El Nino expected to disrupt global energy markets and electricity demand

A strengthening El Nino phenomenon is expected to significantly impact global energy markets and electricity demand. The National Oceanic and Atmospheric Administration (NOAA) indicates a greater than 90 percent chance of a ‘very strong’ El Nino occurring through the 2026-2027 period.

Rising temperatures are projected to drive up electricity consumption due to increased cooling needs. The International Energy Agency (IEA) forecasts global electricity demand growth of 3.6 percent in 2026 and 3.8 percent in 2027, noting that stronger El Nino conditions could push these figures even higher. Since 2015, electricity used for building cooling has increased by 50 percent, reaching approximately 2,900 terawatt-hours.

The climate event will also shift renewable energy production. While solar energy production may increase in certain regions, wind and hydroelectric power face potential declines. In Europe, solar output is expected to rise slightly in the third quarter of 2026, whereas wind production could drop by 9.8 percent in early 2027. Additionally, hydroelectric output in parts of Latin America and Southeast Asia may be suppressed.

These shifts may increase reliance on natural gas and coal to meet demand. ICIS projections suggest that hot summer conditions could increase Asia’s liquefied natural gas (LNG) demand by approximately 1.6 million tons in the third quarter, intensifying competition for limited supplies. Furthermore, El Nino-related rainfall patterns are affecting vessel transit through the Panama Canal.