RIYADH: Electricity consumption by data centers is expected to double by 2030 to reach 945 terawatts per hour, driven by the rapid use of applications powered by artificial intelligence, according to a think tank.
In its latest report, the International Energy Agency said that this rise in electricity demand will create new challenges for energy security and carbon dioxide emission goals.
According to the IEA, electricity consumption by data centers has increased by 12 percent annually since 2019 to reach 1.5 percent of the global amount in 2024.
The agency added that even though AI is driving the use, the technology can also unlock opportunities to produce and consume electricity more efficiently.
“AI is one of the biggest stories in the energy world today — but until now, policymakers and markets lacked the tools to fully understand the wide-ranging impacts. Global electricity demand from data centers is set to more than double over the next five years, consuming as much electricity by 2030 as the whole of Japan does today,” said Fatih Birol, executive director of the IEA.
He added: “The effects will be particularly strong in some countries. For example, in the US, data centers are on course to account for almost half of the growth in electricity demand; in Japan, more than half; and in Malaysia, as much as one-fifth.”
The IEA further said that generative AI requires colossal computing power to process information accumulated in gigantic databases.
The report added that data centers in the US are set to consume more electricity than the cumulative power used for the production of aluminum, steel, cement, chemicals and all other energy-intensive goods combined by the end of this decade.
In advanced economies more broadly, data centers are projected to drive more than 20 percent of the growth in electricity demand between now and 2030, putting the power sector in those economies back on a growth footing after years of stagnating or declining demand in many of them.
In March, another report by the IEA revealed that energy demand globally rose by 2.2 percent in 2024 compared to 2023, driven by usage of electricity and growth in emerging and developing economies.
In that analysis, the agency revealed that energy demand growth last year was also faster than the average annual increase of 1.3 percent between 2013 and 2023.
Meeting rising demand
According to the IEA, the world should tap a diverse range of energy sources to meet data centers’ rising electricity needs.
Data centers are set to account for around one-tenth of global electricity demand growth to 2030, less than the share from industrial motors, air conditioning in homes and offices, or electric vehicles.
The report projected that renewables and natural gas are set to take the lead in this journey due to their cost-competitiveness and availability in key markets.
“Renewables generation is projected to grow by over 450 TWh to meet data center demand to 2035, building on short lead times, economic competitiveness and the procurement strategies of tech companies,” said the IEA.
It added: “Dispatchable sources, led by natural gas, also have a crucial role to play, with the tech sector helping to bring forward new nuclear and geothermal technologies as well.”
The report further said that natural gas and nuclear power capacity is projected to grow by over 175TWh each by the end of this decade to meet electricity demand in data centers.
Aligning with this trend, in October Google signed a deal with Kairos Power to to use small nuclear reactors to generate the vast amounts of energy needed to power its AI-based data centers.
In the same month, Amazon also signed three agreements with X-Energy to develop nuclear power technology called small modular reactors to power its data centers.
Microsoft is also eyeing to use nuclear energy from new reactors at Three Mile Island, the site of America’s worst nuclear accident.
Earlier this month, in a separate report, the IEA said that the range of new energy technologies under development globally is broader and appears more promising than ever before, catering to the rising demand.
The think tank added that modern energy technology landscape is highly dynamic, with both emerging and established economies contributing to the growth of innovation in the sector.
Unlocking opportunities through AI
According to the IEA, while data centers could negatively impact energy security, wise implementation of AI has the potential to transform the energy sector in the coming decade.
The report said that effective use of the technology could unlock significant opportunities to cut costs, enhance competitiveness, and reduce emissions.
“With the rise of AI, the energy sector is at the forefront of one of the most important technological revolutions of our time,” said Birol.
He added: “AI is a tool, potentially an incredibly powerful one, but it is up to us – our societies, governments and companies – how we use it.”
According to the report, countries that want to benefit from the potential of AI need to quickly accelerate new investments in electricity generation and grids.
The IEA also urged these nations to improve the efficiency and flexibility of data centers, and strengthen the dialogue between policymakers, the tech sector and the energy industry.
The report added that countries should also consider establishing new data centers in areas of high power and grid availability.
The Paris-based agency further said that AI could intensify some energy security strains while helping to address others.
“Cyberattacks on energy utilities have tripled in the past four years and become more sophisticated because of AI. At the same time, AI is becoming a critical tool for energy companies to defend against such attacks,” said the IEA.
The emission factor
The IEA said that the growth of data centers will inevitably increase carbon emissions linked to electricity consumption, from 180 million tons of CO2 today to 300 million tonnes by 2035.
However, these emissions remain a minimal share of the 41.6 billion tonnes of overall global emissions estimated in 2024.
“While the increase in electricity demand for data centers is set to drive up emissions, this increase will be small in the context of the overall energy sector and could potentially be offset by emissions reductions enabled by AI if adoption of the technology is widespread,” said the report.
The think tank added that AI could also accelerate innovation in sustainable energy technologies such as batteries and solar photovoltaics, thus contributing to the global climate goals.
