IEA Warns Data Centre Demand Intensifies Efficiency Gap

Global energy efficiency progress is expected to rise to 1.8% in 2025, up from around 1% in 2024, according to the International Energy Agency’s Energy Efficiency 2025 report. 

However, the broader trend remains sluggish, with average annual progress falling to 1.3% since 2019. This is well below the COP28 target of 4% annual improvement by 2030, raising concerns for sectors with rapidly increasing electricity demand, including data centres.

Dr Fatih Birol, Executive Director of the IEA, says: “The acceleration in global progress on energy efficiency that we’re seeing in 2025 is encouraging, including positive signs in some major emerging economies. 

“But our analysis shows that governments need to work even harder to ensure efficiency’s full range of benefits are enjoyed by as many people as possible. 

“Energy efficiency has the power to enhance people’s lives and livelihoods through greater energy security, more affordable bills, improved economic competitiveness and lower emissions.”

Cost pressures and efficiency technologies

The IEA highlights a shift in which sustainable and efficient technologies are increasingly competitively priced, challenging the idea that efficiency always comes at a premium. While upfront costs can still be higher in some cases, lifetime energy savings often outweigh the difference.

A 2025 IEA survey of industrial businesses found that most firms view energy efficiency as their primary defence against energy price volatility. The report also notes that consumers purchasing more efficient air conditioners in 2025 saved up to 30% in energy costs, despite similar initial prices compared with less efficient units.

Retrofits also continue to play a significant role. Combined spending on building retrofits in China, the US and the EU has risen more than 20% since 2019 to around US$120bn in 2024.

In the Netherlands, for example, insulation and high-performance heat pump upgrades costing around US$40,000 can yield US$300–500 per square metre in energy savings over 20 years.

Cooling demand rises faster than any other building load

The report identifies cooling as the fastest growing end-use energy demand in buildings since 2000, increasing by more than 4% per year. This growth reflects expanded access to air conditioning and rising living standards, but the IEA notes that most of the equipment deployed is not highly efficient.

The implications for the data centre sector are significant. The IEA states that if every air conditioner purchased globally since 2019 had been the most efficient model available, the energy saved would have offset electricity demand growth from data centres over the same period.

Cooling is a major operational cost for data centres, particularly as AI workloads increase rack densities and thermal loads. The IEA’s findings suggest that improvements in mainstream cooling equipment could indirectly ease pressure on energy systems that support high-density data centre clusters.

Data centre electricity demand and AI’s dual effect

The IEA expects global data centre electricity demand to double between 2025 and 2030, reaching around 945TWh. This would be comparable to Japan’s total electricity demand in 2024, driven largely by the rapid deployment of AI training and inference infrastructure.

However, the report also outlines potential system-level savings from AI. The IEA projects that AI could unlock 8EJ of energy savings by 2035 through improved industrial processes, better optimisation models and enhanced demand prediction. This figure far exceeds the projected rise in data centre consumption, although the scale of real-world outcomes will depend on adoption and the availability of digital infrastructure.

Workforce gaps affecting efficiency deployment

A shortage of skilled workers remains a major barrier to efficiency improvements. Nearly 18 million people were employed in energy efficiency roles in 2024, yet 72% of employers report workforce shortages. Around 60% expect these shortages to worsen over the next decade and half are already struggling to replace retiring staff.

These gaps are not limited to efficiency technologies. LinkedIn’s 2025 Green Skills Report shows that hiring demand for sustainability professionals is growing almost twice as fast as the development of relevant skills.

The IEA notes that access to digital expertise, trusted data sharing and operational skills are essential for sectors aiming to optimise energy use, including data centre operators deploying AI-enabled efficiency tools.