AI and crypto could double the electricity demand of data centers by 2026 

27.03.2024 632 0

It’s no secret that data centers are among the biggest energy consumers, and while all data center operators are going to great lengths to improve the energy efficiency of their facilities, they can’t outpace the rise in consumption. The constant increase in data center usage is to be expected, but it seems that no one expected there was going to be such a massive jump in such a short period of time. 

And according to a new report by the IEA (International Energy Agency), reveals that data centers are now among the top trends and priorities for the energy sector. The Electricity 2024 report features analysis and forecasts up to 2026. About seven pages from the 170-page report are dedicated to data centers and their performance. That’s quite the attention, considering the vast majority of the report focuses on specific countries and regions. The data centers are featured in the portion for key global trends, which means everyone will be paying attention to them. And for good reason. 

Double up 

According to the IEA, the global electricity demand from data centers could double towards 2026. The agency estimates that in 2022, data centers, cryptocurrencies and artificial intelligence (AI) consumed about 460TWh of electricity. This is almost 2% of the total global electricity demand. Naturally, data centers take the main share of this estimate, as the vast majority of cryptocurrencies and especially AI workloads are carried by these facilities as well. 

“Data centres are a critical part of the infrastructure that supports digitalisation along with the electricity infrastructure that powers them. The ever-growing quantity of digital data requires an expansion and evolution of data centres to process and store it,” says the report. The IEA says data centers need electricity mainly for two major purposes: computing and cooling. They each account for 40% of the total energy consumption of the data centers. The remaining 20% are for the other IT equipment and amenities.  

“Future trends of the data centre sector are complex to navigate, as technological advancements and digital services evolve rapidly. Depending on the pace of deployment, range of efficiency improvements as well as artificial intelligence and cryptocurrency trends, we expect global electricity consumption of data centres, cryptocurrencies and artificial intelligence to range between 620-1 050 TWh in 2026, with our base case for demand at just over 800 TWh – up from 460 TWh in 2022,” says the report. 

To bring some context to these figures, the IEA says, “this corresponds to an additional 160 TWh up to 590 TWh of electricity demand in 2026 compared to 2022, roughly equivalent to adding at least one Sweden or at most one Germany.” 

AI and cryptocurrencies will be the main drivers of energy consumption when it comes to technologies. “Search tools like Google could see a tenfold increase of their electricity demand in the case of fully implementing AI in it. When comparing the average electricity demand of a typical Google search (0.3 Wh of electricity) to OpenAI’s ChatGPT (2.9 Wh per request), and considering 9 billion searches daily, this would require almost 10 TWh of additional electricity in a year… In 2023, NVIDIA shipped 100 000 units that consume an average of 7.3 TWh of electricity annually. By 2026, the AI industry is expected to have grown exponentially to consume at least ten times its demand in 2023,” says the report. 

When it comes to crypto, in 2022 it consumed about 110TWh of electricity or 0.4% of the total global demand, as much as the Netherlands. And the forecast shows the consumption will increase to around 160TWh by 2026. 

Data centers drives rise in electricity demands in many regions 

For a long time, the locations of data centers were mostly remote. But these days the demand for their services is so high, data centers are being constructed everywhere. Locations still matter, but if we look at the data, there are several key regions. According to the IEA, there are more than 8,000 data centers in operation around the world with 33% of them in the USA, 16% in Europe, and almost 10% in China. And quantity doesn’t mean more consumption. 

It’s no surprise that all three main regions will see a significant rise in both new data centers in operation and a rise in energy demand.  “The US data centre electricity consumption is expected to grow at a rapid pace in the coming years, increasing from around 200 TWh in 2022 (~4% of US electricity demand), to almost 260 TWh in 2026 to account for 6% of total electricity demand. Growth will be driven by increased adoption of 5G networks and cloud-based services, as well as competitive state tax incentives,” says the report. 

China will achieve a major jump in the electricity demand from data centers, notes the report. “China’s State Grid Energy Research Institute expects electricity demand in thecountry’s data centre sector to double to 400 TWh by 2030, compared to 2020.We forecast electricity consumption from data centres in China to reach around300 TWh by 2026. Regulations are being updated to promote sustainable practices in current and future data centres to align them with decarbonisation strategies. A major source of data centre growth is expected to come from therapid expansion of 5G networks and the Internet of Things (IoT),” says the IEA in its report. 

Finally, Europe notes relatively modest data center energy consumption compared to the other two regions. “In the European Union, data centre electricity consumption is estimated at slightly below 100 TWh in 2022, almost 4% of total EU electricity demand. Around 1,240 data centres were operating within Europe in 2022, with the majority concentrated in the financial centres of Frankfurt, London, Amsterdam, Paris, and Dublin,” says the report. It also notes that there are a lot of data centers planned for construction in the coming years. So, that’s why IEA forecasts that by 2026, the electricity demand in the EU will reach almost 150TWh. 

The report points out Ireland as the data center capital of Europe. There are 82 of them in the country. Fourteen more are currently under construction, and 40 are approved to be constructed. In 2022, data centers consumed 5.3TWh in the country, which was 17% of its total electricity needs. It’s also equal to the amount of electricity used by the urban residential buildings in the country. IEA forecasts that at this pace, Ireland’s data centers may double their energy consumption by 2026. It will result in 32% of the country’s total electricity demand. 

As such, this massive and swift increase will put a strain on Ireland’s electricity system. The country has already adopted new requirements for data centers with stricter assessments for approving new projects. Already-built facilities also must work on improving their consumption.  

Naturally, most data centers in Europe are located in the north; Denmark, Sweden, Norway and Finland all benefit from their lower temperatures in attracting more data center projects. The Nordic countries also offer lower electricity prices which coupled with the smaller need for significant cooling, is making them a top choice. 

“The largest actor amongst Nordic countries is Sweden, with 60 data centres, and half of them in Stockholm. In August 2023, plans for a nuclear-powered data centre were announced utilising small modular reactors (SMR) technology on the east coast of Sweden, with a commissioning date envisaged for 2030. Given decarbonisation targets, Sweden and Norway may further increase their participation in the data centre market since almost all of their electricity is generated from low-carbon sources,” says the report. 

Major innovations will be needed 

While it’s great that there’s so much activity in the data center industry, it also means that the major rise in energy demand will result in a lot more resources which will be consumed to create said electricity. And the world is already struggling with meeting climate neutrality goals. Also, many regions, including the EU, are imposing stricter regulations on energy consumption and the ways it’s made. 

And the European Commission (EC) also revised its Energy Efficiency Directive. Starting from 2024, data center operators will also have to issue mandatory reports for their energy use and emissions. Large-scale data centers will have to add waste heat recovery applications when it’s technically and economically feasible.  

“In the United States, the Energy Act of 2020 requires the federal government to conduct studies on the energy and water use of data centres, to create applicable energy efficiency metrics and good practices that promote efficiency, along with public reporting of historical data centre energy and water usage,” says the report. In China, regulators require all data centers to be powered entirely by renewable energy by 2032. Until then there are increasing mandates, starting from 5% in 2023 and up. 

As such, data center operators and equipment manufacturers from several industries are already working hard to improve the electricity consumption of data centers. The work is split in two main directions – servers and cooling. The latter seems to be a major focus of everyone, as there’s a lot of possibilities and approaches that can be done to reduce the energy consumption. 

Popular trends are direct-to-chip water cooling with specific low viscous fluids. That can lead to a 20% reduction in consumption. High-efficiency cooling systems can reduce energy demand by 10%. Google says thanks to its DeepMind AI algorithms it can find ways to reduce the electricity demand for a data center by 40%.  

Then again, the age of the Hyperscale data centers is still starting, the IEA notes. And these facilities could drive energy demand up if not done right. Luckily, the agency says it’s going well and Hyperscale data centers will help optimize the usage of electricity.  

“Another promising field of research for decarbonising data centre operations involves time and location shifting of electricity demand. Software developments can allow operators to temporarily shift power loads with carbon-aware models that relocate data centre workloads to regions with lower carbon intensity at selected times,” says the report. All of this means that the data center industry will be very busy for the next few years. Rightfully so, as there’s a lot of challenges to be solved and opportunities to be turned into a reality. 

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