IEA says demand flexibility can boost energy security

Demand flexibility is set to play an increasingly important role in maintaining reliable, affordable and secure electricity systems as global power demand accelerates, according to a new report from the International Energy Agency.

The report, Scaling up Demand Flexibility, says managing when and where electricity is used is becoming as important as managing how much electricity is generated, with global demand for short-term flexibility projected to increase by between two and seven times by 2035 under the IEA's Stated Policies (STEPS) scenario.

Electricity demand is rising rapidly, driven by the electrification of transport, heating, cooling, industry and digital infrastructure. 

The report notes that while low-emissions sources could provide around half of global electricity generation by 2030, global electricity demand could double by 2035, increasing the need for flexibility across power systems.

Importance of flexibility

The report also highlights that electricity systems have historically been designed on the principle that supply follows demand. 

However, digitalisation, connected technologies and new market arrangements are increasingly allowing electricity demand itself to respond to system conditions, helping maintain reliability, reduce costs, integrate renewable energy and defer investment in infrastructure.

According to the IEA, traditional supply-side responses remain important for ensuring security of supply but can be slow to deploy and capital intensive. Demand flexibility offers a complementary approach that can be mobilised more quickly and scaled incrementally.

The agency also highlights the importance of demand-side measures following the recent energy crisis. In 2026, disruption to almost 20% of global liquefied natural gas trade pushed gas prices up by around 50%, demonstrating the risks of relying solely on fuel-based flexibility. 

Demand flexibility and energy efficiency, the report says, could increasingly contribute to energy security, affordability and resilience.

The report examines three case studies representing different stages of power system development: South Africa in 2025, Thailand in 2030 and Ireland in 2035. Together they illustrate how electricity demand could evolve from passive consumption into an active system resource.

Flexibility to become the norm

The IEA says flexibility is already reducing the cost of managing peak electricity demand while improving system reliability. Looking ahead, accelerating electrification, digitalisation and artificial intelligence could see demand flexibility evolve from an infrequently used reliability measure into a routine operational capability supporting day-to-day system optimisation.

The report also stresses that flexibility opportunities are concentrated in specific end uses rather than necessarily the largest electricity-consuming sectors. Electric vehicles, heating systems, industrial processes and digitally connected appliances are identified as important future flexibility resources.

Scaling demand flexibility, however, will require wider deployment of smart technologies, including smart meters, energy management systems, aggregation platforms, connected devices and AI-enabled analytics. The report says interoperability, consumer participation and cybersecurity will become increasingly important as electricity systems rely more heavily on digitally connected demand-side resources.

While demand flexibility could lower operating costs, infrastructure investment and peak demand, improving affordability for consumers, the IEA says policy and market design will determine how rapidly these benefits can be realised. Planning and market processes often continue to exclude demand flexibility despite its potential to improve system efficiency and reduce costs, the report says.

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Three case studies on flexibility

South Africa: Industrial flexibility and peak demand reduction

South Africa represents the most established approach to demand flexibility among the three case studies, with programmes focused primarily on emergency peak shaving during periods of system stress.

According to the report, demand flexibility measures have already avoided around 1.5GW, or 5% of annual peak demand. During periods of high demand this has reduced peaking generation requirements by up to 20%. Although peaking generation contributes only around 1.4% of annual electricity generation, it accounts for approximately 14% of total system operating costs, illustrating how targeted reductions in peak demand can deliver significant savings.

Demand flexibility programmes with large energy users have also helped mitigate emergency load shedding through limited operation, supporting economic activity that would otherwise have been interrupted.

South Africa's Demand Management Programme has delivered up to 1.5GW of peak shaving, mainly from large industrial consumers, supplemented by residential water heaters and pool pumps.

The IEA estimates that equipping hot water systems in 10% of South African households with smart controls could unlock an additional 600MW of peak demand reduction. The resource would only need to be activated infrequently to minimise disruption to consumers while strengthening system reliability and lowering costs.

Thailand: Industrial demand response and electrification

Thailand represents a transition towards broader market-based flexibility as electricity demand grows and electrification accelerates.

The report says demand flexibility could lower national peak demand by up to 13% by 2030, largely through industrial flexibility. This would help manage increasing electricity demand for cooling, with every one-degree increase in temperature currently adding around 1GW to national peak demand.

Demand flexibility could also free up to 15% of transmission capacity on many network corridors, although increased flows on some lines underline the need for coordination when activating flexibility resources.

According to the IEA, less energy-intensive industries could play a central role in providing flexibility, provided sufficient participation is achieved. Machinery, food processing, tobacco and textile industries account for around half of industrial electricity demand and could provide more than 70% of industrial flexibility potential through load shifting and peak shaving.

Residential and commercial buildings also offer flexibility opportunities, with cooling and water heating accounting for around 2.7TWh of electricity demand that could be shifted. The report notes that uptake will depend on regulatory frameworks, market incentives, enabling technologies and consumer confidence.

By shifting electricity demand, demand flexibility could reduce peak demand, improve asset utilisation and lower investment requirements as Thailand's power system becomes increasingly dynamic with greater renewable deployment.

Ireland: Digitalisation and flexibility for a renewables-based grid

Ireland represents the report's long-term vision of a highly digitalised and electrified power system where demand flexibility becomes integrated into routine system operation.

Meeting national policy ambitions could double electricity demand by 2035, with around 85% of the increase coming from transport and heating. Heating demand could more than triple, while transport could grow from a near-zero base to almost one-fifth of total electricity demand.

The IEA says ambitious deployment of flexibility technologies could reduce total energy system costs by up to 10%, lower fossil fuel dispatch, reduce renewable curtailment and strengthen energy security by reducing exposure to volatile fuel prices.

Demand response-ready heat pumps could enable the electrification of heating in around 170,000 additional homes without immediate transmission network reinforcement, equivalent to nearly half of Ireland's current residential retrofit target.

Ireland's growing renewable generation will increase the need for flexibility. The report notes that around 88% of electricity generation could come from renewables by 2035, creating large periods of surplus renewable output requiring both short- and long-term flexibility.

The IEA also highlights the importance of digital technologies. By 2035, Ireland would require an eleven-fold increase in smart EV chargers, representing around 70% of all chargers, alongside a four-fold increase in smart thermostats connected to flexible heat pumps.

Transport is expected to offer particularly strong flexibility potential. Although heating demand could be two-and-a-half times larger than transport demand, transport could provide around three times higher flexibility potential due to the ability to shift electric vehicle charging.

The report stresses that widespread deployment of digital controls could unlock around 3.9 TWh of demand shifting from residential and commercial buildings, while industry would continue to play an important role through greater digitalisation, connectivity and advanced control systems that allow production schedules to respond more dynamically to electricity prices and system conditions.

The IEA report says that the experiences of Ireland, South Africa and Thailand, as well as that of other countries show that demand flexibility is no longer a niche intervention limited to periods of system stress. 

"As electricity systems evolve around the world, flexibility could increasingly become part of how grids are planned, operated and optimised."