How much will AI drive up power demand in the next few years? That’s been the big question at the center of the energy and climate conversation recently. Many analysts have warned that AI-driven electricity usage is expected to more than double in the next five years as consumers and businesses find varied applications for the technology. But others urge caution: not all data centers in the planning process will ultimately be built and AI could become much more energy efficient than it is today.
This is a crucial debate—but the full picture is even more complicated. Even if AI guzzles less energy than the zeitgeist suggests, a wide range of electricity demand drivers lurk just around the corner. A report released earlier this week from the International Energy Agency (IEA) gives a sense of the picture: global electricity demand grew by 4.3% last year due to a range of causes that include not just data centers but also electrification of everything from building heating to cooking, along with more air conditioning thanks to record high temperatures, among other things. “We see one very clear trend: electricity growth,” says Fatih Birol, the IEA’s executive director.
Widening the aperture of the conversation around future power demand can help prevent us from fixating on a single technology (however transformative it might be), and avoid the risk of overlooking the complex interplay of factors that will shape our energy future—and the challenges and opportunities that will arise from it.
To understand the nature of electricity demand growth, it’s helpful to break it down by geography. And there’s no better place to start than in emerging markets and developing countries. Electricity demand ticked up 7% in China and by more than 4% in other emerging and developing economies; meanwhile, electricity consumption in the European Union grew by about 1.5%, according to the IEA.
Some of that growth is the simple product of expanding economies. More wealth means more electricity use. But a significant portion of the rising demand came from high temperatures—particularly heat waves in India and China—that pushed consumers and businesses to crank up air conditioning.
Electricity usage also grew in the U.S. by about 2% last year, according to government data. Unsurprisingly, the most significant source of that growth was new data centers, but other factors contributed, too. Federal programs enacted during the Biden Administration, like the Inflation Reduction Act, have helped boost the country’s advanced manufacturing footprint. That means a wave of new facilities drawing electricity in previously unoccupied land or revitalized vacant facilities. Moreover, today’s manufacturing plants rely more on electricity than they would have a generation ago, when they might have onsite power from fossil fuels.
And then there are electric vehicles. Headlines would have you believe that EVs now face an insurmountable challenge in the U.S. market as people aren’t buying as many as expected. That may be true, but the IEA reports that sales actually continued to grow in the U.S. at greater than a 10% clip. In the coming years, increased EV penetration inevitably means greater power demand.
There are a few lessons to draw from this story. For one, if you’re betting on an AI-efficiency breakthrough to save the world from an electricity crunch, you’re missing the bigger picture. Yes, we know a range of developments, like more energy efficient language models, could reduce AI’s future electricity demand, but that won’t address all of the other sources of demand.
There are also some positive elements that emerge from this story. Most obviously, the IEA says that 80% of new electricity generation globally last year came from renewable energy or nuclear power. That dynamic means that emissions grew at a slower pace than the economy. “If we want to find the silver lining, we see that there is a continuous decoupling of economic growth from emissions growth,” says Birol.
That’s small consolation at a time when emissions need to not just slow down but actually decline in order to avoid some of the worst effects of climate change. But I see another opportunity that could emerge from this imminent power crunch: we may be forced to finally confront the full range of solutions available to us. Yes, power companies are eagerly trying to build natural gas to meet demand. But they’re building solar power and battery storage, too. And because neither will be enough, companies have rediscovered the value of nuclear power. In these circumstances, demand-reducing technologies like smart grids and demand response are already taking on newfound importance and companies are incentivized to find more energy efficient ways to run their business. That importance should only grow.
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