Data centers throughout the United States are gearing up for a sustained uptick in power requirements, driven by increasing demand for technologies like AI, which are straining power grids.

As one of the leading data center markets globally, the US boasts the highest number of data center locations, with projected total revenue reaching US$99.16 billion by 2024.

The significant influence of the US market cannot be overstated. Being the primary hub for connectivity and cloud services globally, coupled with the presence of numerous tech giants, the country’s data center industry is rapidly expanding to meet escalating demands.

Electric utilities nationwide are anticipating a significant surge in demand from data centers, particularly those powering emerging technologies like generative AI (Gen AI). Some power companies are forecasting electricity sales growth several times higher than previous estimates.

According to Reuters, US electric utility shares experienced a notable decline of over 10% in 2023, marking the largest yearly drop since 2008. However, companies that faced a prolonged demand downturn following the introduction of energy efficiencies in the early 2000s have seen a resurgence, with gains of approximately 4% in 2024.

Concerns Over Demand Not Matching Supply

Concerns are mounting over the potential misalignment between demand and supply. Research by the International Energy Agency (IEA) projects data centers to consume well over 1,000TWh of electricity by 2026, more than doubling previous estimates. AI is identified as a significant contributor to this surge in energy requirements, with its demand predicted to rival that of a medium-sized country, posing challenges for both data center operators and energy providers.

Laurel Durkay, Head of Global Listed Real Assets at Morgan Stanley, highlights the transformative demand facing the data center industry. She emphasizes the need for substantial capital investment to accommodate this growth, which is expected to enhance the market and boost company cash flows significantly.

Data-hungry AI Models

The rapid expansion of data centers has raised concerns about the ability of the US electric utility industry to respond promptly to increased power demands, exacerbated by a backlog of projects awaiting grid connection. Certain regions are particularly vulnerable to electricity demand strains caused by data centers, prompting state officials, such as the Georgia senate, to reassess tax incentives due to perceived inadequacies in job creation.

With AI and cloud technologies placing immense strain on the data center industry, companies are innovating to reduce energy consumption. Strategies include maximizing renewable energy utilization, such as harnessing excess heat for community power, and implementing cooling technologies like liquid cooling to reduce power demands.

As data centers worldwide are projected to grow by approximately 34% annually, addressing rising energy challenges has become an imperative for the industry.

Article Credit: Data Centre Magazine