Global datacenter energy demand could double by 2026

In recent years, datacenters have received the spotlight in discussions about energy consumption in various scenarios. More specifically, in 2024, it was given a specific section in the International Energy Agency (IEA) report on the electricity sector published regularly since 2020. In this year’s edition, the study presented a section dedicated to analysing the drivers of electricity consumption in datacenters and revealed that global demand in these environments could double by 2026.

In datacenters, energy is mainly consumed by two processes: data processing itself, which accounts for 40%, and room cooling, which accounts for another 40%. The remaining 20 per cent is used by associated IT equipment. The IEA estimates that datacenters, cryptocurrencies and Artificial Intelligence (AI) will have consumed around 460 TWh of electricity worldwide by 2022, almost 2% of global demand.

Although it is difficult to predict trends, given that digital technologies evolve rapidly, the IEA estimates that global electricity consumption from datacenters, cryptocurrencies and Artificial Intelligence will vary between 620 TWh and 1,050 TWh in 2026, with a base case of just over 800 TWh.

In geographical terms, there are currently more than 8,000 datacenters distributed around the world, with around 33% located in the United States, 16% in Europe and close to 10% in China. The IEA expects electricity consumption by datacenters on US soil to grow more rapidly over the next few years, rising from around 200 TWh in 2022 (around 4% of the country’s demand) to almost 260 TWh in 2026 (6%). This increase should be driven by the greater adoption of 5G networks and cloud-based services, as well as tax incentives from the states.

In China, the energy demand of datacenters is expected to reach around 300 TWh by 2026. An important source of growth should be the rapid expansion of 5G networks and the Internet of Things (IoT).

In the European Union, estimated electricity consumption by datacenters was just under 100 TWh in 2022, almost 4% of the region’s demand. Around 1,240 datacenters operated in Europe in 2022, most of them concentrated in the financial centres of Frankfurt, London, Amsterdam, Paris and Dublin. Electricity consumption by datacenters in the European Union is expected to reach almost 150 TWh by 2026.

In particular, the datacented market in Ireland is developing rapidly. The electricity demand of these environments was 5.3 TWh in 2022 (17 per cent and equivalent to the energy consumed by urban residential buildings). At this rate, consumption could double by 2026. The number of datacenters in Ireland, currently at 82, is expected to grow by 65% over the next few years, with 14 units under construction and 40 with plans already approved. The reason for this growth? Ireland has one of the lowest tax rates in the European Union (12.5 per cent versus an average rate of 21.5 per cent among European OECD countries).

Denmark currently hosts 34 datacenters, half of which are located in Copenhagen. Datacenter demand for energy is also expected to grow in this country and reach 6 TWh by 2026, just under 20% of total demand. Denmark stands out for being the centre of a European initiative, the  Net Zero Innovation Hub for Data Centers, a space for collaboration between suppliers, operators and governments around innovation and the decarbonisation of the sector.

In the United States, datacenters are largely located in California, Texas and Virginia. In the latter case, the economy was dominated in 2021 by the expansion of the datacenter sector, attracting 62% of the state’s new investments and generating more than 5,000 new jobs.

And what about the legislation?

In terms of legislation, the European Union has tightened the rules. The Revised Energy Efficiency Directive applied to the datacenter sector will require more transparency and accountability in order to improve energy demand management. As of 2024, datacenter operators will be obliged to issue reports on energy use and emissions. Large-scale facilities will have to have waste heat recovery applications and guarantee climate neutrality by 2030.

In the United States, the Energy Act of 2020 requires the development of metrics for datacenter energy efficiency and that government agencies maintain a programme focused on datacenter energy practices and an initiative with open data on energy use in federally owned and operated datacenters.

Chinese regulators will require datacenters contracted by public organisations to improve their energy efficiency and be entirely powered by renewable sources by 2032, starting with a 5% proportion in 2023.