Share this post on:

More Power Needed For Data Centers, Electric Vehicles and Emerging Economies

Electricity is central to the functioning of modern societies and economies. Unfortunately, power generation is the largest source of carbon dioxide (CO2) emissions in the world.

The world’s demand for electricity grew by 2.2 percent in 2023, less than the 2.4 percent growth observed in 2022. While China, India and numerous countries in Southeast Asia experienced robust growth in electricity demand in 2023, advanced economies posted substantial declines.

Global electricity demand is expected to rise at a faster rate over the next three years, growing by an average of 3.4 percent annually through 2026. The gains will be driven by an improving economic outlook, which will contribute to faster electricity demand growth both in advanced and emerging economies. Particularly in advanced economies and China, electricity demand will be supported by the ongoing electrification of the residential and transport sectors, as well as a notable expansion of the data center sector.

data centers and rising electricity demand

There are more than 8,000 data centers globally, with about 33 percent located in the United States, 16 percent in Europe and 10 percent in China. Hundreds of new data centers are in development.

Data center electricity usage is set to double by 2026, due to power-intensive workloads such as AI and cryptocurrency mining. Data centers consumed 460TWh in 2022, a figure that could rise to more than 1,000TWh by 2026, which is equivalent to the electricity consumption of Japan. Data centers are one of the most energy-intensive building types, consuming 10–50 times the energy per floor space of a typical commercial office building. The US is home to 33 percent of the world’s data centers, where energy consumption is expected to rise from 200TWh in 2022 to 260TWh in 2026, some six percent of all power use across the country.

In Ireland, data centers could account for 32 percent of all power consumption by 2026 due to a high number of new builds planned. This compares to 17 percent in 2022. As reported by DCD, calls to limit the number of new data center projects in Ireland because of their energy use were rejected by the Irish government last year.

Electricity demand in data centers is mainly from two processes, with computing accounting for 40 percent of electricity demand of a data center. Cooling requirements to achieve stable processing efficiency similarly makes up about another 40 percent. The remaining 20 percent comes from related IT equipment.

Market trends, including the fast incorporation of AI into software programming across a variety of sectors, increase the overall electricity demand of data centers. Search tools like Google could see a tenfold increase of their electricity demand when fully implementing AI in the process. 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. Similar power demands will be required across the digital cloud. Hopefully, AI will help corporations, advocates and governments  improve measurement and increase resilience, while helping us use energy and resources more efficiently. Better data can promote better plans and better decisions.

“Updated regulations and technological improvements, including efficiency, will be crucial to moderate the surge in energy consumption from data centers,” the report’s authors said.

According to the report, the 460TWh consumed by data centers in 2022 represented two percent of all global electricity usage.

The rate at which electricity usage will increase by 2026 depends on “the pace of deployment, range of efficiency improvements, as well as artificial intelligence and cryptocurrency trends”, the report said, but the authors expect demand to rise to somewhere between 650TWh and 1,050TWh. This increase is equivalent to adding the entire power consumption of a country like Sweden at the lowest end of the scale, or Germany at the highest.

Legislation could curtail some of this electricity demand, the report said, with the European Union’s energy efficiency directive, published last September, putting new obligations on data center operators on the continent, the first of which is a requirement for emissions reports to be filed by any data center larger than 500kW. This comes into effect in May.

Data center operators are also experimenting with more efficient cooling and heat reuse technologies, with providers including Aligned and Stack launching high-density racks water-cooled racks for power-intensive workloads such as AI in recent weeks.

Microsoft powered one of its data centers for two days using an experimental hydrogen fuel cell system, though the viability of this technology remains in doubt. The IEA report also predicts that the growth of renewable energy production will accelerate, and claims renewables will overtake coal to generate more than a third of the global electricity by 2025.

Mark Yeeles, vice president of the secure power division at Schneider Electric UK and Ireland, said the findings of the report come as “no surprise.”

“The general consumption of our data and digital habits – social media, email, business applications, streaming, gaming, scientific research, and enterprise – combined with the adoption of AI platforms, is compounding global data center growth at a phenomenal rate,” Yeeles said.

But he believes the data center industry’s willingness to integrate new technologies which reduce demand on the grid mean it can be part of the solution.

On the situation in Ireland, Yeeles called for “immediate, sustainable action” to avoid a power crisis. He believes it is important that “government and industry collaborate more closely, and combine existing technologies with innovative engineering to future proof the country’s energy, economic, and technological outlook.”

The revised Energy Efficiency Directive from the European Commission includes regulations applicable to the European data center sector, promoting more transparency and accountability to enhance electricity demand management. Starting from 2024, operators have mandatory reporting obligations for the energy use and emissions from their data centers, and large-scale data centers are required to have waste heat recovery applications, when technically and economically feasible, while meeting climate neutrality by 2030. An earlier EU regulation, applicable since 2020, sets efficiency standards for data centers enabling better control over their environmental impact. A self-regulatory European initiative created in 2021, called the Climate Neutral Data Centre Pact, sets targets to achieve climate neutrality in the sector by 2030. More than 60 data center operators have signed on to the pact, including large operators like Equinix, Digital Realty and Cyrus One. In the United States, the Energy Act of 2020 requires the federal government to conduct studies on the energy and water use of data centers, to create applicable energy efficiency metrics and good practices that promote efficiency, along with public reporting of historical data center energy and water usage. 

The Department of Energy (DOE) is supporting the local production of semiconductors and is funding the development of more efficient semiconductors over the next two decades. More efficient semiconductors reduce cooling requirements, thus supporting the decarbonisation of the sector. At a state level, regulators in Virginia and Oregon have already imposed requirements for better sustainability practices and carbon emissions reductions. 

Chinese regulators will require all data centers acquired by public organizations to improve their energy efficiency and be entirely powered by renewable energy by 2032, starting with a 5% share mandate for renewables in 2023.

AI electricity demand can be forecast more comprehensively based on the amount of AI servers that are estimated to be sold in the future and their rated power. The AI server market is currently dominated by tech firm NVIDIA, with an estimated 95% market share. In 2023, NVIDIA shipped 100 000 units that consume an average of 7.3 TWh of electricity annually. 

Elsewhere, electricity demand in China rose by 6.4 percent in 2023, driven by the services and industrial sectors. That figure is expected to slow slightly over the next few years thanks to the rapid deployment of solar electricity.

In 2023, India’s demand for electricity grew by 7 percent. We expect growth above 6 percent on average annually until 2026, supported by strong economic activity and expanding ownership of air conditioners. While renewables will meet almost half of this demand growth, one-third is expected to come from rising coal-fired power. Southeast Asia will see strong annual increases in electricity demand of 5 percent on average through 2026, due to strong economic activity.

Per capita consumption in Africa even declined in recent years as the population grew faster than electricity supply was made available. Africa’s per capita electricity consumption in 2023 was half that of India.

Electricity demand in the United States fell by 1.6 percent in 2023 after increasing 2.6 percent in 2022, but it is expected to recover in the 2024-26 outlook period. A key reason for the decline was milder weather in 2023 compared with 2022, though a slowdown in the manufacturing sector was also a factor. We forecast a moderate increase in demand of 2.5 percent in 2024, assuming a reversion to average weather conditions. This will be followed by growth averaging 1 percent in 2025-26, led by electrification and the expansion of the data center sector, which is expected to account for more than one-third of additional demand through 2026.

Electricity demand in the European Union declined for the second consecutive year in 2023, even though energy prices fell from record highs. Following a 3.1 percent drop in 2022, the 3.2 percent year-on-year decline in EU demand in 2023 meant that it dropped to levels last seen two decades ago. As in 2022, weaker consumption in the industrial sector was the main factor that reduced electricity demand, as energy prices came down but remained above pre-pandemic levels. In 2023, there were also signs of some permanent demand destruction, especially in the energy-intensive chemical and primary metal production sectors. These segments will remain vulnerable to energy price shocks over our outlook period.

Record-breaking electricity generation from low-emissions sources – which includes nuclear and renewables such as solar, wind and hydro – is set to cover all global demand growth over the next three years. Low-emissions sources, which will reduce the role of fossil fuels in producing electricity globally, are forecast to account for almost half of the world’s electricity generation by 2026, up from 39 percent in 2023. Over the next three years, low-emissions generation is set to rise at twice the annual growth rate between 2018 and 2023 – a consequential change, given that the power sector contributes the most to global carbon dioxide (CO2) emissions today.

Renewables are set to provide more than one-third of total electricity generation globally by early 2025, overtaking coal. The share of renewables in electricity generation is forecast to rise from 30 percent in 2023 to 37 percent in 2026, with the growth largely supported by the expansion of ever cheaper solar PV. Through this period, renewables are set to more than offset demand growth in advanced economies such as the United States and the European Union, displacing fossil fuels. At the same time, in China, the rapid expansion of renewable energy sources is expected to meet all additional electricity demand, though the weather and the extent to which the country’s demand growth eases remain key sources of uncertainty for the outlook. The strong expansion in renewable power capacity must also be accompanied by accelerated investment in grids and system flexibility to ensure its smooth integration. 

The rapid growth of renewables, supported by rising nuclear generation, is set to displace global coal-fired generation, which is forecast to fall by an average of 1.7 percent annually through 2026. This follows a 1.6 percent increase in coal-fired output in 2023 amid droughts in India and China that reduced hydropower output and increased coal-fired generation, more than offsetting strong declines in coal-fired generation in the United States and the European Union. 

The major factor that will determine the global outlook is evolving trends in China, where more than half of the world’s coal-fired generation takes place. Coal-fired generation in China is currently on course to experience a slow structural decline, driven by the strong expansion of renewables and growing nuclear generation, as well as moderating economic growth. Despite the commissioning of new plants to boost the security of energy supply, the utilization rate of Chinese coal-fired plants is expected to continue to fall as they are used more flexibly to complement renewables. Nevertheless, coal-fired generation in China will be influenced significantly by the pace of the economy’s rebalancing, hydropower trends, and bottlenecks in integrating renewables into the country’s power system.


  • Global hydropower generation declined in 2023 due to weather impacts such as droughts, below average rainfall and early snowmelts in numerous regions. Canada, China, Colombia, Costa Rica, India, Mexico, Türkiye, the United States, and Vietnam, along with other countries, all saw hydropower generation decline.
  • Extreme weather events triggered major power outages in 2023 in the United States and India. This underlined the need to boost resilience as weather impacts on power systems increase, with both supply and demand becoming more weather-dependent.
  • Electricity demand in India surpassed that of Japan and Korea combined at the end of 2023. Bolstered by a fast-growing economy and increased electrification, India’s electricity demand will rise by an annual average of 6.5 percent over the 2024-2026 period. 
  • While China provides the largest share of demand growth in terms of volume, India posts the fastest growth rate out to 2026 among major economies.
  • Electricity demand in Japan declined by 3.7 percent in 2023 compared to a 1% increase in 2022. Despite high temperatures boosting cooling demand in the summer, the slowdown in the manufacturing sector and continued energy saving measures exerted strong downwards pressure on electricity consumption.
  • Electricity demand in the United States, the world’s second largest consumer behind China, declined by 1.6 percent in 2023, after 2.6 percent growth in 2022. A major contributor to the downturn was the milder weather in 2023 compared to 2022.
  • In the European Union, following a 3.1 percent decline in 2022, electricity demand fell by a further 3.2 percent in 2023. We anticipate a return to growth in 2024 of 1.8 percent, assuming a partial recovery in the industry sector given more moderate energy prices and expanding electrification of the transportation and heating sectors.
  • Africa’s population will soon represent 20 percent of the world’s population by 2030. This highlights the massive potential and need for additional electricity supply in this region. Our forecast for Africa for the period 2024-2026 anticipates an average annual growth in total electricity demand of 4 percent.
Greener Cities and climate action

Greener Cities is a resource for sustainable and resilient cities and communities around the world.

Share this post on:
Avatar Gary Chandler

Author: Gary Chandler

Gary Chandler is a sustainability strategist, author and advocate. Follow him on Twitter @Gary_Chandler