data centers now attract more investment than finding new oil supplies

Data Centers and the Global Economy

A recent report from the International Energy Agency (IEA) definitively demonstrates the significant role data centers play in powering the global economy. Current global expenditure on these facilities is projected to reach $580 billion this year.

This figure surpasses investment in new oil supplies by $40 billion, a comparison that highlights the evolving nature of modern, highly digitalized economies, according to the agency’s findings.

Growing Energy Consumption

The demand for electricity from AI data centers is anticipated to increase fivefold before the end of the decade. This growth will effectively double the total energy consumption of all data centers currently in operation.

While conventional data centers will also see increased energy usage, the rate of expansion will not be comparable to that of AI-focused facilities.

The IEA forecasts that the United States will account for approximately half of this increased demand. The remaining growth is expected to be concentrated in Europe and China.

Development Trends and Challenges

New data center development is largely focused in major cities with populations exceeding one million inhabitants. A substantial portion of planned facilities – at least half – will have a capacity of 200 megawatts or greater.

Furthermore, a significant trend involves constructing these centers in close proximity to existing data center infrastructure.

This rapid expansion, particularly in clustered areas and near urban centers, presents several challenges. Increasing grid congestion and lengthy connection queues are becoming prevalent issues in many regions.

In certain markets, such as northern Virginia, securing grid connections can require a wait of up to ten years. Dublin, in Europe, has temporarily halted new interconnection requests until 2028.

Supply Chain Constraints

The grid supply chain itself is experiencing bottlenecks. Delays in the availability of essential components like cables, critical minerals, gas turbines, and transformers are hindering necessary upgrades.

Companies like Amperesand and Heron Power are developing solid-state transformers as a potential solution. These technologies offer improvements over existing, century-old grid management systems.

They promise enhanced integration of renewable energy sources, faster response to grid instabilities, and versatile conversion capabilities. However, widespread deployment is still a year or two away, and scaling up production will take time.

The Future of Data Center Power

The IEA projects that renewable energy sources will supply the majority of power for new data centers by 2035. This outcome is expected to occur regardless of whether current policies are maintained or more aggressive emissions reduction targets are pursued.

Solar power, due to its decreasing costs, is proving particularly attractive to developers.

Over the next decade, approximately 400 terawatt-hours of electricity for data centers will originate from renewable sources. Natural gas is expected to contribute around 220 terawatt-hours.

Should small modular nuclear power plants fulfill their potential, they could provide an additional 190 terawatt-hours to data centers, according to the IEA’s projections.