AI's Energy Appetite Sparks Global Power Grid Concerns
Haley Zaremba

AI is reshaping the global energy market, and there’s no putting the genie back in the bottle. Machine learning and natural language processing require massive amounts of energy-hungry computing power, and as the industry grows it is already placing a major strain on energy grids around the world. But while there are serious concerns for the economic and environmental impact of the technology’s insatiable energy demand, AI remains a huge investment priority for both the public and the private sector. It’s clear that AI is here to stay, and contingency plans for global energy security are urgently needed.

The global data center market is expected to be valued at around USD $300 billion in 2024, with a projected average compound annual growth rate of about 10% over the next five years, driven almost entirely by the growth of artificial intelligence, according to analysis by TMT Finance. 

Law firm DLA Piper recently surveyed 176 senior executives from the data center sector, and found that “70 percent of investors expect to see funding continue to rise for bit barn projects, including debt,” according to a summary report from The Register. “This is despite almost every single one of them – 98 percent of respondents – voicing concerns about the availability and reliability of power to supply those projects,” the summation went on to say.

Indeed, the DLA Piper report found that responsible governance concerns have risen sharply in priority across the sector. Seventy percent of executives surveyed said that they “expect increased scrutiny around ESG practices, particularly regarding the integration of renewable energy and advancements in energy-efficient technologies.” ESG, or ‘environmental, social, and governance’ refers to an investing principle that values social responsibility, environmental stewardship, and good governance. 

Balancing AI-driven data center demand with competing energy, water needs is a critical piece of responsible investment and governance, as runaway data center construction could lead to energy shortages, skyrocketing energy prices, and sharply increased greenhouse gas production. Already, the annual power consumption of AI is more than most entire countries – only 16 nations consume more energy in a year than AI. “The almost overnight surge in electricity demand from data centers is now outstripping the available power supply in many parts of the world,” Bloomberg reported back in June. 

Some countries, such as Ireland, Saudi Arabia and Malaysia are already facing serious problems with producing enough energy to power their already-planned data centers. In the United States, a recent scientific study found that unless the government invests billions of dollars in generation and transmission capacity over the next few years to meet demand surges from data centers, Americans can expect their energy costs to go up by as much as 70 percent.

Due to the currently insufficient infrastructure, data centers are already facing years-long bottlenecks for connecting to the grid. The Register reports that “utility companies in the US are being flooded with power delivery requests for sites marked for data center construction, but that they are unable to fulfill many of these until the 2030s.” What’s more, many of those utilities are demanding that those project investors pay large upfront non-refundable payments in order to fulfill the projects’ massive infrastructural needs. 

Despite the challenges, AI investors remain undeterred. The growth of the sector is inevitable, but will need to be reigned in by governance frameworks to avoid disastrous consequences for the grid, the climate, and the consumer. There are some ambitious plans for making AI less energy-intensive, including through future-facing tech innovations like quantum computing and industry-disrupting algorithms. But until those ideas become reality, what we need is a whole lot more clean energy in a hurry. A rapid buildout of clean energy resources – including nuclear fission and possibly even nuclear fusion – is paramount to balancing this unstoppable market force. 

By Haley Zaremba for Oilprice.com

Haley Zaremba is a writer and journalist based in Mexico City. She has extensive experience writing and editing environmental features, travel pieces, local news in the Bay Area, and music/culture reviews.

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