Global power markets are entering 2026 facing a new mix of pressures — from surging electricity demand driven by artificial intelligence (AI) and data centres to rising affordability concerns, weakening policy support for renewables and increasingly fragmented political commitment to decarbonisation.
That is according to an energy outlook report by S&P Global, which identifies five major trends expected to shape power and renewable energy markets worldwide this year:
Accelerating electricity demand. The report says the most immediate structural shift is a sharp acceleration in electricity demand growth, reversing years of relatively flat consumption in many advanced economies, particularly the US and parts of Europe.
Demand is being driven largely by the rapid expansion of AI infrastructure, data centres and electrification trends, including electric vehicles and heat pumps. Power systems are now facing a new challenge: expanding generation and grid capacity fast enough to meet these loads while maintaining reliability and affordability.
Affordability central. At the same time, affordability has emerged as a central political and economic issue. The report notes that rising power costs – linked to higher financing expenses, supply chain constraints and ongoing grid investment requirements – are putting pressure on governments to balance decarbonisation goals with consumer protection.
This is expected to result in more cautious policy approaches, including slower subsidy rollouts and greater scrutiny of renewable support schemes, particularly across European markets.
Policy uncertainty. Policy uncertainty is identified as another major trend shaping the global outlook. The report highlights that while long-term decarbonisation targets remain in place across most major economies, including the US, China and India, short-term political priorities are becoming more fragmented.
In some regions, governments are shifting toward energy security and cost containment, leading to delayed project approvals, renegotiated contracts and changing regulatory frameworks.
Growing complexity of renewables sector. The global renewables sector itself is also entering a more complex phase of development. According to the report, growth is continuing, but at a more uneven pace across major markets, including China, Europe and the US. Developers are facing higher capital costs, grid connection bottlenecks and land constraints, all of which are slowing project timelines.
The report notes that future growth will increasingly depend on improvements in grid infrastructure, storage deployment and more stable policy environments.
Intensifying power market reform. A further key trend is the intensifying role of power market reform. Many countries are reassessing wholesale market structures to accommodate higher shares of variable renewable energy, distributed generation and new demand patterns, particularly in Europe and the US. This includes growing interest in capacity markets, flexible pricing mechanisms and reforms aimed at incentivising grid investment.
In Africa, the report points to continued power sector expansion driven by population growth, urbanisation and rising electricity access needs. However, it says investment constraints, infrastructure gaps and financing challenges remain significant barriers to faster renewable deployment across the continent. While several countries are advancing solar and wind projects, development remains uneven due to regulatory differences and fiscal limitations.
Overall, the report says the global power sector is entering a period defined less by technological uncertainty and more by economic, political and system-integration challenges. The transition to cleaner energy is expected to continue, but its trajectory will increasingly be shaped by affordability pressures, grid readiness and the ability of policymakers to maintain consistent support frameworks.
Business Day
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