<p>The narrative linking electricity demand growth to artificial intelligence (AI) and data centres has been exaggerated, diverting attention from more significant drivers of energy consumption. The International Energy Agency’s (IEA) analysis presents a sobering reality check: data centres are projected to account for only about 5 per cent of global electricity demand growth by 2030. This modest contribution is dwarfed by other sectors, yet media coverage and public discourse often inflate its significance.</p>.<p>The world’s appetite for electricity is accelerating, with projections showing a robust 3.4 per cent annual growth rate until 2026. While data centres’ electricity consumption is set to more than double from 460 TWh in 2022 to over 1,000 TWh by 2026, this increase must be viewed in proper context.</p>.<p>As the IEA’s analysis reveals in their electricity demand growth projections for 2023-2030, data centres constitute a relatively minor portion of the overall 6,760 TWh growth. Other sectors, such as heavy industry, electric vehicles, and space cooling, command significantly larger shares of the anticipated electricity demand increase. </p>.<p>While it’s true that the proliferation of AI technologies and digital services has increased data centre workloads, the actual impact on global electricity demand is relatively small.</p>.<p>Data centres currently consume about 1-2 per cent of global electricity, a figure expected to rise modestly to <br>5% by 2030. This growth is manageable within the broader context of global energy systems.</p>.<p>The primary drivers of electricity demand growth paint a different picture entirely. Electric vehicles, industrial electrification, and space cooling for buildings are set to dominate the increase in power consumption. Heavy industry and other industrial sectors combined will require a substantial portion of new electricity demand, while electric vehicles are emerging as another major consumer. This makes intuitive sense—electrifying our transportation system and industrial processes represents a fundamental transformation of our energy system.</p>.<p><strong>Energy-efficient centres</strong></p>.<p>The data centre narrative becomes even more questionable when examining efficiency improvements. Modern data centres have achieved remarkable gains in energy efficiency.</p>.<p>The efficiency of AI-related computer chips has doubled approximately every two-and-a-half to three years, with current chips using 99% less power for the same calculations compared to 2008 models. These continuous improvements help offset the impact of increased computing demands.</p>.<p>Moreover, AI itself can enhance energy efficiency across various sectors. By optimising grid operations and improving energy management systems, AI applications can reduce overall electricity usage even as they drive up demand in specific areas like data processing.</p>.<p>To put things in perspective, data centres currently account for only about 1% of global electricity consumption. Their total electricity usage globally is roughly half that of household IT appliances like computers, phones, and televisions. While data centre demand will grow, the IEA’s analysis shows this growth remains modest in the broader context of global electricity consumption. Consider instead the massive impact of air conditioning. Energy demand from air conditioning alone is expected to triple by 2050, accounting for an astounding 37% of all forecast growth in electricity demand. This dwarfs the projected impact of data centres yet receives far less media attention. </p>.<p>While globally, data centres may not be a dominant force in driving electricity demand, they can pose challenges at local levels. In regions where data centre construction is concentrated, such as in parts of the United States or Ireland, their impact on local grids can be pronounced. These localised effects require targeted policy interventions and infrastructure investments to ensure grid stability.</p>.<p>However, these regional issues should not be confused with global trends. The broader narrative should acknowledge that localised impacts, while significant, do not translate into a global crisis.</p>.<p>The discourse around AI and data centre-driven electricity demand needs recalibration. While these technologies are undeniably important and growing rapidly, their contribution to overall demand growth is relatively minor compared to other sectors. Policymakers and stakeholders should prioritise addressing the larger drivers of electricity consumption while continuing to support efficiency improvements in data centres.</p>.<p>By focusing on the real challenges—such as integrating renewable energy sources, enhancing grid resilience, and managing peak loads—societies can better prepare for future energy demands without succumbing to sensationalist narratives.</p>.<p>It’s essential to maintain a balanced perspective that accurately reflects the scale of different contributors to electricity demand growth and directs attention toward effective solutions for sustainable energy futures.</p>.<p><em>(The writer is a research analyst, China Desk, at the Takshashila Institution)</em></p>
<p>The narrative linking electricity demand growth to artificial intelligence (AI) and data centres has been exaggerated, diverting attention from more significant drivers of energy consumption. The International Energy Agency’s (IEA) analysis presents a sobering reality check: data centres are projected to account for only about 5 per cent of global electricity demand growth by 2030. This modest contribution is dwarfed by other sectors, yet media coverage and public discourse often inflate its significance.</p>.<p>The world’s appetite for electricity is accelerating, with projections showing a robust 3.4 per cent annual growth rate until 2026. While data centres’ electricity consumption is set to more than double from 460 TWh in 2022 to over 1,000 TWh by 2026, this increase must be viewed in proper context.</p>.<p>As the IEA’s analysis reveals in their electricity demand growth projections for 2023-2030, data centres constitute a relatively minor portion of the overall 6,760 TWh growth. Other sectors, such as heavy industry, electric vehicles, and space cooling, command significantly larger shares of the anticipated electricity demand increase. </p>.<p>While it’s true that the proliferation of AI technologies and digital services has increased data centre workloads, the actual impact on global electricity demand is relatively small.</p>.<p>Data centres currently consume about 1-2 per cent of global electricity, a figure expected to rise modestly to <br>5% by 2030. This growth is manageable within the broader context of global energy systems.</p>.<p>The primary drivers of electricity demand growth paint a different picture entirely. Electric vehicles, industrial electrification, and space cooling for buildings are set to dominate the increase in power consumption. Heavy industry and other industrial sectors combined will require a substantial portion of new electricity demand, while electric vehicles are emerging as another major consumer. This makes intuitive sense—electrifying our transportation system and industrial processes represents a fundamental transformation of our energy system.</p>.<p><strong>Energy-efficient centres</strong></p>.<p>The data centre narrative becomes even more questionable when examining efficiency improvements. Modern data centres have achieved remarkable gains in energy efficiency.</p>.<p>The efficiency of AI-related computer chips has doubled approximately every two-and-a-half to three years, with current chips using 99% less power for the same calculations compared to 2008 models. These continuous improvements help offset the impact of increased computing demands.</p>.<p>Moreover, AI itself can enhance energy efficiency across various sectors. By optimising grid operations and improving energy management systems, AI applications can reduce overall electricity usage even as they drive up demand in specific areas like data processing.</p>.<p>To put things in perspective, data centres currently account for only about 1% of global electricity consumption. Their total electricity usage globally is roughly half that of household IT appliances like computers, phones, and televisions. While data centre demand will grow, the IEA’s analysis shows this growth remains modest in the broader context of global electricity consumption. Consider instead the massive impact of air conditioning. Energy demand from air conditioning alone is expected to triple by 2050, accounting for an astounding 37% of all forecast growth in electricity demand. This dwarfs the projected impact of data centres yet receives far less media attention. </p>.<p>While globally, data centres may not be a dominant force in driving electricity demand, they can pose challenges at local levels. In regions where data centre construction is concentrated, such as in parts of the United States or Ireland, their impact on local grids can be pronounced. These localised effects require targeted policy interventions and infrastructure investments to ensure grid stability.</p>.<p>However, these regional issues should not be confused with global trends. The broader narrative should acknowledge that localised impacts, while significant, do not translate into a global crisis.</p>.<p>The discourse around AI and data centre-driven electricity demand needs recalibration. While these technologies are undeniably important and growing rapidly, their contribution to overall demand growth is relatively minor compared to other sectors. Policymakers and stakeholders should prioritise addressing the larger drivers of electricity consumption while continuing to support efficiency improvements in data centres.</p>.<p>By focusing on the real challenges—such as integrating renewable energy sources, enhancing grid resilience, and managing peak loads—societies can better prepare for future energy demands without succumbing to sensationalist narratives.</p>.<p>It’s essential to maintain a balanced perspective that accurately reflects the scale of different contributors to electricity demand growth and directs attention toward effective solutions for sustainable energy futures.</p>.<p><em>(The writer is a research analyst, China Desk, at the Takshashila Institution)</em></p>
