Uche Cecil Izuora
The International Energy Agency (IEA) has said AI will be the most significant driver of this increase, with electricity demand from AI-optimised data centres projected to more than quadruple by 2030.
The IEA analysis projects that electricity demand from data centres worldwide is set to more than double by 2030 to around 945 TWh/y, slightly more than the entire electricity consumption of Japan today.
In the United States, power consumption by data centres is on course to account for almost half of the growth in electricity demand between now and 2030.
Driven by AI use, the US economy is set to consume more electricity in 2030 for processing data than for manufacturing all energy-intensive goods combined, including aluminium, steel, cement and chemicals.
In advanced economies more broadly, data centres are projected to drive more than 20 per cent 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.
A diverse range of energy sources will be tapped to meet data centres’ rising electricity needs, according to the IEA report – though renewables and natural gas are set to take the lead due to their cost-competitiveness and availability in key markets.
The report emphasises the significant uncertainties that remain, from the macroeconomic outlook to how quickly AI will be adopted. It also notes questions over how capable and productive AI will become, how fast efficiency improvements will occur, and whether bottlenecks in the energy sector can be resolved.
AI could intensify some energy security strains while helping to address others, according to the report.
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.
Another energy security concern relates to the expanding demand for critical minerals used in the equipment in the data centres that power AI. The report provides what are described as first-of-its-kind estimates of demand from data centres for critical minerals.
While the increase in electricity demand for data centres 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, according to the IEA report. Additionally, as AI becomes increasingly integral to scientific discovery, the report finds that it could accelerate innovation in energy technologies such as batteries and solar PV.
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, improve the efficiency and flexibility of data centres, and strengthen the dialogue between policy makers, the tech sector and the energy industry.
The new report builds on the Global Conference on Energy and AI the IEA hosted in December 2024 and the Agency’s contributions to the AI Action Summit chaired by France and India in February. The IEA is also planning to launch a new Observatory on Energy, AI and Data Centres, which aims to gather the most comprehensive and recent data worldwide on AI’s electricity needs, in addition to tracking cutting-edge AI applications across the energy sector.
Alongside the report, the IEA is making available a new AI agent to help readers interact with its findings. The AI agent is available on the report’s main web page and is said to answer questions on the report’s contents in an “easy and conversational manner.”
Some key takeaways from the new report indicates that there has been a step change in the capabilities of AI, driven by falling computation costs, a surge in data availability and technical breakthroughs. However, there is no AI without energy. Affordable, reliable and sustainable electricity supply will be a crucial determinant of AI development, and countries that can deliver the energy needed at speed and scale will be best placed to benefit. Training and deploying AI models takes place in large and power-hungry data centres. A typical AI-focused data centre consumes as much electricity as 100 000 households, but the largest ones under construction today will consume 20 times as much.
Data centres account for a small share of global electricity consumption today, but their local impacts are far more pronounced.
Global investment in data centres has nearly doubled since 2022 and amounted to half a trillion dollars in 2024. This investment boom has led to growing concerns about skyrocketing electricity demand.
Data centres accounted for around 1.5 per cent of the world’s electricity consumption in 2024, or 415 TWh. The United States accounted for the largest share of global data centre electricity consumption in 2024 (45%), followed by China (25%) and Europe (15%).
Globally, data centre electricity consumption has grown by around 12% per year since 2017, more than four times faster than the rate of total electricity consumption.
AI-focused data centres can draw as much electricity as power-intensive factories such as aluminium smelters, but they are much more geographically concentrated. Nearly half of data centre capacity in the United States is in five regional clusters. The sector accounts for substantial shares of electricity consumption in local markets.
Renewables and natural gas take the lead in meeting data centre electricity demand, but a range of sources are poised to contribute. Half of the global growth in data centre demand is met by renewables, supported by storage and the broader electricity grid. Renewables generation is projected to grow by over 450 TWh to meet data centre demand to 2035, building on short lead times, economic competitiveness and the procurement strategies of tech companies. 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. Natural gas expands by 175 TWh to meet growing data centre demand, notably in the United States. Nuclear contributes about the same amount of additional generation to meet data centre demand, notably in China, Japan and the United States. The first small modular reactors come online around 2030.
Overall, data centres 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. However, the significance of data centres in driving electricity demand differs by country. Emerging and developing economies are already experiencing rapid electricity demand growth. In these countries, data centres account for around 5 per cent of the increase in electricity demand to 2030. Advanced economies, on the other hand, have seen several decades of essentially stagnant electricity demand. In this group of countries, data centres account for more than 20 per cent of demand growth to 2030, presenting a wake-up call on the need to put the electricity sector on a growth footing again.
Grids are already under strain in many places. The IEA estimates that unless this is addressed, around 20 per cent of planned data centre projects could be at risk of delays.
Building new transmission lines can take four to eight years in advanced economies and wait times for critical grid components such as transformers and cables have doubled in the past three years. Generation equipment is also in high demand. Turbine deliveries for new gas-fired power plants now face lead times of several years, potentially delaying their commissioning beyond 2030.
If the electricity sector does not step up, there is a risk that meeting data centre load growth could entail trade-offs with other goals such as electrification, manufacturing growth or affordability.
Options to mitigate these risks include locating new data centres in areas of high power and grid availability, and operating either data centre servers or their onsite power generation and storage assets more flexibly. An AI- focused data centre is 10 times more capital-intensive than an aluminium smelter, which means curtailing its operations to provide flexibility to the grid is very costly.
Regulators could explore measures to incentivise data centre operators to use spare server capacity or their backup power generation or storage assets more flexibly. Grid operators could also examine incentives to locate data centres in areas where grids are less constrained.
On the plus side, AI-based management combined with remote sensors could increase the capacity of transmission lines. Up to 175 GW of transmission capacity could be unlocked if these tools are applied, says the IEA report, without any new lines being built. This is more than the increase in the data centre power load to 2030 in the Base Case.
Emerging and developing economies other than China account for 50 per cent of the world’s internet users but less than 10 per cent of global data centre capacity. Countries with a record of reliable and affordable power will be best placed to unlock data centre growth, localise the computing power that is critical to homegrown AI development, and spur the IT industry more generally. Data centres can also be anchors for new low-emissions power projects. However, in regions with frequent power outages or power quality issues, maintaining a data centre can be risky or costly, making overseas hosting more appealing for businesses.
Annual emissions from electricity use by data centres are projected to grow from 180 million tonnes today to 300 million tonnes in the IEA’s Base Case by 2035, and up to 500 million tonnes in the Lift-Off Case.
While these emissions remain below 1.5 per cent of the total energy sector emissions in this period, data centres are among the fastest growing sources of emissions