The global electrification market size was reached at USD 73.64 billion in 2022 and it is expected to hit around USD 172.9 billion by 2032, growing at a CAGR of 8.91% between 2023 and 2032.
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Electrification is the conversion of any non-electric energy source to electricity at the point of final consumption, and it is a major emerging trend in global energy markets. A combination of the introduction of newer electric end-use technologies, manufacturers, and a variety of policy objectives in various jurisdictions are driving this trend. Electrification is an important option to achieve net zero goals since it has a substantial potential to reduce emissions and decarbonize energy supply chains.
According to the International Energy Agency (IEA), in the Net Zero Emissions by 2050 Scenario, the electricity share in total final energy consumption rises to 27% in 2030 from 20% in 2021 as more energy end uses electrify. The share has been rising steadily in recent years, but to meet the Net Zero Scenario's deadline of 2030, this increased rate will need to almost quadruple.
The transition to electric transportation and the deployment of heat pumps can largely meet the demand. The greatest promise for electrification in the industry is in low-temperature heat processes. Industrial end uses electrification is taking longer than expected due to the fierce market competition and lengthy equipment lifespan.
The growing inclination towards electrified sources particularly in the transportation sector is expected to augment the growth of the electrification market during the forecast period. This is owing to the rising concerns over pollution and climate change. Electrification can be applied in various industries and sectors, including transportation, residential and commercial buildings, and industrial manufacturing.
In the transportation sector, for example, electrification involves the use of electric vehicles (EVs) such as cars, buses, and trucks, as well as supporting infrastructure such as charging stations. In buildings, electrification involves the use of electric heating and cooling systems, as well as other electrical appliances such as lighting, water heaters, and refrigerators.
In the industrial sector, electrification can involve the use of electric-powered machinery and equipment, as well as other electrified systems for manufacturing and production processes. The shift towards electrification is driven by concerns over climate change and air pollution, as well as improvements in technology and decreasing costs of renewable energy sources.
Electrification is one of the most significant strategies for reducing greenhouse gas emissions and promoting sustainable development and is likely to play an increasingly important role in the global energy landscape in the coming years.
Report Scope of the Electrification Market
|Market Size in 2023||USD 80.2 Billion|
|Market Size by 2032||USD 172.9 Billion|
|Growth Rate from 2023 to 2032||CAGR of 8.91%|
|Largest Market||North America|
|Fastest Growing Market||Asia-Pacific|
|Forecast Period||2023 to 2032|
|Segments Covered||By Source and By Application|
|Regions Covered||North America, Europe, Asia-Pacific, Latin America and Middle East & Africa|
Increasing focus on policy implementation by various economies
Many countries are approaching electrification from various perspectives, with the goal of increasing either electricity demand or the share of (renewable) electricity in the total energy supply. Some countries, primarily developing countries, are also addressing the distribution network, setting targets for the proportion of the population connected to the electricity grid or increasing the system's capacity.
Sweden recently published a strategy focused solely on electrification and how to further enable it. It focuses on increasing grid capacity, expanding the EV charging network, and developing the wind energy sector. Likewise, Japan issued a comprehensive response to power shortages.
Other electrification-related policy measures include: Many regions are working to strengthen their electricity network. Several governments, including India, the European Union, Hungary, and the United States, have established funds or frameworks to accomplish this in recent years. Canada and Australia have begun to fund smart- and micro-grid demonstration projects in order to improve the resilience and reliability of the power grid.
Some countries, such as Australia and India, have launched information and education campaigns to raise public awareness of electrification as well as its potential. Thus, the increasing electrification-related policy measures are likely to drive the growth of the electrification market in the years to come.
Difficulties in building electrification and grid-responsiveness
The major hurdle for buildings is not the politics or implementation of electrification but transforming electrified buildings into responsive consumers that are in line with price and grid fluctuations. Buildings must behave like smart EV chargers, matching their use with renewable and other clean energy output, as electrification turns an even higher portion of constructing ultimate energy consumption into electricity. This presents two different sets of difficulties for the electrification market.
The first most is the economic that is resource aggregators and utilities must make sure that their value propositions to commercial and residential consumers are strong enough to win their support. This frequently entails an initial investment in smart equipment and the readiness to alter one's energy use habits.
The second difficulty is technical; the technical challenge associated with electrification lies in the complexity and non-uniformity of buildings, making it challenging to manage them in a scalable manner. Currently, commercial load control is facing a challenge similar to that of residential load control a decade ago, where it is reliant on manual intervention from occupants or the installation of retrofit devices, such as an air conditioner load switch. This is expected to restrain the growth of the electrification market within the estimated timeframe.
Improvements in technologies
Technological advancement is a key trend gaining traction in the electrification market. The advancements and improvements in the energy storage systems to reduce costs and increase efficiency make it easier to integrate renewable energy sources into the grid. Further, the development of smart grid technology has opened up possibilities for improved electric power generation, transmission, and distribution.
In comparison to conventional grids, it can be installed more quickly and takes up less area thanks to its adaptability. The goal of the smart grid design concept is to make the grid observable, make assets controllable, improve the performance and security of the power system, and especially to improve the financial elements of operations, maintenance, and planning. These advancements will create immense growth opportunities for the market in the years to come.
Impact of COVID-19
The Covid-19 pandemic had a significant disruption in global supply chains. It also affected the production and distribution of electrification technologies. Also, the limitations imposed to contain the spread and effects of COVID-19 have also had a significant impact on people's lives and the way energy is used throughout entire economies. Covid-19 lockdown measures caused the weekly electricity demand in the impacted districts to drop by almost 10–35%, increasing the overall share of renewable energy sources to fulfill this need.
In some locations, the power demand experienced record-high shares of infeed from variable renewables due to a combination of low electricity demand and the increased capacity coming online in 2019 and the first quarter of 2020. Additionally, there was a decline in the demand for passenger transit as a result of a combination of government lockdowns and concerns regarding catching the virus and spreading it while using mass transportation methods.
However, the pandemic increased public awareness of the importance of the environmental sustainability and resulted in increase in the consumption of renewable energy sources. This is expected to create lucrative growth opportunities for the market in the years to come.
On the basis of source, the renewable energy source segment held maximum revenue share in 2022. This is owing to the rising environmental concerns and increasing pressure to reduce greenhouse gas emissions. Furthermore, the growing environmental regulations in both developed and developing economies is also expected to support the growth of the segment in the years to come. Energy storage systems and technological improvements in solar PV production are expected to present enormous prospects for the segmental growth of the market.
The fossil fuels segment is anticipated to grow at a moderate CAGR during the forecast period. The increase in world population has increased the demand for energy specifically in developing economies. Fossil fuels are still primary source of energy and currently supplies approximately 80% of the world energy requirement. Also, the increase in middle-class population in developing economies increases energy demand which in turn is likely to contribute to the segmental growth of the market.
Based on the application, transportation segment generated the largest market share in 2022. Pressure to reduce carbon emissions in the transportation sector is growing as awareness of climate change and air pollution rises. One of the main solutions to this problem is the electrification of transportation, particularly with the usage of electric vehicles (EVs). Further, incentives and policies are being implemented by numerous countries to promote the use of EVs and other electric transportation technology.
These include tax breaks, credits, and requirements that automakers create a specific number of zero-emission automobiles. These factors are likely to contribute to the growth of the segment in the global electrification market.
On the other hand, the building segment is likely to grow at the fastest CAGR during the forecast period. The technological possibilities are well developed in the construction industry, and heat pumps are now the most popular heating system in newly constructed homes. However, since heat pumps must be retrofitted into existing structures and since consumers prefer other options, there is still room for improvement in the adoption of this technology.
North America has held largest revenue share in 2022. This is owing to the early adoption of technologies in the region. Also, there are various policies implemented in the region related to electrification. For instance, the introduction of the Inflation Reduction Act 2022: Sec. 13401 Clean Vehicle Credit in the US, it sets a Clean Vehicle Credit of up to $7,500 per vehicle to encourage and accelerate the use of electric vehicles and tries to minimize domestic inflation, particularly that caused by the global energy crisis.
Further, the Ministry of Natural Resources also disclosed funding for the placement of EV chargers in neighborhood locations in Canada. The Zero-Emission Vehicle Infrastructure Program (ZEVIP), which aims to increase access to EV charging, will provide the funding for these improvements. After receivers have been chosen by each Action Center and TAF, EV chargers will be installed in public areas.
Asia-Pacific is expected to grow at the fastest CAGR during the forecast period. This is attributable to the increasing urbanization across the region. The region is home to some of the world's largest and fastest-growing cities, and this trend is expected to continue in the coming years. As more people move to cities, the demand for electrification solutions in buildings, transportation, and other areas will increase.
Many governments in the region are actively promoting electrification as a way to reduce carbon emissions and improve energy security. For instance, Australia's government has announced its Long Term Emissions Reduction Plan with the aim of reaching net zero emissions by 2050. The plan outlines a technology-driven approach to achieving a net zero economy, while taking into account the impact on key sectors, geographic regions, and employment.
The plan is a part of a broader strategy to reduce emissions that is focused on the development and implementation of low-emissions technology. The Low Emissions Technology Statements and the Technology Investment Roadmap are important components of this approach. This policies and incentives are likely to encourage the adoption of electrification solutions, which is driving market growth in the region.
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