The United States is experiencing a spike in electricity demand that hasn’t been seen since the early 2000s. 20 years of roughly flat electricity demand, driven largely by efficiency improvements offsetting population and economic growth, is being replaced by a new era of growth. A resurgence in domestic manufacturing, investment in clean energy infrastructure via the Inflation Reduction Act, as well as general widespread electrification (e.g. electric vehicles, induction stoves, heat pumps) have all contributed to the elevated levels seen now. But it’s the meteoric rise of artificial intelligence and data center expansion that has become the main area of focus for companies, governments, and countries as they navigate supporting the increased electricity demand alongside their sustainability goals.
The US Department of Energy’s December 2024 Report on U.S. Data Center Energy Use, produced by Lawrence Berkeley National Laboratory, estimates that data center energy usage has tripled in the past decade and is expected to once again double or triple by 2028. While accounting for a 4.4% share of total electricity consumption in the US in 2023, it is expected that consumption will increase to between 6.7-12.0% by 2028.
This rising demand for electricity in the US, on the one hand, showcases robust investment and growth in critical infrastructure and technology. At the same time, permitting timelines and processes for modernizing and expanding the current grid move much slower (4+ years) than the time it takes to construct a new data center (~2 years). Owners and operators have worked and continue to put effort towards improving the sustainability of data centers including Google’s recent partnership with TPG Climate Rise and Intersect Power to couple clean energy with data centers, Microsoft’s first-of-a-kind wood-constructed data center designed to cut emissions, or Meta’s innovative approach to cooling which has helped reduce energy consumption and water usage.
But with delays and innate complexities in managing the various forces between data center owners and operators, government agencies, and utilities and energy providers, it is pivotal that the downstream portion of the private sector reliant on data centers also take steps to advance sustainability.
Here are a few important considerations for businesses to include in planning and decision making:
- Focus on improving efficiency of AI products - For software and tech-enabled service companies, building models as efficiently as possible reduces their operational costs (computing, storage, and network capacity) and in turn improves the environmental impact of the data center (less energy consumed for computing, storage, and network capacity).
- Select cloud provider with environmental track record - Research available cloud providers to understand which are utilizing renewable energy sources and have released sustainability commitments / emissions reports. Make sure to incorporate a regional lens to better understand the specific geographic consequences as well.
- Be proactive regarding future regulation - Develop products and services in anticipation of potential regulatory efficiency standards for AI (e.g. Article 40 of the EU’s AI Act), leading to better market positioning and ability to capture demand.
- Implement programs to educate your workforce - According to the International Energy Agency, a Google search requires just 0.3 watt-hours of electricity compared with 2.9 watt-hours (roughly 10 times) for a ChatGPT query. It is important for companies to create opportunities for their employees to learn about the ESG impacts of AI to foster the promotion and advancement of sustainability.
All parties (companies that own or rely on data centers, governments, utilities, etc.) have a responsibility to combat the potential negative environmental consequences of increasing energy demand. Integrating sustainability into your operations is motivating to employees, demonstrates commitment to customers, and should be reflected in your public communications.
Reach out to hear how Clearyst can help your business reduce data center energy consumption and how it fits into broader corporate sustainability strategy.