AI’s Impact on Global Electricity Demand

The integration of artificial intelligence (AI) into various sectors is rapidly transforming the landscape of energy consumption. According to a recent report by the International Energy Agency (IEA), the increasing reliance on AI is set to significantly elevate the demand for electricity, particularly from data centers.

In 2020, data centers consumed less than 300 terawatt-hours (TWh) of electricity, but projections indicate this could rise to nearly 1,000 TWh within five years. Remarkably, this figure surpasses the current total electricity consumption of Japan.

The United States currently boasts approximately 45% of global data center capacity, closely followed by China. These two nations are anticipated to maintain a dominant presence in the data center market through 2035.

Sources of Power for Data Centers: A Mixed Bag

The report sheds light on the evolution of energy sources for powering data centers. In the short term, fossil fuels such as coal and natural gas are expected to remain dominant contributors to electricity supply. A projected increase of 175 TWh from natural gas will predominantly occur in the United States over the next decade.

However, the IEA adopts an optimistic outlook towards renewable energy, forecasting that almost half of the global electricity demand growth by 2035 could be satisfied through renewable sources like wind and solar. In particular, Europe may see renewables fulfilling up to 85% of new electricity demand.

Nuclear energy, often favored by tech companies aiming to minimize emissions, is also positioned to play a more significant role post-2030, further diversifying the energy mix for data centers.

Wider Context of Electricity Demand Growth

While the discussion surrounding data centers and AI is important, it is equally crucial to consider other contributors to electricity demand. The increase in electricity consumption in the coming years will be driven not just by data centers but also by various sectors such as electric vehicles (EVs), appliances, and industrial activities.

The expected growth in demand from these areas is significant, surpassing that of data centers, which will account for just over 8% of total electricity needs from now until 2030.