AI boom to drive global surge in electricity demand this year, IEA reports

The International Energy Agency (IEA) says the boom in AI services will trigger global electricity demand as the emerging technology spurs energy consumption. The agency projects that the electricity demand will grow the fastest in decades.

Also read: Google’s carbon emissions jump 50% amid growing AI demand

According to the IEA, the world is also expected to see a significant increase in energy generation from renewables next year. This also comes amid growing calls for increased investments towards clean energy.

India will experience a stronger electricity demand

In an electricity mid-year update report, the IEA revealed that electricity demand will grow by an estimated 4% this year, compared to 2.5% recorded in 2023. The figure – if achieved – will be the highest annual growth rate recorded since 2007, IEA said, adding that it also expects demand to grow by 4% next year.

India, China, and the United States are expected to see stronger demand, with a projected growth rate of 8%, 6%, and 3%, respectively.

The report states that the rapid development and deployment of AI systems will be the major growth driver for electricity this year and in the coming years. However, the agency revealed there are uncertainties over data centers’ total electricity consumption.

Big tech firms in AI, such as Microsoft, Google, Meta, and OpenAI, are not open about the energy consumption at their data centers and their climate impacts, IEA said. However, they have indeed admitted that energy consumption at their data centers has grown in the past few years, and they have become huge contributors to carbon emissions.

Apart from the rapid AI deployment, bad weather conditions such as hot temperatures are expected to contribute to increased electricity consumption. The IEA report cites increasing use of air conditioning will also drive demand for electricity as climate change pushes global temperatures up.

The report indicates that several “intense heatwaves in the first half of 2024” have already put pressure on the power grid.

Renewable electricity is also expected to grow

Although the projected demand will put pressure on electricity systems, there is also a ray of hope. The IEA report reveals that renewable energy sources are also expected to increase significantly this year and in 2025.

Also read: Microsoft signs carbon credit deal with Occidental to tackle AI-related emissions

IEA estimates that renewable energy will account for 35% of global electricity in 2025, representing a five-percentage point increase from 2023. IEA’s director of energy markets and security, Kaisuke Sadamori, emphasized the need for speedy implementation of renewable energy projects.

“It’s encouraging to see clean energy’s share of the electricity mix continuing to rise, but this needs to happen at a much faster rate to meet international energy and climate goals,” said Sadamori.

According to the IEA, electricity generated from renewable globally is expected to surpass thermal energy for the first time in 2025.

Solar energy from solar cells alone is projected to meet about half of the global growth in electricity demand this year and next year. While renewable electricity expands, thermal power is not expected to fall, but it remains strongly supported by firm demand in India and China.