Escalating energy demand in the digital age

By William Adkins and Tim Longstaff

As we integrate more sophisticated technologies into our lives—from blockchain technologies like Bitcoin to AI-driven platforms like ChatGPT—the demand for electricity has increased dramatically; it has also sparked a complex debate about who actually bears the cost of this escalating consumption. With technology firms achieving market capitalizations in the trillions, the true cost of their power usage often remains hidden, raising significant concerns about sustainability and equity. This extraordinary surge in energy demand also coincides with the climate crisis, and its need to actively reduce carbon emissions. This creates a complicated dilemma: meeting the tech industry's growing energy consumption while maintaining progress toward sustainable goals.

To put things into perspective:

• Cryptocurrency mining globally currently consumes around 100-150 TWh a year. This consumption level surpasses the annual electricity usage of several countries, such as Poland (~150 TWh), Sweden (~130 TWh), the Netherlands (~120 TWh), Belgium (~90 TWh)
• A new 150MW data center supporting solely for video streaming might consume over 2 GWh of electricity per day (at 60 % utilization), which is able to power roughly 270,000 households in the UK
• Training a single AI model can consume as much energy as 626,000 kilowatt-hours, equivalent to the energy usage of 230 UK homes for a year

The new challenges to nations’ grid infrastructure

Some of the traditional data center hubs in Europe, most notably in Ireland, have caused a significant strain on the national power grid. 80+ data centers in the country are estimated to be consuming approx. 20% of the country's electricity supply in 2022, which could go up to a third by 2026. This substantial demand has sparked concerns about the overall stability of the power grid, with blackouts happening in Dublin area. To counteract this, Dublin government has introduced an effective moratorium and limited new DC construction application.

In the UK, electricity demand is expected to see a pivotal transition from the past 2 decades, with National Grid projecting significant growth from 2023 to 2050, doubling the current demand. Alongside wider decarbonization moves including electrification of heating network and transportation, data centers are also a key contributor to the expected growth. UK's current transmission and distribution network is far from ready to meet all this demand - substantial upgrades to the infrastructure will be required.

Towards sustainable solutions and fair pricing

Data centers as a whole represent a much more efficient use of energy compared to traditional on-premise servers, making cloud computing an inevitable and desirable development going forward. The improvement in data center efficiency to-date has been meaningful, though not yet sufficient to address the exponential growth in energy needs. A combination of regulatory, technological, and commercial measures needs to be deployed to drive continuous future improvement:

1. Enforce energy efficiency regulation for data centers
2. Deploying new technologies to reduce energy consumption or improve efficiency
3. Introducing appropriate charging for cloud processing
4. Leveraging advanced software solutions to optimize data center operations

In closing, this report discusses the important role that energy consumption plays in data center operations. Now is the right time for both investors and corporates to explore the opportunities when having a vital role to play in addressing these challenges while riding the trends of data centers and technologies.

We would like to thank Bruce Tang for co–authoring this publication.

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