Artificial intelligence has the potential to transform the energy sector in the coming decade, driving a surge in electricity demand from data centres around the world, according to a new report from the International Energy Agency.
The technology can also unlock significant opportunities to cut costs, enhance competitiveness and reduce emissions, the report states.
The IEA’s special report Energy and AI, offers comprehensive, data-driven global analysis to date on the growing connections between energy and AI.
The report draws on new datasets and extensive consultation with policy makers, the tech sector, the energy industry and international experts.
It projects that electricity demand from data centres worldwide is set to more than double by 2030 to around 945TWh, slightly more than the entire electricity consumption of Japan today.
AI will be the most significant driver of this increase, with electricity demand from AI-optimised data centres projected to more than quadruple by 2030.
In the United States, power consumption by data centres is on course to account for almost half of the growth in electricity demand between now and 2030.
Driven by AI use, the US economy is set to consume more electricity in 2030 for processing data than for manufacturing all energy-intensive goods combined, including aluminium, steel, cement and chemicals.
In advanced economies more broadly, data centres are projected to drive more than 20% of the growth in electricity demand between now and 2030, putting the power sector in those economies back on a growth footing after years of stagnating or declining demand in many of them.
A diverse range of energy sources will be tapped to meet data centres’ rising electricity needs, according to the report – though renewables and natural gas are set to take the lead due to their cost-competitiveness and availability in key markets.
IEA executive director Fatih Birol, said: “AI is one of the biggest stories in the energy world today – but until now, policy makers and markets lacked the tools to fully understand the wide-ranging impacts.
“Global electricity demand from data centres is set to more than double over the next five years, consuming as much electricity by 2030 as the whole of Japan does today.
“The effects will be particularly strong in some countries.
“For example, in the United States, data centres are on course to account for almost half of the growth in electricity demand; in Japan, more than half; and in Malaysia, as much as one-fifth.”
The report emphasises the significant uncertainties that remain, from the macroeconomic outlook to how quickly AI will be adopted.
It also notes questions over how capable and productive AI will become, how fast efficiency improvements will occur, and whether bottlenecks in the energy sector can be resolved.
AI could intensify some energy security strains while helping to address others, according to the report.
Cyberattacks on energy utilities have tripled in the past four years and become more sophisticated because of AI.
At the same time, AI is 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 the data centres that power AI.
The report provides first-of-its-kind estimates of demand from data centres for critical minerals, whose global supply is today highly concentrated.
While the increase in electricity demand for data centres is set to drive up emissions, this increase will be small in the context of the overall energy sector and could potentially be offset by emissions reductions enabled by AI if adoption of the technology is widespread, according to the report.
Additionally, as AI becomes increasingly integral to scientific discovery, the report finds that it could accelerate innovation in energy technologies such as batteries and solar PV.
Birol said: “With the rise of AI, the energy sector is at the forefront of one of the most important technological revolutions of our time.
“AI is a tool, potentially an incredibly powerful one, but it is up to us – our societies, governments and companies – how we use it.
“The IEA will continue to provide the data, analysis and forums for dialogue to help policy makers and other stakeholders navigate the path ahead as the energy sector shapes the future of AI – and AI shapes the future of energy.”
According to the report, countries that want to benefit from the potential of AI need to quickly accelerate new investments in electricity generation and grids, improve the efficiency and flexibility of data centres, and strengthen the dialogue between policy makers, the tech sector and the energy industry.
The report is part of the IEA’s expanding work analysing the deepening ties between energy and AI.
It builds on the Global Conference on Energy and AI the IEA hosted in December 2024 – the largest conference on this topic to date – and the Agency’s contributions to the AI Action Summit chaired by France and India in February.
The IEA will also soon launch a new Observatory on Energy, AI and Data Centres, which will gather the most comprehensive and recent data worldwide on AI’s electricity needs, in addition to tracking cutting-edge AI applications across the energy sector.
Alongside the report, the IEA is publishing a new AI agent to help readers interact with its findings. The AI agent is available on the report’s main web page and answers questions on the report’s contents in an easy and conversational manner.