AI and crypto mining are driving up data centers energy use

Unveiling the Energy Surge: A Forecast by the International Energy Agency

In a recent report by the International Energy Agency (IEA), it is predicted that data centers could devour double the amount of electricity by 2026, primarily fueled by the expansion of cryptocurrencies and artificial intelligence.

The Backbone of Digital Storage

Our reliance on data centers to store a plethora of digital content, from emails to cat videos, has intensified. Furthermore, the emergence of data centers dedicated to Bitcoin mining and AI training has ignited concerns regarding their environmental repercussions. Greenhouse gas emissions linked to the electricity consumption of these data centers necessitate a transition to more renewable energy sources to address the pollution stemming from power grids.

A Striking Statistics Snapshot

According to the IEA’s annual electricity report, in 2022, data centers, cryptocurrencies, and AI collectively accounted for approximately 2 percent of global electricity demand, utilizing 460TWh of electricity. Crypto mining alone contributed nearly a quarter of this consumption, utilizing 110TWh.

Image: IEA

Projected Growth: A Gigantic Leap

By 2026, the electricity consumption from data centers, inclusive of those dedicated to cryptocurrencies and artificial intelligence, could soar to 1,050TWh. This projected surge is tantamount to adding the electricity demand of an entire country, resembling the scale of Sweden or Germany under different scenarios.

The Global Landscape: Dominance of the US

Presently, the United States houses 33 percent of the world’s 8,000 data centers and leads in Bitcoin mining. The IEA anticipates a rapid growth trajectory for data center electricity consumption in the US, projecting an increase from roughly 4 percent of demand in 2022 to 6 percent by 2026. Factors such as the expansion of 5G networks and cloud-based services are pivotal drivers of this growth.

Regional Dynamics: Ireland’s Rise

Ireland, with its low corporate tax rates, is poised for a data center boom. Already accounting for 17 percent of the country’s electricity consumption in 2022, the 82 existing data centers, along with 54 in the pipeline, could contribute to nearly a third of Ireland’s annual electricity demand by 2026.

Challenges and Risks

The IEA report highlights the challenges posed by the rapid expansion of data centers, including elevated electricity demand. This is not limited to Ireland, as exemplified by London’s housing development challenges and Texas grappling with the strain on its power grid due to the influx of crypto mines.

Energy Breakdown: A Closer Look

Since data centers function as warehouses for computers, 40 percent of their electricity demand arises from computing activities. Another 40 percent is attributed to cooling equipment, while the remaining 20 percent is consumed by other IT equipment.

AI Integration: An Augmented Demand

Incorporating AI into data centers further amplifies their overall electricity demand. According to the IEA report, Google Search, in a scenario fully incorporating AI, could consume up to ten times more electricity. Similarly, the AI industry is forecasted to consume ten times more electricity in 2026 than it did in the previous year.

Image: IEA

Cryptocurrency’s Soaring Demand

Cryptocurrency’s electricity demand is expected to surge by 40 percent by 2026. While some success stories, like Ethereum’s significant reduction in electricity use, exist, the Bitcoin network remains a major contributor to carbon emissions stemming from crypto mining.

Embracing Renewable Energy

Fortunately, the IEA foresees accelerated global growth in renewable energy, surpassing coal to generate over a third of the world’s electricity by 2025. However, the challenges posed by burgeoning data centers necessitate a simultaneous focus on improving energy efficiency, such as adopting high-efficiency cooling systems, to ensure sustainable growth without outpacing the rise in renewables.