Electrification could cut $400b in energy import bills amidst Hormuz shock

Electricity could supply 33% of final energy use by 2035.

Fuel-importing countries could cut their energy import bills by more than $400b by 2035 through faster electrification, compared with 2025 levels, according to the International Energy Agency (IEA).

The reduction would come as countries reduce their reliance on imported fuels, IEA said in its Electrification 2026 report.

Faster electrification could also reduce global oil use by 18 million barrels per day by 2035, mainly driven by the rapid uptake of electric vehicles.

Based on technologies available today and energy prices before the current Strait of Hormuz supply shock, electricity could cost-effectively meet 33% of global final energy consumption by 2035, up from 23% today.

“This would put the 35% goal that is under discussion within striking distance,” IEA said.

The report was prepared at the request of Türkiye and Australia to inform discussions ahead of COP31, where countries are considering the adoption of a 35% global electrification target.

The agency said the potential for cost-effective electrification exists across all regions, although priorities vary by country.

Opportunities in emerging and developing economies include electrifying agricultural water pumps, expanding the use of electric two- and three-wheelers, and increasing electricity use amongst small businesses.

“However, realising this potential will require wider action to accelerate electrification in line with what is economically competitive,” IEA said.

The report also highlighted emerging electricity-security risks, including concentrated supply chains for key technologies and critical minerals, cybersecurity threats, natural disasters, and climate hazards.

In a faster-electrification scenario, emissions from transport, buildings and industry could fall 40% by 2035. These sectors currently account for more than half of global energy-related carbon dioxide emissions.