IEA Electricity 2024.

Mar 12, 2024

https://www.iea.org/reports/electricity-2024

The International Energy Agency (IEA) estimates that electricity consumption from data centers, artificial intelligence (AI), and the cryptocurrency sector could double by 2026, with data centers being significant drivers of growth in electricity demand globally. In 2022, these sectors consumed an estimated 460 terawatt-hours (TWh). By 2026, total electricity consumption from data centers could reach more than 1,000 TWh – roughly equivalent to the electricity consumption of Japan.

Key Highlights

  • Data Centers and AI as Major Energy Consumers

    • Data centers currently account for around 1% of global electricity consumption, but their rapid growth is a significant factor in rising energy demand.
    • Energy consumption varies by AI application. For example, video generation is far more energy-intensive than text generation or AI-driven search functions.
    • The speed of AI adoption by households is swift, but long-term trends remain uncertain, depending on which AI applications become most popular.

  • Global Electricity Demand Drivers

    • Despite the significant growth of data center energy use, it represents only a small portion of global electricity demand growth.
    • The IEA’s Stated Policies Scenario projects global electricity demand to rise by 6,750 TWh by 2030.
    • Bigger drivers of this growth include economic expansion, electric vehicles, air conditioners, and electricity-intensive manufacturing, which far outpace digitalization and AI in terms of demand impact.

  • Strain on Local Power Networks

    • The rapid growth of data centers can cause strain on local power grids, particularly due to mismatches in construction timelines versus grid expansion and strengthening.
    • Data centers are often concentrated in specific regions, intensifying their local impact. In some areas, the sector accounts for a significant share of electricity use, such as over 10% in at least five US states and more than 20% in Ireland.

Data Centers in Australia

In Australia, data center energy demand is forecast to increase significantly by 2030.

  • Current Contribution to National Energy Use

    • Data centers currently account for 5% of Australia’s total electricity generation.
    • By 2030, this share is projected to rise to 8%, with a possible high of 15% under certain scenarios.

  • Power Supply Growth

    • Morgan Stanley Research (MS) forecasts an increase in data center uninterruptible power supply requirements from 1,050 MW in 2024 to nearly 2,500 MW by 2030, marking a 13% increase.
    • Electricity demand from data centers is expected to reach nearly 23 TWh by 2030, an 18% rise from 2023 levels.
    • In the most bullish scenario, demand could surge to as much as 43 TWh by 2030, equivalent to over 20% of Australia’s current National Electricity Market (200 TWh annually).

  • Regional Concentration

    • New South Wales is projected to account for the largest share of data center electricity demand by 2030, at 24.7 TWh.
    • Victoria follows with a forecast demand of 9.4 TWh.

Long-Term Challenges

While the Australian grid is expected to manage increased data center energy demand through 2030, challenges loom beyond that as coal plants retire. Meeting the energy needs of a growing data center sector will require:

  • Efficiency improvements in data center operations.
  • The development of new renewable power generation sources.

Government Actions

The Australian government is taking a number of measures to improve data center energy efficiency, driven by the need to address their growing energy demands and reduce greenhouse gas emissions.

  • Mandatory Five-Star NABERS Rating

    • Data center service providers hosting federal agency workloads are now required to achieve a five-star rating under the National Australian Built Environment Rating System (NABERS).

  • Digital Transformation Agency’s Data Centre Panel

    • The Digital Transformation Agency (DTA) has launched a new Data Centre Panel to promote sustainable practices. Providers seeking inclusion on the panel must:
      • Adhere to the Government’s ICT Sustainability Plan for data centers.
      • Meet emission thresholds outlined in the National Greenhouse and Energy Reporting Act.
      • Use GreenPower accredited renewable energy sources.
      • Maintain a 5-star NABERS rating or equivalent environmental rating.
      • Achieve a Power Usage Effectiveness (PUE) target of less than 1.4.
      • Implement a comprehensive plan for reaching net zero emissions through innovation, planning, and investment.

Projected Improvements in PUE Ratings

Power Usage Effectiveness (PUE), a key metric for data center energy efficiency, is expected to improve under all scenarios outlined by Morgan Stanley Research:

  • Bull Case Scenario: PUE remains steady at the current estimated rating of 1.7.
  • Bear Case Scenario: PUE improves significantly, falling to 1.2.
  • Base Case Scenario: PUE is projected to reach 1.35 by 2030.

Understanding Power Usage Effectiveness (PUE)

PUE is calculated by dividing the total facility power by the IT equipment power. A PUE of 1 represents perfect efficiency, where all energy consumed powers IT equipment directly. In 2022, the global average annual PUE was 1.55.

Global Projections and Challenges

As the IEA projects that global electricity consumption from data centers, cryptocurrencies, and AI could range between 620-1,050 TWh in 2026, up from 460 TWh in 2022, the base case forecast is for just over 800 TWh. This is equivalent to adding the electricity demand of one Sweden or one Germany to the grid. The range reflects uncertainties around the pace of deployment and efficiency gains, as well as future technological developments.

The report highlights the following key factors driving data center energy demand:

  • Increased adoption of 5G networks and cloud-based services.
  • The rapid expansion of the Internet of Things (IoT).
  • The growing use of AI, including in search engines.
  • The growth of the cryptocurrency sector.

Regional Data Center Electricity Consumption Projections

  • United States: Consumption is expected to rise from 200 TWh in 2022 to nearly 260 TWh by 2026, accounting for 6% of total U.S. electricity demand.
  • China: Projected to reach 300 TWh by 2026.
  • European Union: Expected to grow from slightly below 100 TWh in 2022 to nearly 150 TWh by 2026.

Challenges and Opportunities for the Grid

The rapid expansion of data centers creates challenges for electricity systems:

  • Grid Stability: Increased demand in concentrated locations may strain local grids.
  • Spatial Concentration: Clustering of data centers intensifies grid constraints in specific areas.

Efficiency Gains and Sustainability Measures

The IEA emphasizes the importance of efficiency gains to manage rising data center energy consumption. Key areas for improvement include:

  • High-efficiency cooling systems.
  • Direct-to-chip water cooling.
  • AI-optimized server adaptability.
  • Time and location shifting of demand.

These efficiency gains, combined with the increasing use of renewable energy sources and Power Purchase Agreements (PPAs), are critical steps toward ensuring the sustainability of data center operations. As Australia’s data center sector grows, these strategies will be essential to mitigating its environmental and economic impact.