How does the hottest year on record drive urgency for efficiency measures?

The world is seeing record hot temperatures, boosting the need for cooling

The world has recently endured its hottest summer on record —from scorching temperatures in the United States, the Middle East and China exceeding 50°C to heat waves like Cerberus in Europe, causing thousands of deaths, wildfires, and disruptions in sectors like agriculture and tourism.

Rising temperatures are driving greater cooling demands, threatening to trigger a vicious cycle of higher electricity use and carbon emissions. Heat waves can also worsen health disparities, reduce productivity, raise electricity costs, disrupt essential services, and drive forced migration. Extreme heat puts strains on electricity systems, requiring substantial investments in grid infrastructure and power generation while burdening consumers with high cooling costs, especially for the most vulnerable.

Various policy levers are being used to address the challenge of rising cooling demand, ranging from enforcing stricter standards for air conditioning units to introducing demand response programmes to help balance the grid. 

Extreme heat levels are driving a surge in air conditioner sales and record power demand

Data shows extreme heat drives higher purchase of air conditioners, with sustained average daily temperatures of 30°C boosting weekly sales by around 16% in China, for example. During the May to September global heat wave, people were looking online for air conditioners more than ever, with the search term's relative popularity on Google up more than 30% worldwide compared with the historical average level of searches for those months. Online sales data from China in June 2023 revealed a 60% year-on-year increase in air conditioner sales – a tenfold rise compared to figures from January – and an increase of sales in electric fans of almost 90%.

Higher temperatures have a significant impact on electricity demand. IEA analysis shows that every 1°C increase in the average daily temperature above 24°C drives a rise of about 4% in electricity demand in Texas, while in India, where air conditioner ownership is lower, the same temperature increase still drives a 2% gain.

Between May and September this year, power grids hit record levels of peak electricity demand in more than 10 countries around the world, including China, the United States, Canada, India, Brazil, Thailand, Malaysia and Colombia – together accounting for more than 60% of total global electricity demand. In some regions, such as in the Middle East and parts of the United States, space cooling can represent more than 70% of peak residential demand on hot days. 

Daily electricity load versus temperature in Texas, May to September, 2019 and 2023


Daily electricity load versus temperature in India, May to September, 2019 and 2023


Cooling already represents an estimated 9% of global electricity demand today and will steadily see its share to grow. The most significant increase is observed in emerging markets and developing economies, where the stock of air conditioners is set to double by the end of the decade due to rising temperatures as well as growing populations and economic growth. Cooling demand is being further boosted by extended cooling seasons as well as longer use each day. 

Increase in cooling demand are leading to supply shortages, restrictions and blackouts worldwide

Numerous nations have experienced the impacts of heat waves, with notable instances such as Argentina experiencing a massive blackout in March 2023 affecting 20 million people, attributed to a power line fire exacerbated by the heat wave. In Mexico, recent summer heat waves resulted in multiple deaths and power generation capacity nearly reached the maximum limit. Egypt faced rolling blackouts due to surging air conditioning demand, and India estimates an income loss equivalent to 5.4% of GDP due to higher temperatures and reduced working hours across various sectors.

Between April and June 2023, major cities in Viet Nam were prompted to mitigate increased demand due to increased temperatures and heat waves, ultimately leading to power cuts for businesses and households which affected productivity and gave rise to various health issues. The government applied power-saving measures, including implementing energy efficiency measures, cutting back on streetlighting, and encouraging households to reduce electricity consumption.

Increased cooling needs can often mean grid operators need to bring older, inefficient and more polluting power plants online to cope with the spikes in demand. For instance, in June 2022, Sichuan experienced extensive power restrictions and in May 2023, China Huadian’s Sichuan subsidiary recorded its highest purchases of coal for power generation in several years.

Demand response programmes offer new ways to reduce the burden on power grids

To relieve pressure on power grids during hot periods, operators are embracing new strategies. This includes enabling appliances and cooling devices to be flexible and adapt energy usage according to real-time electricity demand, thus aiding grid balance during peak periods and offering consumers cost savings. This "demand response" can involve voluntary electricity use reduction during emergencies or financial incentives for consumers who reduce consumption.

For example, in Texas, when electricity demand hit an all-time high this summer, the grid operator increasingly used its demand response and energy flexibility programmes. These programmes reward large energy consumers for reducing demand during grid stress or shifting consumption to off-peak hours. In 2023, demand response payments are 20 times higher, benefiting programme participants.

In China, the Huzhou air conditioner demand-side management pilot was the first of its kind aimed at the residential sector. Wi-Fi connected air conditioners were enabled allowing users to adjust their settings via a smartphone app. The Chinese government has developed demand-side management plans to cover at least 5% of the country’s electricity consumption by 2025, mostly from industry and cooling in public sector buildings.

Additionally, district cooling systems can play a role in alleviating strain on power grids reducing the demand for individual air conditioning units, particularly during hot days. For instance, Tabreed, a company headquartered in the UAE’s capital of Abu Dhabi, currently delivers around 4.5 GW of cooling across 89 plants located throughout the Gulf region.

Improved cooling for all has far reaching social and economic implications

These growing cooling needs have far‑reaching social implications that demand attention for inclusive transitions. While affordability of air conditioning is expanding, it remains constrained by income and wealth disparities. For example, in Sub-Saharan Africa only 5% of households own air conditioners due to financial limitations and, in some cases, a lack of access to electricity. By contrast, more than 85% of households in countries like Japan, Korea, and the United States have access to air conditioning. 

In regions grappling with high electricity prices, inefficient cooling burdens residents with high cooling costs. Consumers are also facing rising purchase prices for units, as inflation escalates and in the warmer seasons when demand is most urgent.

Rising temperatures, increasingly frequent heatwaves, and heat-induced labour stress disproportionately affect low-skilled, outdoor job sectors, affecting the productivity of vulnerable low-income households primarily engaged in agriculture and construction.

Unreasonably hot temperatures in buildings, also presents significant health risks like heat-related illnesses, dehydration, and disrupted sleep patterns, potentially affecting elderly, children and pregnant women the most.

Highly efficient air conditioner units are within reach

The IEA’s Net Zero Emissions by 2050 (NZE) Scenario foresees MEPS levels for air conditioners between 5-6.5 W/W in 2030. Recent IEA analysis shows that efficient air conditioners, aligned with NZE Scenario targets, are available in almost all global markets and do not necessarily come with higher upfront costs.

For example, in Thailand, consumers with a budget of USD 350 can choose between a low-efficiency unit at 3 W/W and one that is double as efficient (6 W/W), which are both selling at the same price. Purchasing the more efficient unit could almost halve their electricity bill, resulting in savings of up to USD 2 000 over the unit’s lifetime. This pattern is not exclusive to these countries and is evident in market data for most places around the world.

Policy solutions are available to support large-scale deployment of highly efficient products. In countries with the longest-running policy programmes, such as the United States and Europe, MEPS and labels have helped more than halve the energy consumption of air conditioners.

In China, new regulations for room air conditioners introduced in 2020 raised efficiency standards, and by the end of 2021, units exceeding minimum requirements increased their market share from 19% to 56%.

Such policies could quickly double the average efficiency of air conditioners being sold. When combined with insulated buildings and better built neighbourhoods and cities, enhanced efficiency not only leads to reduced operating costs for air conditioning but also lowers the need for investments in new electricity generation and grid capacity. In this way, energy efficiency policies assume a dual role in helping achieve net zero emissions objectives while also strengthening the capacity to adapt to soaring temperatures and promote inclusive transitions. 

Air conditioners’ efficiency rating and retail prices in Southeast Asia, 2023