| Data centres
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.
Overall, 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. However, the significance of data centres in driving electricity demand differs by country. Emerging and developing economies are already experiencing rapid electricity demand growth. In these countries, data centres account for around 5% of the increase in electricity demand to 2030. Advanced economies, on the other hand, have seen several decades of essentially stagnant electricity demand. In this group of countries, data centres account for more than 20% of demand growth to 2030, presenting a wake-up call on the need to put the electricity sector on a growth footing again.
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Sources of electricity for datacentres, IEA Base Case, 2020-2035. Source: IEA, Energy and AI
Grids are already under strain in many places. The IEA estimates that unless this is addressed, around 20% of planned data centre projects could be at risk of delays. Building new transmission lines can take four to eight years in advanced economies and wait times for critical grid components such as transformers and cables have doubled in the past three years. Generation equipment is also in high demand. Turbine deliveries for new gas-fired power plants now face lead times of several years, potentially delaying their commissioning beyond 2030. If the electricity sector does not step up, there is a risk that meeting data centre load growth could entail trade-offs with other goals such as electrification, manufacturing growth or affordability. 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. An AI- focused data centre is 10 times more capital-intensive than an aluminium smelter, which means curtailing its operations to provide flexibility to the grid is very costly. Regulators could explore measures to incentivise data centre operators to use spare server capacity or their backup power generation or storage assets more flexibly. Grid operators could also examine incentives to locate data centres in areas where grids are less constrained.
On the plus side, AI-based management combined with remote sensors could increase the capacity of transmission lines. Up to 175 GW of transmission capacity could be unlocked if these tools are applied, says the IEA report, without any new lines being built. This is more than the increase in the data centre power load to 2030 in the Base Case.
Installed capacity Share of capacity under development IEA. Licence: CC BY 4.0
Top ten data centre clusters by installed capacity vs share of capacity under development (announced projects), 2024. Source: IEA, Energy and AI. IEA analysis based on data from OMDIA (2025), Data Center Building and Investment Intelligence Service. The Pearl River Delta cluster encompasses the combined capacity of Guangzhou, Shenzhen and Hong Kong
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. Countries with a record of reliable and affordable power will be best placed to unlock data centre growth, localise the computing power that is critical to homegrown AI development, and spur the IT industry more generally. Data centres can also be anchors for new low-emissions power projects. However, in regions with frequent power outages or power quality issues, maintaining a data centre can be risky or costly, making overseas hosting more appealing for businesses. Annual emissions from electricity use by data centres are projected to grow from 180 million tonnes today to 300 million tonnes in the IEA’s Base Case by 2035, and up to 500 million tonnes in the Lift-Off Case. While these emissions remain below 1.5% of the total energy sector emissions in this period, data centres are among the fastest growing sources of emissions.
www.modernpowersystems.com | May 2025 | 31
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