World electricity demand increased by 5% in 2021, with nearly 50% of the increase met by fossil fuels

Derived from the flow of electric charge, electricity has become an integral part of modern life. Many work, communication, transport and leisure activities depend on this form of energy. Given its important role in our lives, access to a secure supply of electricity is essential. Most electricity globally is produced from fossil fuels in large power plants, where heat energy from burning coal, natural gas, or oil is converted into electricity. However, low-carbon sources – nuclear energy and renewables such as solar, wind, hydro and biomass – are making up increasingly large proportions of the global generation mix as a result of efforts to mitigate climate change as well as falling technology costs. The electricity from the generators is typically fed into an electrical grid to be delivered to the consumers. Electricity first flows over large distances through the transmission network and then within regional distribution networks before finally getting delivered into our homes and businesses.

Continually matching the supply of electricity with demand is a complex task. Electricity markets are therefore designed not only to ensure ahead of time that sufficient generation capacity is available for the expected demand (typically through forward contracts) but also to perform real-time balancing using flexibility measures such as dispatchable generation, energy storage and interconnection. Nevertheless, the electricity system is transforming towards an even more complex future. While a higher share of intermittent renewables and decentralised generation in the mix disrupt the supply side, the demand side is challenged by a high level of uncertainty as electrification of heat and transport is advanced as a key decarbonisation strategy. Thus, the future will bring about additional roles for the grid, a greater need for flexibility and new business models, all of which will make electricity systems increasingly dependent upon digital technologies.

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