1.5°C overshoot inevitable
  • Return below 1.5°C by 2100 via:
    • Rapid transition
    • Large-scale CO₂ removal (unproven)

Policy Options to Cut Emissions

• Scale-up renewables & nuclear
• Improve energy efficiency
• Reduce methane leaks
• Electrify end-use sectors
• Use hydrogen & CCUS where electrification is hard
• COP28 target:
  • Tripling renewables by 2030
  • Efficiency improvement target (4%) not met (currently ~2%)

UPSC Insights

• Energy security = fuel + minerals + grids + climate
• India emerges as future demand centre
• Electricity is the backbone of future energy systems
• Renewables dominate growth, but fossil fuels persist
• Grid investment & mineral diversification are decisive bottlenecks
• Policy choices today shape security, affordability & climate outcomes

India – Energy Outlook (WEO 2025)

India as the Global Engine of Energy Demand Growth

• India is the largest source of energy demand growth globally in the Outlook.
• In the STEPS (Stated Policies Scenario):
  • Energy demand increases by >15 exajoules (EJ) by 2035
  • This is almost equal to China + all Southeast Asia combined
• India’s contribution to global growth (to 2035):
  • 1st in oil demand growth
  • 2nd in electricity generation growth
  • 2nd in coal demand growth
  • 3rd in natural gas demand growth

📌 UPSC relevance:
India is no longer a marginal player but a system-shaping country in global energy markets.

Economic & Demographic Drivers of Energy Demand

Growth fundamentals

• GDP growth (2010–2024): Second only to China
• Projected GDP growth (to 2035): 6.1% annually (highest among major economies)
• GDP per capita in 2035: ~75% higher than today

Structural transformation

• Urbanisation:
  • India adds one Bangalore every year to its urban population (till 2035)
• Built environment:
  • Floor space expands by 40%
• Mobility:
  • ~12,000 cars added every day
• Cooling demand:
  • >250 million air conditioners added over the next decade

📌 Insight:
India’s energy transition is driven not by luxury consumption but by basic development needs.

India’s Multiple Energy Challenges

India must simultaneously address:

• Universal access to modern energy
• Reduction in fossil-fuel import dependence
• Reliability of electricity supply
• Air pollution reduction
• Greenhouse gas (GHG) mitigation

Energy access

• Despite progress, ~20% of population still relies partly or fully on traditional biomass for cooking
• Pradhan Mantri Ujjwala Yojana:
  • LPG subsidies for poor households
  • Key clean-cooking intervention

Climate Commitments & Policy Direction

• Net Zero target: 2070
• Supporting measures:
  • 50% non-fossil power capacity target by 2030
  • Nuclear expansion to 100 GW by 2047 (from ~8 GW today)
  • Carbon market for select industries from 2026
  • Biofuels policy:
    • 20% ethanol blending in petrol achieved in 2025
    • Aimed at reducing oil imports

India’s Energy Mix in the STEPS

Long-term trends

• Solar PV and wind are the fastest-growing energy sources to 2050
• Together they reach ~20% of India’s total energy mix
• Coal and oil remain mainstays, especially for → Industry, Dispatchable power

Sectoral demand growth

• Fastest growth → Industry, Transport
• Industry alone accounts for >50% of demand increase by 2050

Emissions trajectory

• CO₂ emissions:
  • Peak around 2040
  • ~3.4 Gt per year by 2050 (STEPS)

India Achieves 50% Non-Fossil Power Capacity Ahead of Time

• Target announced in 2022:
  → 50% non-fossil power capacity by 2030
• Achieved in 2025 for grid-connected capacity
• Achieved in 2026 even after including auto-producers

Investment shift (very important)

• 2015: Fossil : Non-fossil = 1 : 1
• 2025: Fossil : Non-fossil = 1 : 4
• Solar PV investment (last decade):
  • USD 113 billion
  • More than all fossil fuel power generation combined

📌 UPSC Insight:
India’s transition is investment-driven, not merely target-driven.

Future Power Mix (STEPS)

Installed capacity

• Non-fossil share:
  • 60% by 2030
  • 70% by 2035
• >95% of capacity additions to 2035 are non-fossil

Electricity generation

• Solar + wind:
  • 11% today → >25% by 2030 → ~40% by 2035
• Nuclear:
  • Generation triples by 2035
• Non-fossil sources:
  • >50% of electricity generation by 2035

Carbon intensity

• Falls by ~45%
• To ~400 g CO₂/kWh
• Narrows gap with global average

Co-benefits

• Sharp reduction in:
  • Fine particulate matter (PM)
  • Sulphur dioxide (SO₂)

Grid, Storage & System Flexibility Challenges

Storage

• >230 GWh of battery storage added by 2030 (STEPS)
• Government issuing tenders for new storage capacity

Transmission

• Network expands by 35% by 2030
• >200,000 km of new transmission lines
• ~60,000 km specifically for renewable integration
• Green Energy Corridor → Backbone for renewable evacuation

📌 Conceptual takeaway:
Renewable transition = Generation + Storage + Grids, not generation alone.

Financial Stress in Power Distribution

• Distribution companies (DISCOMs) face:
  • Delayed payments of ~USD 7 billion (Oct 2025)
• Reforms undertaken:
  • Payment security mechanism
  • Payment security fund
  • State government guarantees

Impact

• Foreign Direct Investment (FDI) in power sector:
  • Doubled to ~10% of total power investment
  • Compared to average during 2015–2020

UPSC Insights

• India is the single most important driver of future global energy demand
• Energy transition in India is shaped by development needs, not luxury consumption
• Achieving 50% non-fossil capacity early is a landmark but:
  • Coal remains important for reliability
• Grid expansion, storage, and DISCOM reforms are critical bottlenecks
• India’s pathway shows how growth, energy security, and climate action can be pursued together