The global electricity demand is expected to grow exponentially in the coming decades, largely due to an increased demand from tech companies for new data centers to support the rollout of high-energy-consuming advanced technologies, such as artificial intelligence (AI). As governments worldwide introduce new climate policies and pump billions into alternative energy sources and clean tech, these efforts may be quashed by the increased electricity demand from data centers unless greater international regulatory action is taken to ensure that tech companies invest in clean energy sources and do not use fossil fuels for power.
The International Energy Agency (IEA) released a report in October entitled “What the data centre and AI boom could mean for the energy sector”. It showed that with investment in new data centers surging over the past two years, particularly in the U.S., the electricity demand is increasing rapidly – a trend that is set to continue.
The report states that in the U.S., annual investment in data center construction has doubled in the past two years alone. China and the European Union are also seeing investment in data centers increase rapidly. In 2023, the overall capital investment by tech leaders Google, Microsoft, and Amazon was greater than that of the U.S. oil and gas industry, at approximately 0.5 percent of the U.S. GDP.
The tech sector expects to deploy AI technologies more widely in the coming decades as the technology is improved and becomes more ingrained in everyday life. This is just one of several advanced technologies expected to contribute to the rise in demand for power worldwide in the coming decades.
Global aggregate electricity demand is set to increase by 6,750 terawatt-hours (TWh) by 2030, per the IEA’s Stated Policies Scenario. This is spurred by several factors including digitalization, economic growth, electric vehicles, air conditioners, and the rising importance of electricity-intensive manufacturing. In large economies such as the U.S., China, and the EU, data centers contribute around 2 to 4 percent of total electricity consumption at present. However, the sector has already surpassed 10 percent of electricity consumption in at least five U.S. states. Meanwhile, in Ireland, it contributes more than 20 percent of all electricity consumption.
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