Morgan Stanley: Industrial and air-conditioning demand joins AI, and global power tightness may exceed expectations

Why has the global electricity forecast been raised again?

Morgan Stanley has raised its already above-consensus forecast for global electricity consumption in 2030 by another 10%, to about 36 trillion kilowatt-hours, and expects a compound annual growth rate of 4.2% through 2030.
Demand is no longer driven solely by data centers: the bank expects industrial electricity consumption in Asia to grow at a compound annual rate of about 4%, contributing 43% of the region’s incremental power demand; space cooling adds about 0.4 percentage points to annual growth in Asian electricity demand through 2030.
AI remains an important source of incremental demand. The bank expects Asian data center electricity consumption to grow at a compound annual rate of 27%, requiring 84 gigawatts of power supply capacity by 2030, about 4 times the 2025 level.

Morgan Stanley believes electricity demand is growing faster than baseload power supply and grid capacity in the United States, ASEAN and India, creating relatively favorable conditions in their power markets; conditions in Europe and Japan are improving after years of decline.
The bank expects US data center developers to face power supply shortfalls of 43 gigawatts and 80 gigawatts in 2028 and 2029, respectively, even after accounting for solutions that accelerate power supply. About 15 gigawatts of the shortfall could shift to Asia.
Grid constraints are also pushing users to build their own power sources or install them on site. The bank expects behind-the-meter power demand to rise to 47 gigawatts in the United States and 8 gigawatts in Asia by 2030, benefiting on-site power providers.

Morgan Stanley expects fossil fuels still to account for about half of the global generation mix in 2030. In Asia, coal-fired power combined with energy storage competes with more expensive imported natural gas at an around-the-clock generation cost of about 50 to 60 US dollars per megawatt-hour.
Electricity demand rises around daylight hours, changing the intraday supply and demand curve in power markets. The bank believes this benefits margins for flexible generation and batteries but lowers returns on renewable energy, so different power sources cannot all be assumed to benefit.

Morgan Stanley says rising demand, disruptions to fuel supply and grid upgrades drove electricity prices up about 20% year on year in 2026. The bank expects market-based electricity sales spreads to widen by about 15% by 2028, with bargaining power gradually shifting from equipment suppliers to power infrastructure owners.
According to the bank’s model for a large AI cloud provider, a 20% change in electricity prices changes earnings by only about 1%, giving utilities room to raise electricity prices.
The bank believes valuations of Asian stocks benefiting from “AI power supply” have fallen since the start of the year, while earnings expectations have been revised upward. Its estimate of earnings per share in 2028 is 14% above market consensus, corresponding to about 500 billion US dollars in value creation.