AI, heavy industry, transportation and green hydrogen are competing for renewable electricity, making clean power allocation a defining challenge for the energy transition.
By Ankush Kumar
The global energy transition is entering a new phase. Some of the world’s largest economies are seeing renewable energy grow at a brisk pace. India, China, the US, the UK and Germany have witnessed periods when renewables surpass conventional power. Rapid capacity growth, falling costs and supportive policies are driving this shift.
According to the International Energy Agency (IEA), global electricity demand grew by 4.3% in 2024 and is expected to continue rising by nearly 4% annually through 2027, marking one of the fastest sustained periods of electricity demand growth in decades. The agency projects that renewable energy will meet around 95% of this additional demand, led by rapid growth in solar photovoltaic (PV) generation.
That momentum is already reshaping the global electricity mix. According to global energy think tank Ember, clean power sources met all growth in global electricity demand in 2025, preventing an increase in fossil-fuel generation. Renewables also supplied 34% of global electricity, overtaking coal’s 33% share for the first time in more than a century. Global solar generation is now equivalent to the annual electricity demand of the EU-27.
This raises a different question: it is no longer only about how to produce more clean electricity, but also about how to allocate it. As electricity demand grows across data centres, transport, buildings and industry, governments and businesses will increasingly have to decide which uses should have priority, particularly when clean power and grid capacity remain limited.
The New Competition for Renewable Electricity
Artificial intelligence provides perhaps the clearest example of this shift. Training large language models, running AI inference and supporting cloud computing require enormous computing power. Consequently, Microsoft, Google, Amazon Web Services and Meta are expanding their global data center footprints while signing long-term renewable power purchase agreements (PPAs). These contracts help companies meet climate commitments, satisfy investor expectations for lower-carbon operations and secure reliable long-term electricity supplies for increasingly energy-intensive AI infrastructure.
According to the IEA’s Energy and AI report, electricity consumption from data centers is projected to more than double from approximately 460 terawatt-hours (TWh) in 2024 to more than 1,000 TWh by 2030. By then, data centers could account for nearly 3% of global electricity demand, up from about 1% today, consuming roughly as much electricity annually as Japan.
Greater efficiency is unlikely to slow that growth. According to Thomas Spencer, Senior Energy Analyst at the IEA, advances in AI hardware and model efficiency are occurring faster than in almost any other technology. However, those improvements are expected to be outweighed by the rapid expansion of energy-intensive AI applications, resulting in continued growth in electricity demand.
AI is only part of the story. More cars are moving to electricity, while homes and businesses are also switching away from fossil-fuel heating. EV adoption is accelerating as batteries become cheaper and charging networks expand, while stricter emissions rules are pushing the transition further. Heat pumps are another source of demand, replacing conventional heating systems with a much more efficient use of electricity.
Major industries are also electrifying. SSAB is pioneering fossil-free steel using renewable electricity and green hydrogen, while ArcelorMittal is expanding electric arc furnace capacity across Europe. Chemical producer BASF is investing in electrified steam crackers, and Heidelberg Materials is testing electrified cement production alongside carbon capture technologies. Although these technologies differ, they all rely on reliable access to affordable renewable electricity. For manufacturers, electrification is driven by stricter emissions regulations, customer demand for lower-carbon products and the need to remain competitive as global supply chains decarbonize.
Green hydrogen adds another layer of competition. Producing one kilogram typically requires 50–55 kilowatt-hours of renewable electricity, making power the largest input cost before hydrogen can replace fossil fuels in sectors that are difficult to electrify directly.
The Grid Has Become the New Bottleneck
Expanding renewable generation alone will not solve this challenge. Solar and wind installations continue to reach record levels, while investment in battery storage is accelerating. However, generating renewable electricity is only part of the equation. Delivering it efficiently to consumers is becoming the next major hurdle.
Across Europe and many other regions, transmission infrastructure has emerged as one of the biggest constraints on the energy transition. Renewable energy projects are often completed years before the transmission lines needed to connect them to the grid.
According to the IEA, more than 1,650 gigawatts of renewable energy projects worldwide are waiting for grid connections—roughly five times the amount of solar and wind capacity added globally in 2022. This challenge could be seen in both developed and developing economies.
In 2022, Germany curtailed more than 8 TWh of renewable electricity—enough to supply around 2.3 million households for a year. The country’s strongest wind resources are concentrated in the north, while much of its manufacturing base is in the south. Because transmission expansion has lagged renewable deployment, clean electricity cannot always reach industrial demand centers. As a result, renewable generation is sometimes curtailed while conventional power plants remain online to maintain grid stability.
India, one of the world’s fastest-growing renewable energy markets, has also experienced renewable energy curtailment as rapid additions of solar and wind capacity increasingly test transmission networks and grid flexibility. Renewable-rich states such as Rajasthan and Tamil Nadu continue expanding clean energy generation, yet delivering that electricity efficiently to industrial and urban demand centers remains an ongoing challenge.
Who Should Get the Green Electrons?
As renewable electricity becomes more valuable, governments and electricity markets face difficult choices. Should limited clean power support AI data centres that drive digital innovation? Should it electrify steel production, replace fossil-fuel heating in buildings, or produce green hydrogen for aviation, shipping and other industries that cannot be easily electrified directly?
Many analysts argue that renewable electricity should first be directed toward applications where direct electrification delivers the greatest emissions reductions. The IEA consistently identifies direct electrification as the most efficient pathway for transportation, buildings and many industrial processes. This is because it avoids the energy losses associated with converting electricity into alternative fuels. Green hydrogen, by contrast, is expected to play its largest role in sectors where direct electrification is not technically or economically feasible.
Others argue that electricity allocation should reflect broader economic priorities. As AI, advanced manufacturing and digital infrastructure become strategic industries, governments may prioritize sectors that strengthen domestic supply chains, attract investment and improve national competitiveness. The race to build renewable energy is far from over, but the next competitive advantage may lie in how effectively countries use the clean electricity they produce. In that sense, green electrons are becoming the new energy currency.