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Outbyte PC Repair FREEClear out junk files and repair common Windows errorsFree Scan →Outbyte Driver Updater FREEScan for outdated or missing drivers - takes under a minuteDriver Scan →Data centers are becoming a major source of new electricity demand, but they are not the sole reason global power use is surging. The International Energy Agency (IEA) expects worldwide electricity demand to grow by roughly 4% annually through 2027, driven by data centers alongside industrial expansion, air conditioning, electric vehicles, heat pumps and broader electrification.
The more important distinction is between global energy consumption and local grid stress. Data centers used about 415 TWh of electricity worldwide in 2024—approximately 1.5% of global consumption—but their large, concentrated and often continuous loads can overwhelm transmission networks, substations and available generation in particular regions.
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What the IEA actually forecast
The February 18, 2025 Data Center Knowledge headline, “Data Centers to Drive Surging Global Power Demand,” summarized the IEA’s Electricity 2025 report. The report estimated that global electricity demand rose 4.3% in 2024 and projected growth of close to 3.9% annually through 2027.
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That would add approximately 3,500 TWh of electricity consumption over the three-year period—roughly comparable to adding Japan’s annual electricity use to global demand each year. However, the IEA did not say that data centers alone would create all of this growth.
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Industrial production, cooling, transport electrification, heat pumps, economic development and data-center expansion all contribute. Emerging markets and developing economies are expected to account for about 85% of demand growth through 2027, making this a broad electrification and economic-growth story rather than only an artificial-intelligence story.
The newer Electricity 2026 outlook projects global electricity consumption of approximately 33,600 TWh in 2030, compared with about 28,200 TWh in 2025. In the United States, demand is expected to grow close to 2% annually, with data centers remaining a major factor.
How much electricity do data centers use?
The IEA’s Energy and AI analysis estimates that data centers consumed around 415 TWh globally in 2024, or approximately 1.5% of worldwide electricity consumption.
That share is growing rapidly. Data-center electricity consumption has increased by about 12% annually since 2017—more than four times the growth rate of total electricity consumption. The IEA estimates that global data-center electricity use could reach approximately 1,200 TWh by 2035 in its base case.
Consumption is also geographically concentrated. In 2024, the United States accounted for about 45% of global data-center electricity use, China about 25% and Europe about 15%.
A global share of 1.5% can therefore be misleading. One hyperscale or AI campus may represent a substantial portion of a utility’s incremental load. Several facilities in the same region can create transmission congestion, interconnection queues and competition for firm generation even when national or global supply appears adequate.
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Why AI is changing the electricity equation
Traditional cloud computing already required large facilities, but AI adds a new layer of power intensity. Training and inference use large quantities of accelerated computing hardware, including GPUs and other specialized processors. These systems generate more heat, require more sophisticated cooling and can produce much higher rack densities than conventional enterprise servers.
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Efficiency improvements can reduce the electricity required for a particular computation. But efficiency does not automatically reduce total demand. If cheaper and faster AI makes new applications economically attractive, greater adoption can offset or exceed the energy saved per task. That is an economic possibility, not a universal rule.
Regional effects
United States
U.S. electricity demand grew 2% in 2024 after declining 1.8% in 2023. The IEA expects average growth of approximately 2% annually during 2025–2027, with the forecast revised upward largely because of expected data-center demand.
U.S. data centers consumed about 180 TWh in 2024, according to the IEA’s analysis. Data-center electricity demand is projected to increase by roughly 240 TWh above 2024 levels by 2030 in the cited outlook. The effect will not be uniform: development timelines and site selection are increasingly influenced by available transmission and grid infrastructure.
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China’s data centers consumed more than 100 TWh in 2024, according to the IEA. Consumption could approximately double by 2027, although the agency emphasizes substantial uncertainty in Chinese projections and sector data.
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Data centers represented about 3% of China’s additional electricity demand during 2022–2024. Their contribution could rise to around 6% of additional demand during the following three years. These are projections, not guaranteed outcomes.
European Union
EU electricity demand rose 1.4% in 2024 after declines in 2022 and 2023. Data centers, heat pumps and electric vehicles support recovery, while weak industrial consumption offsets part of the increase. The EU is not expected to return to its 2021 consumption level before 2027.
The global issue is also a local-grid problem
Data centers affect the electricity system at several levels:
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- Generation: New facilities need additional energy and dependable capacity.
- Transmission: High-voltage lines may be needed to move power to concentrated campuses.
- Distribution: Substations, transformers, switchgear and local feeders may require upgrades.
- Interconnection: A region can have nearby generation but lack a deliverable grid connection.
- Reliability: AI facilities require UPS systems, backup generation and power-quality equipment.
- Cooling and water: Higher-density computing increases heat-rejection requirements and may intensify local water concerns.
CBRE’s 2026 analysis identifies power availability and grid infrastructure constraints as factors affecting development timelines in markets including Northern Virginia, Chicago, London and Frankfurt. Conditions differ significantly by location, however. Generation mix, transmission capacity, permitting, climate, water availability and market rules determine whether a particular region faces a serious constraint.
Can renewables meet the growth?
The IEA’s Electricity 2025 supply analysis says low-emissions sources—renewables and nuclear—are expected to meet all global electricity-demand growth through 2027. Renewables are expected to surpass coal in global generation in 2025, while nuclear generation is forecast to reach a record high.
This does not mean every data center will receive new renewable electricity every hour. Wind and solar output varies, and data centers generally require high reliability. Firming may come from hydroelectricity, nuclear, natural gas, batteries, storage, grid imports or demand flexibility.
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There is also an important difference between several forms of “renewable power”:
- Annual matching: A company buys enough renewable energy over a year to offset its consumption.
- Hourly matching: Clean-energy purchases correspond to consumption hour by hour.
- Physical grid supply: Electricity is delivered through the interconnected grid, regardless of which generator produced each electron.
- Renewable-energy certificates: The buyer receives environmental attributes, which do not necessarily mean a nearby facility is physically powered by renewables.
- Firm power: Capacity is available when required, including during periods of low wind or solar output.
An annual power-purchase agreement can support new renewable generation without guaranteeing 24/7 clean electricity at a data-center campus.
What role can nuclear play?
Nuclear power is attractive for data centers because it can provide firm, low-carbon generation. The original article reported up to 25 GW of announced small-modular-reactor capacity associated with data-center supply plans in the United States.
That figure describes announced plans—not operating capacity or guaranteed generation. SMRs still face licensing, financing, manufacturing, construction, fuel and grid-connection constraints. Projects can be delayed, resized, canceled or redirected. Existing nuclear plants, restarts and uprates may contribute sooner than new SMR construction.
Nuclear can therefore be part of the supply response, but it does not eliminate the need for transmission, distribution upgrades, backup systems, cooling infrastructure or demand management.
The supply response must extend beyond generation
BCG estimates that global data-center power demand could reach approximately 130 GW by 2028, with compound annual growth of about 16% from 2023 to 2028. This is a BCG industry forecast, not an IEA figure.
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Meeting that demand requires coordinated expansion of:
- Power generation and fuel supply
- High-voltage transmission
- Substations, transformers and switchgear
- Interconnection capacity
- Batteries and other storage
- UPS systems and backup generation
- Liquid-cooling and heat-rejection equipment
- Water infrastructure
- Electrical construction and engineering workforces
- Grid-management and energy-monitoring software
Construction schedules can also be mismatched. A data-center building may be completed before a transmission upgrade or utility interconnection is ready, leaving the site with physical capacity but no practical access to full power.
What operators, utilities and regulators can do
Data-center operators
- Choose locations based on deliverable power and transmission capacity—not only land, taxes or fiber access.
- Secure long-term electricity arrangements and clarify who pays for grid upgrades.
- Improve server utilization, workload efficiency and power usage effectiveness (PUE).
- Use liquid cooling for high-density racks where facility design and maintenance support it.
- Shift flexible workloads toward periods of abundant electricity.
- Pair renewable procurement with storage where practical.
- Evaluate behind-the-meter generation carefully, including fuel, emissions, permitting and air-quality impacts.
- Plan for water consumption, backup fuel and local environmental constraints.
Utilities and regulators
- Require transparent, credible load forecasts rather than relying only on speculative capacity reservations.
- Coordinate generation, transmission and distribution planning.
- Update interconnection rules and allocate upgrade costs fairly.
- Evaluate reliability, affordability, emissions, water and land-use effects together.
- Develop flexible-load tariffs and demand-response programs where technically feasible.
How to interpret the numbers
Energy-market comparisons often become confusing because they mix different measurements:
- GW or MW: Power capacity or instantaneous demand.
- TWh: Total electricity consumed over a period.
- Peak load: The highest demand reached at a particular time.
- Connected capacity: The amount a facility is designed or contracted to draw, which may exceed average use.
- PUE: Total facility energy divided by IT-equipment energy. A lower PUE generally indicates better facility efficiency, but it does not measure the usefulness or productivity of the computing workload.
A forecast of 130 GW is not directly interchangeable with a forecast of 1,200 TWh. The former describes power demand or capacity; the latter describes annual energy consumption. Converting between them requires assumptions about utilization and load factor.
What this means for investors and energy consumers
Data-center growth creates potential demand for utilities, transmission, transformers, switchgear, cooling, batteries, backup generation, grid software and construction services. But demand growth does not guarantee that every company or project will succeed. Outcomes depend on permitting, interconnection timing, equipment supply, electricity prices, financing and whether projected AI workloads materialize.
For electricity consumers, the effect is local rather than universal. Data centers may increase pressure on rates where utilities must finance major upgrades, but the result depends on market design, cost allocation, generation availability and whether new infrastructure is paid for by the projects creating the demand.
For cloud customers, a region’s electricity constraints can influence the availability, price and timing of compute capacity. Cloud pricing remains workload-, region-, instance-, storage-, network- and commitment-dependent; electricity consumption should not be inferred from a single advertised cloud price.
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Bottom line
Data centers are among the fastest-growing and most concentrated sources of new electricity demand, particularly as AI increases computing density and cooling requirements. But the IEA’s forecast is broader: global demand growth also reflects industrial activity, cooling, transport electrification, heat pumps and economic development.
The central challenge is not simply producing more electricity. Generation, transmission, distribution, interconnection, cooling, storage, reliability systems and permitting must expand together. Renewables and nuclear are expected to cover global demand growth through 2027 in the IEA’s outlook, but local data centers will still need firm, deliverable and high-quality power.
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