China, India drive Asia power demand growth amidst LNG price pressures

China and India drive consumption as fuel disruptions squeeze import-dependent markets.

Asia's power markets are facing higher natural gas costs and supply disruptions as China and India drive strong electricity demand growth, according to the International Energy Agency (IEA).

Electricity demand in China is expected to grow 5.5% in 2026, driven by manufacturing activity and electric vehicle charging, whilst India's demand is forecast to rise 7% after weather-related weakness in 2025.

The IEA's Electricity Mid-Year Update forecasts global electricity demand growth of 3.6% in 2026 and 3.8% in 2027, up from 3% in 2025.

“Global electricity consumption is projected to reach 30,700 terawatt-hours (TWh) in 2027, compared with 28,600TWh in 2025,” it added.

Disruptions to liquefied natural gas (LNG) flows through the Strait of Hormuz have pushed natural gas prices in Asia and Europe to their highest levels since the 2022-23 energy crisis and increased electricity generation costs in many regions.

Several Asian countries have switched from natural gas to coal for power generation as gas prices rise.

The impact has varied across Asian markets. Wholesale electricity prices in Japan rose by more than 30% year-on-year in the second quarter of 2026, whilst prices in India increased by less than 10% over the same period.

Higher fuel costs and supply disruptions are also weighing on electricity consumption in LNG-importing markets such as Pakistan and Bangladesh.

The IEA said rising renewable generation has helped diversify electricity supplies in many countries, supporting energy security and cushioning the impact of the market shock.

Renewables are expected to become the world's largest source of electricity generation in 2026, overtaking coal after reaching near parity in 2025.

“Renewable generation is set to grow by more than 8% in 2026, and it is poised to increase its share of global electricity generation from 33% in 2025 to 37% by 2027,” the IEA said.

Solar PV generation is expected to increase by about 600TWh in 2026, matching its record growth in 2025, and overtake wind power as the world's second-largest source of renewable electricity generation after hydropower.

The IEA expects higher natural gas prices to contribute to a 1% increase in global carbon dioxide emissions from electricity generation in 2026, as some markets increase coal-fired generation.

Growth in renewable and nuclear generation is also expected to prevent further emissions growth in 2027.

The report also warned that weather conditions could affect electricity demand and generation, as a “stronger-than-expected El Niño event” in 2026 could increase cooling demand whilst reducing hydropower and wind generation in some regions.

Rising renewable generation is also making negative wholesale electricity prices more common in some markets, which can indicate a lack of system flexibility, the IEA noted.

“At the same time, wider price swings throughout the day are increasing the importance of flexibility, including battery storage and demand response, for maintaining reliable and efficient electricity systems,” it said.