The 2026 global power market outlook: common problems, diverse solutions

Power markets globally are more complex and challenging to understand than ever in 2026. Most countries face broadly similar challenges and opportunities, but they are taking different approaches to resolve them based on their specific circumstances.  

Electricity demand continues to grow, driven by industrialisation, electrification and rapid data centre buildout. Yet in many markets, infrastructure is struggling to keep up. At the same time, the Middle East conflict has heightened concerns around energy security, threatening to structurally reshape market dynamics.  

Using proprietary data from Wood Mackenzie’s Lens Power & Renewables solutions, analysts from our regional research teams have compiled a series of long-term strategic insights covering power markets globally.

Read on for a brief overview of the outlook for each region, and fill in the form at the top of the page to access a compilation of short extracts from a selection of our regional reports.  

US and Canada: Record demand growth drives unprecedented investment despite risks 

Underpinned by surging demand, an all-of-the-above approach to investment reigns in the North American power sector. Gas is booming again, while renewables and storage buildout continues apace and even coal generation can expect greater longevity. However, grid constraints are a limiting factor, while policy risk and affordability are concerns. 

Data centre pipeline growth is slowing, but the overall US power demand outlook is still exceptionally strong - we now forecast 3.2% annual sales growth through 2035, two-thirds of which will come from datacentres. At 2.2%, expected Canadian market growth for the same period is somewhat lower but has risen noticeably from the 1.5% predicted in our previous outlook.  

The popularity of gas with the current US administration means we expect it to contribute 52% of incremental generation through 2035, leading to rising emissions in all major US markets. Yet with gas investment costs at an all-time high, the need for electrons must be balanced against the risk of stranded assets.  

The tension between speed to power and affordability are spurring reforms across regional US power markets. However, state policy responses remain fragmented and there is no silver bullet - colocation and behind-the-meter arrangements included. Looking ahead, ways must be found to connect large loads quickly while addressing who pays for what and who bears the operational risks. 

Europe: Decarbonisation accelerates alongside major demand expansion, but targets remain out of reach 

Europe's power demand is set to expand by 66% by 2050, as electrification gathers pace across the continent. While progress will lag government goals through 2030, growth will accelerate over the coming decades. In the near term, data centre buildout is the primary demand driver; later in the 2030s, the pace quickens as bans on internal combustion vehicle sales take effect, ultimately driving EV demand 15-fold by 2050. Heat pump deployment will expand fivefold, though it will fall short of national targets in most markets. Geopolitical uncertainty introduces downside risk to this demand view - economic slowdown and commodity price increases could weigh on load growth, though prolonged fossil fuel disruption may conversely accelerate electrification and trigger additional policy support. 

The timing of load growth matters for market economics. Price support in day-ahead wholesale markets is expected to materialise in the second half of the 2030s and into the first half of the 2040s, offering stability to renewable asset owners currently experiencing low capture rates - particularly as solar capacity expands rapidly. Curtailment levels and price divergence across markets will be shaped by the pace of low-carbon supply growth, interconnector expansion, and the continued price-setting influence of gas. Delays to grid infrastructure and interconnectors are likely, creating ongoing uncertainty in the near term. 

Meeting this demand will require over 1,400 GW of net new PV and wind capacity by mid-century. Battery storage will surge tenfold to 470 GW by 2050, as variable renewables penetration rises from 28% to 68% of the power mix. An increasingly pro-nuclear regulatory landscape is underpinning operational extensions of Europe's existing fleet, prolonging the technology's contribution to a low-carbon grid. Zero-carbon power's share of the mix is set to surpass 80% by 2030 and reach 93% by 2050. 

Despite this progress, Europe's ambitions will largely fall short of official targets. The REPowerEU goal of a 69% renewables share of generation by 2030 will not be met. We project the actual figure at just below 64%. Coal will fully exit the EU27 power mix at the start of the 2040s, and CCS will begin to gain meaningful traction in the late 2030s. Gas generation will decline by 45% by 2050, even as installed capacity grows, reflecting a steep fall in utilisation rates. The overall direction of travel is clear, but investment opportunities will not be uniform. Developers and investors will need a precise understanding of where the most attractive markets lie. 

Southern Cone: Constrained demand growth and diverging national energy trajectories 

Weak investment and constrained macroeconomic policy space signal modest GDP growth and lower projections for data centre buildout in Latin America’s Southern Cone. As a result, electricity demand growth in Argentina, Bolivia, Brazil and Chile will remain below the global average.  

Renewables are advancing across the region, underpinned by low capital cost and policy support. Solar and wind will drive the majority of new capacity through 2060, although high curtailment, grid constraints and lower expectations for additional load create short-term headwinds - particularly in Chile and Brazil. Meanwhile, battery storage emerges as the Southern Cone’s fastest-growing technology. 

Renewables penetration and seasonal variability are reshaping the region’s marginal power-market cost dynamics. Rapid growth in solar, wind, hydro and battery storage will see renewables exceed 55% of installed capacity in Bolivia by 2060, limiting the role of gas generation and weakening domestic gas monetisation. 

In Brazil, water availability for hydro generation is the primary driver of price uncertainty, with marginal costs likely to rise between 2029 and 2040 as large-load demand accelerates. Chile exhibits pronounced seasonal patterns in marginal costs fluctuation driven by solar availability, necessitating increased gas dispatch to help mitigate price spikes. Similarly, Argentina's June-to-August marginal costs are projected to reach US$100 per megawatt hour by 2060, as high seasonal demand coincides with reduced renewable availability, requiring greater thermal generation. 

The need to ensure reliability as grids become increasingly renewables-dependent will mean gas retains a role as a dispatchable resource in all four markets to a greater or lesser degree. However, the flexibility provided by battery storage will support greater renewables penetration over time. Even in Argentina, where gas generation will continue to dominate over the mid-term, renewables will steadily erode its share post-2040. 

Asia Pacific: Growing dominance of renewables to meet healthy ongoing demand growth  

APAC will see the highest electricity demand growth of any global region in the coming decades. Driven by ongoing industrialisation, economic expansion and urbanisation in its developing economies - particularly in China, India and Southeast Asia - APAC will account for nearly three-quarters of overall global demand growth to 2035. 

China’s total power demand exceeded 10,000 terawatt hours in 2025, the first country to reach this milestone. The country’s power sector dominates the region, with installed capacity accounting for 72% of APAC’s total. Demand growth will continue over the long term, albeit at a comparatively moderate pace for the region as drivers shift from heavy industry towards digitalisation, electrification and advanced manufacturing. 

Chinese coal-fired generation capacity should peak by 2030 as it shifts from baseload resource to flexibility provider, although it will continue to dominate marginal prices through 2035. Wind and solar already represent 47% of the country’s power capacity - that will rise to 84% by 2060 (and deliver 73% of generation). As renewables penetration deepens, energy storage will expand at a rate of 8.5% annually to help provide much-needed flexibility. 

Australia’s power system is set to triple its capacity by 2060, as structural demand growth from electrification, industrial decarbonisation and data centres drives renewable and storage buildout. The country’s energy transition is already well-advanced, with solar now the largest capacity source. However, grid connection, transmission and project delivery constraints mean renewable deployment is expected to lag ambitious targets of 82% renewable generation by 2030.  

Coal and gas generation will remain important, staying higher for longer until batteries, pumped storage and other flexible capacity can take over the role of delivering flexibility and reliability. We expect full coal retirement in 2047, with gas to continue in the mix as a residual balancing resource through 2060. 

Learn more about the global power market outlook 

Fill out the form at the top of the page to access your complimentary extracts from the full reports, which draw on insights from our powerful Lens Power & Renewables solutions to cover key topics in more detail.