Data centers could guzzle up twice as much electricity by 2026, thanks in large part to cryptocurrencies and artificial intelligence, according to a new report from the International Energy Agency (IEA).
We rely on data centers to store all our emails, photos, cat videos, and whatever else is floating around in the cloud. More and more data centers are appearing to mine Bitcoin and train AI.
That has already sparked backlash about the environmental impact of cryptocurrencies and AI tools like ChatGPT, as all those data centers are responsible for greenhouse gas emissions related to their electricity consumption. The world will need much more renewable energy to clean up pollution from electricity grids while satisfying the skyrocketing electricity demand from data centers.
That growth is equivalent to adding the electricity demand of an additional country
According to the IEA’s annual electricity report released today, data centers, cryptocurrencies and AI accounted for around 2 percent of global electricity demand in 2022, consuming 460 TWh of electricity. It is estimated that crypto mining alone is responsible for almost a quarter of that electricity consumption, with a consumption of 110 TWh in 2022.
By 2026, the electricity consumption of data centers – including those used for cryptocurrencies and artificial intelligence – could rise to 1,050 TWh, depending on the pace at which the technology develops. That growth is equivalent to adding the electricity demand of an additional country; Sweden in a more modest scenario or at most Germany.
The US currently has the most data centers, with 33 percent of the world’s approximately 8,000 data centers. It is also the country with the most Bitcoin mining. The IEA predicts a “rapid pace” of electricity consumption growth in US data centers in the coming years, from roughly 4 percent of US demand in 2022 to 6 percent in 2026. Expanding 5G networks and cloud-based services are other driving forces behind that growth.
Ireland, with one of the lowest corporate tax rates in the European Union, is expected to see a boom in new data centers. The 82 data centers would already account for 17 percent of the country’s electricity consumption in 2022. Another 54 are under construction or have recently been approved to begin construction. By 2026, all these data centers could be responsible for almost a third of the country’s annual electricity demand.
“The rapid expansion of the data center sector and increased demand for electricity may pose challenges for the electricity system,” the IEA report said. The risk is not unique to Ireland. In London, demand for electricity in data centers has made it harder to develop more housing. Texas, a Bitcoin mining hub in the US, is struggling with new crypto mines (also called crypto data farms), putting pressure on its already aging and stressed power grid.
Because data centers are essentially warehouses for computers, 40 percent of their electricity demand comes from computers. Keeping all that equipment cool accounts for another 40 percent of demand, while other IT equipment accounts for the rest.
Adding AI to the mix increases the overall electricity demand of data centers. Google Search could consume up to ten times more electricity in a scenario where AI is fully integrated, the IEA report said. Similarly, the report predicts that the AI industry could burn ten times as much electricity by 2026 as it did last year.
The demand for electricity for cryptocurrencies is expected to increase by 40 percent by 2026. There have been some success stories in reducing the energy and environmental footprint of cryptocurrencies. The Ethereum blockchain was able to reduce its electricity consumption by more than 99 percent by switching to a much more energy-efficient method for validating blocks of new transactions. Yet the Bitcoin network has refused to follow suit and is responsible for the majority of CO2 emissions resulting from crypto mining.
Fortunately, the IEA also predicts accelerated growth in renewable energy around the world, overtaking coal to generate more than a third of the world’s electricity by 2025. That still does not solve all the challenges that new data centers entail. It is arguably just as important to improve energy efficiency – for example by introducing high-efficiency cooling systems – because excessive growth in electricity demand could outpace the increase in renewable energy sources.