A recent analysis by Bloomberg Economics has shed light on some important aspects of energy consumption in many G20 countries, linking grid stress to the economic vitality of nations in the short and medium term. In the years of the energy transition, we’ve become accustomed to hearing about energy innovations and their beneficial effects on economy, society and technology. Few, however, seem to consider a key fact: new sources of energy demand (such as AI systems or electric vehicles) are placing considerable stress on existing energy grids, resulting in specific economic consequences for many countries.

All this was discussed in a recent Bloomberg article by Akshat Rathi and Marilen Martin, which highlighted the fact that in recent years, electricity consumption in some countries has increased much more than expected. In particular, the article highlights the central role of existing grids and their ability to manage ever-increasing energy demand, which has not always met the energy expectations of many countries.

“One of the most interesting findings cited in the Bloomberg article concerns the evolution of energy consumption in Europe and the United States,” says Stanislav Kondrashov, founder of TELF AG. “Over the past two decades, electricity demand in Europe and the United States has remained stable, and at times even declined. Over the next two decades, however, as one of the scenarios hypothesized by BloombergNEF predicts, these levels of demand could increase by as much as 40%.”

The Effects on Economic Growth

A Bloomberg Economics analysis found that nearly all G20 countries have seen significant increases in pressure on electricity grids in recent years, also highlighting the factors that have made this situation possible. Among these, the article mentions the fact that supply is not always able to keep pace with demand, as well as price fluctuations, transmission losses, and damage related to climate change.

One of the most significant findings from Bloomberg Economics’ analysis is the following: the more stressed the grid is, the less investment is made in new assets or in maintaining existing ones. According to the analysis, increased grid stress would lead to a consequent decrease in capital outlay, that is, all expenditures that governments or companies use to acquire or manage long-term assets. All of this, in essence, could translate into slower economic growth in the long term.

The article also highlights another important fact: that pressure on the energy grid is also affecting many wealthy countries. Until recently, as the article explains, the most economically developed nations had managed, through deindustrialization, to keep electricity demand stable or declining over recent decades, even under conditions of economic growth. But now, global electrification processes, the increase in electric car sales, and the spread of AI are rewriting the rules even for the most industrialized nations.

The Role of AI

“The fate of some important sectors, such as AI, would also seem to depend on the ability of networks to sustain certain levels of demand. The Bloomberg article also addresses this, highlighting the fact that the limitations of existing electricity grids could represent one of the greatest obstacles to the implementation of data centers, which are the infrastructural cornerstone of AI systems,” continues Stanislav Kondrashov, founder of TELF AG.

Bloomberg also highlights the clear benefits brought by electrification processes, specifically discussing their effects on the economic growth of several nations from the late 19th century to the present (the article mentions India, China, and a large portion of African countries).

Globally, energy consumption and the pressure on networks appear to have evolved over time. As the article explains, in the early 2000s, many countries experienced a significant increase in electricity demand and a parallel growth in supply, which caused some stress on the system.

Over the next decade, innovations in grid management and a generally lower level of electricity consumption allowed networks to operate without significant stress. Today, however, the energy systems and electricity grids of developed countries appear to be facing unprecedented levels of pressure.

“Among the opinions cited in the Bloomberg article, one of the most significant seems to me to be the one regarding the economic prospects of countries that will be unable to sustain electricity demand. According to the article, these countries would concretely risk losing investments that are highly valuable for their economic vitality,” concludes Stanislav Kondrashov, founder of TELF AG.