How Electrification Can Rebuild the Global Economy

Volatility has put energy security at the top of the global economic agenda. As countries and companies look to reduce exposure to fossil-fuel price shocks and supply disruptions, a century-old technology is emerging as one of the most important tools for the future: electrification.

Electrification means switching from fossil-fuel combustion to electric-powered alternatives — vehicles, heating systems and industrial processes — powered by an increasingly low-carbon grid. Optimized with digital controls, electrification is evolving beyond an infrastructure upgrade into a defining economic trend that can strengthen energy security, improve industrial competitiveness and reduce reliance on fossil fuels.

Already transforming transport through the widespread adoption of electric vehicles, electrification now has the potential to reach almost every aspect of life, from domestic heating to heavy industry.

The electrification renaissance could not be more timely. With global electricity demand set to soar by 75% by 2050, driven in large part by projected growth in data centers, replacing fossil-fuel power with electricity from cleaner fuel sources represents one of humanity’s most effective methods of tackling climate change.

In the current International Energy Agency (IEA) scenario for net-zero emissions to be achieved by 2050, the share of electricity in global energy consumption must surpass 27% by 2030.

In January, IEA Executive Director Fatih Birol told delegates at the World Economic Forum meeting in Davos that Europe needs to aim for total electrification.

“When we look at energy security in Europe, and Europe’s goals — such as reaching our climate goals, but also at the same time being affordable — I see one future for Europe: Electrify everything,” Birol declared.

That sweeping entreaty is not an overstatement. Electrification’s potential spans much of human activity.

Electric vehicles (EVs) represent the most visible deployment of electrification. Even with a recent slowdown in US purchases, global adoption continues to climb, with forecasts projecting that EVs could account for more than 40% of new car sales by 2030.

Transportation is moving fast on electrification, thanks in part to "stunning advances in battery technology,” says Jon Creyts, CEO of the Rocky Mountain Institute, a US-based clean energy nonprofit. “Today, more than a quarter of new car sales globally are electric, and each step down that cost curve has opened the next-larger market. Heavy trucking was considered an unapproachable, hard-to-abate sector not long ago."

Beyond transport, for buildings — where heating accounts for one-sixth of global natural gas demand — heat pumps offer huge potential. By moving heat from the air rather than generating it, heat pumps could cut the equivalent of 500 million metric tons of CO2 emissions by 2030, according to the World Economic Forum.

Energy-hungry industries, such as aluminum, steel, concrete and chemical manufacturing, contribute one-quarter of global emissions. Long equipment lifetimes and competitive markets have meant slower electrification here than in other sectors, but progress is being made.

Big early wins have come from low-temperature industrial heat processes, such as food drying and many beverage processes, where electric systems can replace gas and coal with fewer engineering obstacles. Even in hard-to-decarbonize sectors, such as steel and cement production, new thresholds are being crossed.

Earlier in 2026, ArcelorMittal announced a €1.3 billion ($1.5 billion) investment in the construction of an electric arc furnace at its steelmaking site in Dunkirk, France — part of a broader shift away from blast furnaces and toward recycling scrap metal. Momentum is building across the technology: The global electric arc furnace market is expected to grow at a CAGR of 5.6% and reach $1.1 billion by 2030.

These transformations are accelerating as electric technologies move down the cost curve. EV battery costs, for example, dropped 8% in 2025 to $108 per kilowatt-hour — despite an increase in metal prices — with a further 3% reduction expected in 2026.

The economic benefits aren’t limited to operating costs. Electrification is also proving to be a boon for employment. The electricity sector has surpassed fuel supply (defined as oil and gas, coal, low-emission fuels and critical minerals) as the biggest employer in the energy sector: From 2021 to 2025, jobs in the electricity sector rose by 3.9 million, representing nearly three-quarters of all energy sector job additions.

Forward-looking businesses recognize electrification's benefits. “The companies moving the fastest are not waiting for perfect conditions; they’re identifying operational gains and building capabilities as they go,” says Creyts. “On top of efficiency improvements, these companies are seeing cost savings and energy security benefits. Companies have told us that electrification has made them more competitive, innovative and attractive to partners and investors.”

However, structural barriers to progress persist. The pace of electrification is increasingly not being set by demand for solutions, but by the speed at which grids can connect new loads and new clean generation plants.

Goldman Sachs has warned that the lack of critical spare capacity in almost all US power grids risks relinquishing the lead in the AI race. In Europe, aging networks and permitting delays have left an estimated 1,700 GW of renewable energy capacity stalled in grid-connection queues.

Alongside the determination of policy makers, private investment is critical to cutting through these obstacles, says Agustín Delgado Martín, CTO of energy group Iberdrola.

“Without a robust, digital and interconnected grid, Europe cannot unlock the full potential of electrification, renewables and AI-enabled innovation, nor support the competitiveness of other strategic sectors,” Delgado Martín says.

Founded in Bilbao, in the Basque region of Spain, Iberdrola’s roots in electrification date back 125 years, when the company began to power the country’s industrial heartland. That local history now underpins a much broader global ambition: to build and modernize the grid infrastructure needed for the next phase of electrification.

Iberdrola has launched a €58 billion ($67.8 billion) investment plan to continue to advance electrification and energy security through 2028, including upgrades to network infrastructure to expand capacity for data centers and large-scale development projects.

Delgado Martín acknowledges the multiple challenges that leaders face as they accelerate the energy transition while maintaining a secure supply of affordable power.

“The biggest challenge is not just technical,” he says. “It’s strategic: building an energy system that is resilient, competitive and digitally enabled, so it can support industrial leadership and unlock innovation and competitiveness.”

Electrification can only grow as fast as grids can connect new clean generation facilities. The next phase of the energy transition will be decided by execution: faster permitting, quicker connections and digital networks that turn investment into usable capacity.