Key Takeaways

  • Data centers are expected to consume 20% of U.S. electricity by 2035.
  • AI computing will drive demand for nearly 200 gigawatts of capacity.
  • Electricity prices have surged 76% in the past year due to supply-demand imbalances.
  • Global electricity demand from data centers could reach 1,935 terawatt-hours by 2033.

Rising Electricity Demand

A recent report indicates that data centers in the United States will account for one-fifth of the country’s electricity consumption by 2035, a fourfold increase from current levels. This surge is largely attributed to the growing demands of artificial intelligence computing.

Capacity Growth Driven by AI

The report predicts that data center capacity will approach 200 gigawatts over the next decade, with nearly half of that dedicated to AI training and inference. The U.S. is expected to maintain a significant share, hosting 64% of AI chips based on power demand by 2033.

Revised Forecasts and Industry Response

BloombergNEF’s updated electricity demand estimate for 2035 is 83% higher than its previous prediction made in December. Other organizations have also revised their forecasts upward, reflecting the rapid expansion of data centers across the nation. For instance, the Electric Power Research Institute has more than doubled its 2024 estimates, while S&P’s projections increased by over a third between October and April.

Strained Electrical Grids

As new data centers come online, they will connect to electrical grids that are already under pressure. In the PJM Interconnection region, which stretches from Virginia to Illinois, data centers are projected to consume 34% of the electricity supply. Meanwhile, ERCOT, which serves most of Texas, will allocate 22% of its generating capacity to these facilities.

Challenges in Connection Requests

PJM has faced difficulties managing connection requests from both large generators and data centers, leading to a four-year pause on new applications. Although the queue reopened in April, the situation remains critical, with American Electric Power threatening to withdraw from the interconnection due to the ongoing supply-demand imbalance. This has resulted in a 76% increase in electricity prices over the last year.

Global Implications

Despite the U.S. leading in AI computing, data center growth is expected to expand globally. By 2033, if AI adoption continues at its current pace, data centers worldwide could generate an additional 1,935 terawatt-hours of electricity demand, nearly equivalent to India’s total annual consumption.