Data centers' energy footprint has been growing aggressively over the last decade, first with the advent of cloud computing and now with the artificial intelligence (AI) boom. The estimated global data center consumption (excluding cryptocurrency mining) in 2022 was 240-340 terawatt hours (TWh) up from 200 TWh in 2015. Energy consumption is expected to surge in the coming years. McKinsey & Company predicts that U.S. data center demand will increase by 10 percent annually through 2030.
The largest data center market in the United States is Northern Virginia where efforts are underway to address overwhelming growth in energy demand. This year, Virginia legislators proposed HB 116 introducing energy efficiency and renewable requirements that data centers must meet to qualify for a sales and use tax exemption. Although energy efficiency and renewables are promoted as effective tools for curbing emissions, certain limitations hinder their adoption. For AI data centers, demand response programs that reduce energy use during peak periods may not be a suitable option since offsetting services for another time can be more costly than keeping the power on. While data center demand has led to increased renewables development as data companies seek clean energy to fuel their activities, the ever-increasing backlog of projects in the interconnection queue, waiting to be connected to the power grid, poses a significant challenge. New renewables projects may not be ready in time to meet the needs of these data centers.
Utilities servicing large data center markets are entering into ambitious supply deals, fueling new energy infrastructure investment. Growth in data center energy demand is driving a boom in planned gas-fired power plant projects in addition to preventing fossil fuel power plant retirements. PJM, the regional grid operator that services Virginia, is constructing new power lines connecting to coal plants in West Virginia to meet data center demand. Once renewable energy projects come online to keep up with demand, PJM believes that these new power lines and coal capacity will not be needed.
AI and its uncharted capabilities often arouse anxiety and fear, some exaggerated and some real. Concerns surrounding the excessive energy demand data centers require to maintain AI services are very real. Energy efficiency gains and renewables growth are struggling to keep pace with the demands of AI computing, and utilities are looking towards dirty, more expensive alternatives such as natural gas and coal. The power sector now requires swift solutions to balance data center demand and climate policy.
