If there’s any question about whether data centers are driving the global economy, a new report from the International Energy Agency should dispel any doubts. This year, the world will spend $580 billion on data centers, $40 billion more than it will spend on new oil supplies.
“This point of comparison provides a telling marker of the changing nature of modern, highly digitalized economies,” the agency said in the report.
Electricity consumption from AI data centers is expected to grow fivefold by the end of the decade, doubling the total used by all data centers today. Conventional data centers will also consume more energy, though the increase won’t be nearly as dramatic.
Fully half of that demand growth is expected to occur in the U.S., the IEA said, with the bulk of the remainder occurring in Europe and China.
Most new data centers are being developed by large cities with populations exceeding 1 million people, the agency said. One half of those in the pipeline are at least 200 megawatts, and most are being built near other data centers.
“This rapid build out of data centers — especially in clusters and around urban areas — comes with challenges,” the IEA wrote. “Grid congestion and connection queues are increasing in many regions, and connection queues for new data centers are often already long.”
In some markets like northern Virginia, grid connection waits can be as long as a decade. In Europe, Dublin has paused new interconnection requests entirely until 2028.
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The supply chain for the grid is another pinch point, with cables, critical minerals, gas turbines, and transformers delaying upgrades, the agency said.
Some companies, like Amperesand and Heron Power, are working on solid-state transformers, which promise to be a significant upgrade over the century-old technology that currently manages parts of the grid. They can integrate renewables more deftly, react swiftly to grid instabilities, and can handle a range of conversions. But first deployments are at least a year or two away, and it’ll take a while to ramp up production.
The IEA expects renewables to supply the majority of new data center power by 2035, regardless of whether countries maintain their current policies or more aggressively pursue lower emissions. Solar, which has come down in cost significantly in recent years, has become a particular favorite of developers.
Over the next decade, around 400 terawatt-hours of electricity for data centers will come from renewables, whereas natural gas will supply around 220 terawatt-hours. If small modular nuclear power plants deliver on their promises, the IEA expects they’ll contribute 190 terawatt-hours to data centers.
