A groundbreaking new report from the International Energy Agency (IEA) sheds light on the transformative potential of artificial intelligence (AI) within the energy sector, while also highlighting the significant challenges it poses. The report, titled "Energy and AI," delivers a comprehensive, data-driven analysis of the intricate connections between energy and AI, drawing upon new datasets and extensive consultations with policymakers, the tech sector, the energy industry, and international experts.

AI's Impact on Electricity Demand

The report projects a dramatic surge in electricity demand from data centers worldwide, driven primarily by the proliferation of AI applications. By 2030, data centers are expected to consume approximately 945 terawatt-hours (TWh) of electricity, more than double their current consumption. This figure surpasses the entire electricity consumption of Japan today, underscoring the magnitude of AI's impact on global energy systems. The IEA anticipates that AI-optimized data centers will experience the most substantial growth, with electricity demand projected to quadruple by 2030.

In the United States, the report forecasts that data centers will account for nearly half of the growth in electricity demand between now and 2030. Driven by AI, the US economy is projected to consume more electricity for data processing than for manufacturing all energy-intensive goods combined, including aluminum, steel, cement, and chemicals. This shift marks a significant transformation in the energy landscape, with data processing emerging as a dominant consumer of electricity.

Advanced economies, in general, are expected to see data centers drive more than 20% of the growth in electricity demand between now and 2030. This resurgence in demand reverses years of stagnation or decline in many of these economies, presenting both opportunities and challenges for the power sector.

Energy Sources for Data Centers

The report indicates that a diverse range of energy sources will be tapped to meet the rising electricity needs of data centers, with renewables and natural gas expected to take the lead due to their cost-competitiveness and availability in key markets. While coal currently provides a significant portion of the energy needed to power data centers, its share is expected to decline as renewables and natural gas gain prominence.

Opportunities and Challenges

IEA Executive Director Fatih Birol emphasized the significance of AI in the energy world, stating, "AI is one of the biggest stories in the energy world today – but until now, policymakers and markets lacked the tools to fully understand the wide-ranging impacts." He cautioned that the effects would be particularly strong in certain countries, such as the United States, Japan, and Malaysia, where data centers are poised to account for a substantial portion of electricity demand growth.

The report acknowledges the uncertainties surrounding the macroeconomic outlook, the pace of AI adoption, and the potential for efficiency improvements. It also raises concerns about energy security, noting that cyberattacks on energy utilities have tripled in recent years and become more sophisticated due to AI. However, AI is also becoming a critical tool for energy companies to defend against such attacks.

Another energy security concern relates to the expanding demand for critical minerals used in the equipment in data centers. The report provides first-of-its-kind estimates of demand from data centers for critical minerals, whose global supply is today highly concentrated. According to the IEA, Data centre electricity consumption will reach about 945 terawatt hours (TWH) by 2030.

Emissions and Innovation

While the increase in electricity demand for data centers is set to drive up emissions, the report suggests that this increase could be offset by emissions reductions enabled by AI if the technology is widely adopted. Additionally, AI's increasing integration into scientific discovery could accelerate innovation in energy technologies such as batteries and solar PV.

Recommendations for Policymakers

The report urges countries to accelerate investments in electricity generation and grids, improve the efficiency and flexibility of data centers, and strengthen dialogue between policymakers, the tech sector, and the energy industry. It is part of the IEA's expanding work analyzing the deepening ties between energy and AI and builds on the Global Conference on Energy and AI the IEA hosted in December 2024 and the Agency's contributions to the AI Action Summit chaired by France and India in February.

Potential Pitfalls

Concerns have been raised that the rapid adoption of AI could undermine efforts to combat the climate crisis if not managed carefully. The report acknowledges that AI could reverse gains made in advanced economies to reduce energy use and lead to increased reliance on readily available energy sources, such as gas plants or even coal-fired power stations. Furthermore, AI data centers can consume vast quantities of fresh water for cooling, potentially straining water resources in already arid regions.

The Path Forward

The IEA emphasizes that AI is a powerful tool, but its impact on the energy sector and the environment depends on how societies, governments, and companies choose to use it. The agency plans to launch a new Observatory on Energy, AI, and Data Centers to gather comprehensive data on AI's electricity needs and track cutting-edge AI applications across the energy sector. The IEA is also publishing a new AI agent to help readers interact with its findings and answer questions on the report's contents.