US Data Centres Confront the Strain of Rising Power Demands
With one of the large data centre markets, the US holds the most data centre sites in the world, with its total data centre revenue expected to reach US$99.16bn in 2024.
Its market influence cannot be overstated. Given that the country is the single largest region for connectivity and cloud in the world today, alongside many technology companies being based there, its data centre industry is inevitably scaling up rapidly to meet rising demands.
Electric utilities across the country are predicting a ‘tidal wave’ of new demand from data centres now powering new technologies such as generative AI (Gen AI). In fact, some power companies are now projecting electricity sales growth several times higher than previous estimates.
As reported by Reuters, in 2023, electric utility in the US shares fell by more than 10%, the biggest yearly drop since 2008. Companies that have suffered a prolonged demand lull after the introduction of new energy efficiencies at the start of the millennium are currently up by about 4% so far in 2024.
Concerns over demand not matching supply
According to research by the International Energy Agency (IEA), data centres are expected to consume well over 1,000TWh of electricity by 2026 - a figure that has more than doubled. In particular, AI has been cited as one of the causes of excess energy requirements. Demand for the technology is currently predicted to require as much energy as a medium-sized country, which causes additional challenges for both data centre operators and energy providers alike.
Likewise, Laurel Durkay, Head of Global Listed Real Assets at Morgan Stanley explains in the below video how the data centre industry is going to continue experiencing a transformative level of demand.
“This is ultimately going to require billions of dollars of new capital investment into the space that will transform the market and really grow the cash flows of these companies in a way that we haven’t seen before,” she says.
‘Data-hungry AI models’
Such rapid growth has ultimately raised concerns that the US electric utility industry will be unable to respond quickly to the rise in power demand because of a swelling backlog of projects in line to connect to the grid.
This has also emerged as a threat to electricity demand in certain regions across the country, as some state officials are concerned about how much data centres could strain power grids.
For instance, the senate in Georgia voted in March 2024 to suspend some tax breaks for data centres. According to them, the relevant businesses were failing to create enough jobs for the local economy.
With AI and cloud technologies putting immense pressures on the data centre industry, companies are now having to find new ways to reduce energy consumption.
One of the ways it does this is by maximising renewable energy usage with new sustainable strategies such as harnessing excess heat to power local communities. Likewise, using cooling technologies like liquid cooling is also helping to keep systems cooler and less demanding for power.
With data centres around the world expected to grow at roughly 34% each year, it is now inevitable for data centre businesses to tackle rising energy challenges.
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