Energy under pressure: Navigating the power scarcity era

Global electricity demand is increasing faster than we can develop new power sources, making power scarcity a real issue for many facilities. During a presentation at the 2025 Honeywell User Group conference in San Antonio, Prudence Hoffman, portfolio director of Honeywell Integrated Climate Solutions, presented the macrotrends affecting the market and highlighted the causes and possible solutions to power scarcity.

 “We have global expansion of economies, particularly in new and emerging markets, coupled with advancements in digital technologies like AI, that are significantly elevating electricity consumption,” Hoffman said. Outside factors like climate change and global political instability will make vulnerable aging infrastructure even more susceptible to power scarcity challenges.

“Global electricity demand has seen a significant increase,” Hoffman said. Demand increased by 4% in 2024, marking what Hoffman called a “pivotal moment” as the globe surpassed 30,000 terawatt hours (TWh) of total demand for the first time.

“This has been largely attributed to extreme heat waves, which have intensified consumption patterns,” Hoffman said. “Additionally, we are also seeing the rise of cloud computing and cryptocurrency, and this is playing a huge role in driving this demand even higher.” By 2050, data centers alone could require 2,500 to 4,500 TWh of global electricity, or 5 to 9% of total demand.

“The increasing consumption of electricity driven by AI is critical, and it’s not just a technological advancement, it’s reshaping our economy,” Hoffman said. AI is projected to generate $10 to $15 trillion in annual economic value globally, but achieving even a quarter of this economic value by the end of the decade would require an additional 50 to 75 gigawatts (GW) of data center infrastructure worldwide.

Electrification taking center stage

The accelerated pace of electrification is also influencing global demand. From 2023 to 2050, electricity usage related to electrification could more than double or even triple in faster energy transition scenarios. “This also highlights the critical role that electrification will play in shaping our energy future,” Hoffman said. “Power scarcity is becoming a pressing issue as demand continues to outpace generation capabilities.”

Utilities face the challenge of doubling transmission capacity to meet the needs of new renewable sources. “But even as all that demand is going up, we have aging infrastructure, with a large percentage of the transformers, circuit breakers and transmission lines needing urgent modernization,” Hoffman said. “And we can see the financial implications as utilities are starting to request rate increases to fund these infrastructure updates.” The demand for transformer capacity is also projected to surge dramatically by 2050 and be further complicated by supply chain disruptions.

“Energy instability and outages are on the rise,” Hoffman said. This is largely due to weather, which has caused 80% of outages since 2000, including a significant increase in the last decade.

“Tackling these challenges means we need to focus on sustainable and clean power generation, but it’s not just about meeting today’s needs, it’s about securing a stable energy future,” Hoffman said. More than 95% of coal generated electricity is under phase out or net-zero pledges, but only about 10% have actual plans to do so.

Coal is being replaced by solar, wind, hydro and nuclear power, which are key to hitting climate targets, and globally, emissions in the power sector are at a record high, increasing by 1.6% in 2024, compared to the previous year (or an extra 223 million tons of carbon dioxide in the atmosphere.) “This spike is mainly due to fossil-fuel generation, particularly coal, which was used to tackle the power requirements of the air conditioning needed for heat waves,” Hoffman said. “But there’s good news. Clean power now makes up around just under 41% of the global energy mix.”

Emission intensity has also fallen by 15% since a peak in 2007, and clean energy investments since 2015 have jumped by 60%. In 2024, renewable power sources were set to add a record 858 TWh, up by 49% from 2022.

“However, integrating low carbon power into the grid is challenging due to implementations which affect stability. Advances in energy storage and smart grids are crucial to tackling challenges along with infrastructure investments and managing potential disruptions during the transition,” Hoffman said.

Smarter grids needed

Growing electricity demand and more variable power generation means the need for more flexible power systems to handle both short term and seasonal needs. Intermittent renewables like wind and solar can lead to imbalances between supply and demand. “Weather patterns play a big role in electricity demand, causing year-to-year variability,” Hoffman said. “This makes it really tough to keep a steady balance between supply and demand, leading to grid balancing issues that can disrupt energy supply.” The good news, she says, is advancing technologies are making grid integration and resilience better at managing those fluctuations, and energy storage solutions are scaling up to provide more short-term flexibility.

“But the transition to a more renewables-based energy system could lead to potential disruptions on the grid. Industrial and commercial sites like many of our customers and many of you in this room will need to navigate these potential disruptions as we move forward,” Hoffman said. “Increasing consumption, scarcity and variable generation are making the energy sector more uncertain and less secure.”

Overall energy security is a significant issue for many countries. “This underscores the need for countries to adapt their energy strategies to be able to manage the challenges presented by clean energy so that they can ensure stability and security,” Hoffman said.

“The changing landscape of energy security shows that we need a comprehensive approach that tackles both traditional risks and those from climate change and those created by clean-energy transitions. As we navigate this shift it is crucial to balance affordability, system resiliency and security—especially in today's unpredictable economic climate,” Hoffman said.

To ensure electricity security, anticipating peak demand growth is essential, which highlights the important of resource adequacy planning, including additional risk information. Energy transition is complex and understanding all the dynamics is key, Hoffman said.

Resilience, flexibility come to the fore

Further complicating the forecasting for electricity demand is the rise of artificial intelligence and data center needs, the adoption of electric vehicles and shifting population trends. “This highlights the need for smart and flexible power systems to adapt to the rapid expansion of solar photovoltaics, the rising use of electric vehicles and the growing prevalence of air conditioning to manage more frequent heat waves,” Hoffman said.

Energy operators and consumers can use microgrids or advanced power management to improve energy resilience. “These systems offer localized control and stability during disruptions, which is critical for a secure and resilient energy future,” Hoffman said.

Microgrids can also play a big role in making the electrical grid more flexible and efficient. They are crucial for modern energy management in helping reduce the impact of grid disturbances, and they cut down on energy losses in transmission and distribution. Microgrids can also operate independently when the main grid is down. “Microgrids are gaining popularity, growing 11% from 2018 to 2022,” Hoffman said.

With increasing extreme weather events, microgrids can also increase reliability and security of the power supply, in addition to behind-the-meter power management applications.

Still, many industrial users will likely be impacted by power scarcity, and proactive maintenance is the key to avoiding power disruption. “It’s crucial to take proactive measures to minimize disruptions,” Hoffman said. “We need solutions that can predict, prevent and reduce their effects. Tools like predictive analytics are great for spotting issues early and forecasting power and stability.”