How to meet AI’s hunger for electricity

Author Moonshot.news

Published on: 10/04/2025

The potential of artificial intelligence has made big tech companies spend huge amounts on developing AI-based services. One critical issue is energy costs for the data centres to be followed by major energy demands when many millions start using various AI features. “There are uncertainties in how quickly AI will be adopted, how capable and productive it will become, how fast efficiency improvements will occur, and whether bottlenecks in the energy sector can be resolved”, International Energy Agency (IEA) says in a new report. 

Big tech companies like Google, Microsoft and Amazon have recently announced that they are investing in nuclear power to get access to carbon-free electricity to meet the surging demand of electricity for data centres.

According to the IEA-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.

“Artificial intelligence has the potential to transform the energy sector in the coming decade, driving a surge in electricity demand from data centres around the world while also unlocking significant opportunities to cut costs, enhance competitiveness and reduce emissions”, according to the report.

Electricity demand from data centres worldwide is set to more than double by 2030 to around 945 terawatt-hours (TWh), slightly more than the entire electricity consumption of Japan today, the report says. 

“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.”

“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.” 

The report says that in advanced economies more broadly, data centres are projected to drive more than 20% 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 report – though renewables and natural gas are set to take the lead due to their cost-competitiveness and availability in key markets.

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.”

“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.” 

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. 

“AI is a tool, potentially an incredibly powerful one, but it is up to us – our societies, governments and companies – how we use it”, says IEA executive director Dr Fatih Birol. 

Key findings in the report:

• Data centres accounted for around 1.5% of the world’s electricity consumption in 2024, or 415 terawatt-hours (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. 
• Data centre electricity consumption is set to more than double to around 945 TWh by 2030. This is slightly more than Japan’s total electricity consumption today. 
• AI is the most important driver of this growth, alongside growing demand for other digital services. 
• 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.
• 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. 
• Emerging and developing economies other than China account for 50% of the world’s internet users but less than 10% of global data centre capacity.  
• Electricity grids are already under strain in many places: we estimate that unless these risks are addressed, around 20% of planned data centre projects could be at risk of delays.
• Key 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. These strategies are still underexplored.