Understanding data centre energy trends

In 2024, data centres accounted for around 1.5% of global electricity consumption. By 2030, this figure is set to double, requiring 3% or more of global electricity; it’s the equivalent of the current electricity consumption of nations like Japan.

 

The rise of AI is a primary accelerator of this energy demand. Training sophisticated AI models and running continuous tasks are compute-intensive, requiring vast arrays of powerful, energy-hungry processors. Although more work needs to be done to fully understand data centres’ energy consumption and projected growth, we are starting to gain a clearer picture. According to a recent report by the International Energy Agency, AI growth alone is projected to quadruple AI-optimised data centre electricity demand by 2030 Without a dramatic shift in the way these centres are powered, this trajectory has the potential to inflate our global carbon footprint, pushing us closer towards breaching 1.5C of global warming.

Relying on renewable sources from national energy grids, however, won’t be enough. One of the biggest obstacles to gaining access to renewable generation is grid capacity and interconnection bottlenecks. When new, massive data centre loads and substantial renewable energy sources are connected to often legacy grid infrastructure, it can lead to lengthy deployment delays and complex permitting processes.

 
The case for co-location

The race to power data centres with renewables boils down to a prioritisation exercise: What resources provide the greatest reliability, cost-effectiveness, and crucially the shortest time to execution in order to keep up with growth objectives? The good news is that we have viable routes to power this digital expansion more sustainably. There are many factors at play here, but with the likes of Google’s emissions soaring by 51% between 2019 and 2025, a key decision factor will be what resources can be built and support emissions reductions as quickly as possible. This graph shows how some of that prioritisation might take place:

Other papers have suggested a shorter timeframe for the deployment of nuclear assets, particularly small modular reactors, which have the potential to serve as a zero-emission source of electricity for data centres. As a result of the relative shorter deployment time, renewables make, in most cases, not only financial sense, but also operational sense. One of the most promising paths lies in co-locating data centres with renewable sources. Instead of bringing clean energy to data centres, you bring the centre’s load to the energy source by building data centre facilities directly alongside, or very close to, the power plants that generate their electricity. It’s a model that many operators including technology giants like Google and Microsoft have been accelerating. Already a solution for faster and more sustainable power connections, co-location brings a range of business benefits:
 

1. Futureproof corporate emissions reporting

A further motivation to take this approach is underscored by evolving global carbon accounting standards. As it stands, data centres tend to rely on the purchase of market-based mechanism such as Renewable Energy Certificates (RECs) or Guarantees of Origin (GoOs) to claim reductions in their emissions. However, this may soon have to change. The Greenhouse Gas Protocol is currently reviewing these accounting mechanisms in its Scope 1 and 2 guidance, which could significantly impact how companies claim reductions of these emissions. Updated IFRS S2 requirements also require reporting exclusively on a location-based approach.

A potential tightening of these rules might mean unbundled RECs or GoOs (RECs or GoOs that are bought and sold separately from the physical electricity that generated them) are no longer accepted as valid mechanisms against Scope 2 emission reductions and would profoundly affect data centre providers that rely on them.

Co-locating renewable sources directly with data centres demonstrates a much stronger claim to 'additionality'. The clean energy that is generated will directly link to the data centre's demand and contribute tangibly to the decarbonisation of local energy supply. This makes it a much more verifiable way for data centre providers to report reductions.

2. Offer lower carbon solutions

Crucially, this robust approach also addresses the increasing pressure from data centre providers’ customers, many of whom look to their supply chain to reduce their own Scope 3 emissions and are critically reviewing their procurement strategies. Claiming credible emission reductions through co-location can offer customers the guaranteed low carbon IT solutions they desire.

3. Regulation and policy are changing

Governments worldwide are beginning to acknowledge the digital sector's environmental impact. The European Union has introduced the revised Energy Efficiency Directive, which requires data centres with a power demand of 500 kW or more to report annually on their energy consumption, Power Usage Effectiveness, water usage, and renewable energy share. With a focus on deploying co-located renewables alongside data centres, this ensures performance against these KPIs.

Such policies to tackle energy use will likely become the norm over time. They may even increase in ambition as the carbon impact of automation and AI demand becomes ever much clearer. Businesses that are transparent about their energy use and implement efforts to reduce consumption now will signal their ambition in scaling sustainably, and ultimately, stay ahead of any future policy restrictions.

4. Operational benefits

The advantages of this energy supply model extend beyond just sourcing clean power. When implemented correctly, the deployment of co-located renewables combined with battery energy storage systems form an integral component in an uninterruptible power supply infrastructure at site level, where co-located renewables provide resilience to external power supply issues.

At a grid level, it can minimise energy lost in transmission, reduce strain on existing electricity grids, and enhance reliability of the grid through the creation of localised microgrids.

Co-locating renewable generation capacity near or in data centre locations provides a crucial piece to a data centre’s decarbonisation puzzle while sidestepping current grid challenges. There is enormous potential for this approach to benefit data centre operators from a practical perspective, as well as in meeting the changing expectations of customers and policymakers.

Amidst the challenge of balancing digital growth with climate goals, data centre operators must now explore these types of opportunities and their reduction potential to support the sector’s transition.