Data Centres set to Double Consumption as Investments Rise

Growing use of Gen AI could result in data centres needing much more power to run
A recent report finds that data centres could use up to 9% of total electricity generated in the US by the end of the decade, doubling current consumption

As investors around the world continue to pour money into developing and expanding data centres, electricity use continues to ramp up. 

As a result, data centres could use up to 9% of the total electricity generated in the United States (US) by the end of the decade, more than doubling their current consumption.

According to the Electric Power Research Institute, the estimated annual growth rate of electricity use by the data centre industry ranges from 3.7% to 15% through 2030. It cites that such an increase in data centre power could strain the country’s electricity grid, leading to rising power bills and outages.

This comes in the midst of rising adoption of technology such as generative artificial intelligence (Gen AI) that continues to fuel data centre expansion.

Gen AI growth could contribute to energy strains

Since the commercial take-off of AI models at the end of 2022, with the launch of OpenAI’s ChatGPT, businesses have been eager to get their hands on the latest technology. 

If used responsibly, some of the benefits that AI could afford the data centre industry moving forward include improved decision-making, reducing excess power consumption and increased productivity.

However, growing use of Gen AI could result in data centres needing much more power to run. As the technology continues to evolve, it is demanding more space and power within data centres - particularly across the US.

As reported by Reuters, about 80% of the 2023 US data centre load is currently concentrated in 15 states across the US, primarily Virginia and Texas.

With the world’s data centres using more electricity than ever before, companies are having to quickly prioritise ways to be more energy efficient. According to the International Energy Agency (IEA), global demand for electricity grew 2.2% in 2023, highlighting that it could double as soon as 2026.

Data centre powerhouses: European and US activity continues to surge

According to data analysis by law firm Linklaters, US$22bn was invested globally in data centres in the first five months of 2024 alone. This follows a significant US$36bn global investment in data centres in 2023, which was the second-largest investment year in the past decade.

Linklaters also found that the US and Europe are continuing to emerge as the dominant data centre locations. North America has continued to maintain its lead in the market, boasting the most data centres and accounting for 69% of investments as of April 2024.

However, Europe is also seeing significant interest with a surge of activity, going from 6% in 2022 to 20% in 2023. Currently in 2024, according to Linklaters, more than US$7bn has been invested in European data centres, highlighting the continent’s growing importance in the global market.

“Appetite for data centres within Europe is growing exponentially, driven by evolving technology such as AI,” says Daniel Law, Financial Sponsor Partner at Linklaters. “This surge in demand is fuelling a wave of investment geared towards developing robust digital infrastructure capable of supporting the continent's growing data needs.”

Italy in particular continues to emerge as a popular data centre location, with the country’s data centre revenue expected to show an annual growth rate of 5.78% between 2024-2028. As a result, numerous big tech companies like Amazon Web Services (AWS) are continuing to pour money into the country to remain competitive.

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