The Rising Energy Demand of Data Centers: A Looming Challenge for Global Energy Supply

by | Jan 20, 2025 | Industry Insights

Rajat Kapoor, Managing Director and Head of Synergy’s Oil Gas and Petrochemicals practice at Synergy Consulting, Inc., shares his views on The Rising Energy Demand of Data Centers: A Looming Challenge for Global Energy Supply.

The global electricity demand is on an unprecedented upward trajectory, fueled by the rapid expansion of data centers essential for supporting energy-intensive advanced technologies, including artificial intelligence (AI). Despite significant investments in alternative energy sources and global climate policies aimed at reducing carbon footprints, the unchecked energy consumption of data centers risks undermining these efforts. And this means the reliance on fossil fuels will continue as renewable sources do not have the capacity to satisfy this demand.

A recent report by the International Energy Agency (IEA), titled “What the Data Centre and AI Boom Could Mean for the Energy Sector”, underscores the scale of the challenge. Investment in new data centers has surged, particularly in the United States, propelling electricity demand to unprecedented levels. The report predicts that by 2026, the electricity consumption of data centers, cryptocurrencies, and AI systems could reach 1,000 Terawatt Hours (TWh)—a figure comparable to Japan’s annual energy usage—up from the current 460 TWh.

The rapid adoption of advanced technologies looks to outpace the capacity of renewable energy sources to meet latent demand. While the expansion of renewable energy, particularly solar and wind power, has been a central focus of global energy strategies, these sources are not yet sufficient to meet the surging electricity demand from the tech sector. In response, many tech companies, particularly in the United States, are expected to turn to natural gas—a sector experiencing robust growth—as a primary energy source to power their operations. 

At present, many tech companies operate data centers with a capacity of around 40 MW, but the coming years are set to see an acceleration in the size and energy demands of these facilities. By the time these companies begin constructing campuses of 250 MW or more, the energy requirements will be substantial—equivalent to the electricity needs of an entire mid-sized city. As a growing number of campuses of 500 MW or more emerge in the 2030s and 2040s, the demand for gas-generated electricity could surge, following years of national investment in a green transition.

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