The world is on the brink of a historic energy transition, according to a recent report from the International Energy Agency. By 2026 (or sooner), renewables could surpass coal for global electricity generation.

According to the IEA’s 2025 Electricity Market Report, released at the end of July, wind, solar, hydropower, and other renewables will together surpass coal electricity generation in a seismic shift that signals a critical moment in the global climate fight against climate change.

The transition is happening against the backdrop of surging electricity demand worldwide. As the globe heats up and more cooling is needed, at the same time that technology like AI requires more power, renewables are increasingly meeting the demand. The combination of falling costs, aggressive policy incentives, and rising public and private sector investment is driving the change.

Still, it's not a clean-cut victory for renewables– at least not yet. Grid constraints, geopolitical instability, and uneven access to clean technologies continue to be a challenge. As the world races to meet net-zero targets, the question now is not just how fast we can build renewable capacity—but whether we can build the infrastructure to support it and ensure that the benefits are shared equitably.

Rising Energy Demand Across the Globe

Even as the world transitions to cleaner energy, consumption is on the rise. According to the IEA report, global electricity demand is expected to grow by 3.3% to 3.7% through 2026, driven largely by countries that are not a part of the group of 38 Organisation for Economic Co-operation and Development (OECD) countries, such as China, India, and Southeast Asian nations. These fast-growing economies are expanding their industrial bases, improving living standards, and electrifying transportation and building systems, all of which require significantly more power.

In China, electricity demand is forecast to rise by 5% annually, fueled by investments in manufacturing and technology sectors. China is the world’s largest electricity user, and its power demands are being driven by rising output in energy-intensive industries and the expanding use of electric vehicles and heat pumps. The IEA expects that electricity demand will accelerate to 5.7% in 2026 thanks to a number of policy changes encouraging the widespread adoption of both EVS and heat pumps.

India is close behind on electricity demand, with electricity use projected to increase thanks to a growing middle class, increased cooling needs, and large-scale investments in digital infrastructure and manufacturing. By 2026, the IEA predicts that electricity demand will rise by 6.6%. Southeast Asia, too, is seeing steady increases as rural electrification improves and populations urbanize rapidly.

In the wealthiest countries, electrification is growing more modestly, but still increasing. AI demands are outstripping the supply of new fossil fuel energy, causing a shift to renewables. The adoption of electric vehicles has slowed but continues to grow at a moderate pace, while residential and commercial heat pump adoption has been rising. Additionally, tech giants like Amazon, Google, and Microsoft have become the largest new electricity consumers in the U.S., building or expanding hyperscale data centers that require 24/7 power and are often colocated with renewable energy or battery storage systems. The IEA expects that U.S. demand will grow by an average annual rate of 2.3% in 2025 and 2.2% in 2026.

Renewables are on the Rise as Fossil Fuels Fall

Growth in wind and solar output topped 4,000 terawatt hours (TWh) in 2024 and will pass 6,000TWh by 2026, making up around 36% of the global energy mix while traditional fossil fuels like coal will fall to around 32%, according to the IEA. That marks coal's lowest share in a century.

The main reason for coal's decline is the rapid deployment of solar and wind power, which is reshaping the global electricity sector. The electricity sector in China is particularly important to global coal markets, with one out of every three tonnes of coal consumed worldwide burned at a Chinese power plant. In 2024, China continued to diversify its power sector, advance the construction of nuclear plants, and accelerate its huge expansion of solar and wind capacity. This should help limit increases in coal consumption through 2027, according to the report.

As renewables increase, solar and wind in particular will meet more than 90% of the increase in global electricity demand out to 2026, in spite of political headwinds. One factor that could influence the timing of this tipping point is weather—hydro and wind in particular are susceptible to fluctuations based on weather-related impacts.  

At the same time, natural gas (LNG) will also play a key role in the transition. The steady increase in gas-fired power generation is set to continue displacing coal and oil in the power sector in many regions. However, this displacement is happening alongside renewable growth.

Natural gas-fired generation globally is expected to see growth of 1.3% in both 2025 and 2026, following a 1.9% increase in 2024. Geopolitical tensions have continued to fuel price volatility, too. In the first half of 2025, wholesale electricity prices in the European Union and the United States rose by 30-40% from the same period a year earlier, largely due to higher natural gas prices amid a tighter global gas market.

This natural gas volatility is pushing renewables adoption, as high fossil fuel and electricity prices resulting from the global energy crisis have made renewable power technologies much more economically attractive. While coal faces a decline, gas occupies a more complex middle ground - declining in some advanced economies due to renewable competition, but still growing in others due to coal displacement and economic development.

A Pivotal Moment in the Global Energy Transition

This approaching milestone represents more than just a statistical crossover—it marks a fundamental restructuring of the global energy system that seemed impossible just decades ago. This transition is being driven not by climate policy alone, but by economics, with solar and wind now the cheapest sources of electricity in most markets worldwide.

Yet this historic shift comes with significant caveats. The surge in electricity demand, particularly from AI and data centers, means that while renewables are winning the race for new capacity, total energy consumption continues to climb. Natural gas remains caught in the middle, serving as both a bridge fuel, replacing dirtier coal, and a competitor to clean energy expansion.

The path forward will require more than just building renewable capacity—it demands massive investments in grid infrastructure, energy storage, and flexible demand systems to handle the intermittency of wind and solar. Geopolitical tensions and supply chain vulnerabilities continue to create price volatility that can either accelerate or hinder the clean energy transition.

Perhaps most critically, this transformation must be global and equitable. While China and India are driving much of the world's electricity demand growth, ensuring that developing nations can access affordable clean energy technologies will determine whether this renewable milestone translates into meaningful climate progress. The next few years will test whether the momentum behind this energy transition can overcome the infrastructure, political, and economic challenges that lie ahead.