AI and crypto-mining increase data centers’ energy consumption

Data centers could guzzle twice as much electricity by 2026, largely thanks to cryptocurrencies and artificial intelligence, according to a new report from the International Energy Agency (IEA).

We rely on data centers to store all our emails, photos, cat videos, and everything else floating around in the cloud. More and more data centers are coming up to mine Bitcoin and train AI.

This has already caused backlash over the environmental impact of cryptocurrencies and AI tools like ChatGPT, as all those data centers are responsible for greenhouse gas emissions linked to their electricity use. The world will need much more renewable energy to clean up pollution from power grids and at the same time satiate the rising electricity demand from data centers.

Data centers, cryptocurrencies and AI accounted for about 2 percent of global electricity demand in 2022, with 460TWh of electricity, according to the IEA’s annual electricity report released today. Crypto mining alone is estimated to account for nearly a quarter of that electricity consumption, burning through 110TWh in 2022.

By 2026, electricity consumption from data centers – including those used for cryptocurrencies and artificial intelligence – could rise to 1,050 TWh, depending on the rate at which the technology develops. That growth is equivalent to adding an extra country’s electricity demand; Sweden under a more modest scenario or Germany at most.

The US has the most data centers today, with 33 percent of the world’s approximately 8,000 data centers. It is also the country with the most Bitcoin mining. The IEA predicts a “fast pace” of growth for data center electricity consumption in the US over the next few years, rising from about 4 percent of US demand in 2022 to 6 percent by 2026. Expanding 5G networks and cloud-based services are other drivers of that growth.

Ireland, with one of the lowest corporate tax rates in the European Union, is expected to see a surge in new data centers. Its 82 data centers were already responsible for 17 percent of the country’s electricity consumption in 2022. Another 54 are either under construction or recently approved to begin construction. By 2026, all those data centers could account for nearly a third of the country’s annual electricity demand.

“The rapid expansion of the data center sector and the increased demand for electricity may pose challenges to the electricity system,” says the IEA report. The risk is not unique to Ireland. In London, the electricity demands of data centers have made it more difficult to develop more housing. Texas, a hub for Bitcoin mining in the US, is grappling with new crypto mines (aka data farms for crypto) putting pressure on its already aging and stretched power grid.

Since data centers are basically warehouses for computers, 40 percent of their electricity demand comes from computers. Keeping all that equipment cool accounts for another 40 percent of demand, with other IT equipment making up the rest.

Adding AI to the mix increases data centers’ overall electricity demand. Google Search could use up to ten times more electricity in a scenario that fully incorporates AI, the IEA report says. Likewise, it predicts that the AI ​​industry could burn through ten times as much electricity in 2026 as last year.

Electricity demand for cryptocurrencies is expected to increase by 40 percent by 2026. There have been some success stories in limiting crypto’s energy and environmental footprints. The Ethereum blockchain was able to reduce its electricity consumption by more than 99 percent by switching to a much more energy-efficient method of validating blocks of new transactions. Even so, the Bitcoin network has refused to follow suit and is responsible for a majority of the carbon emissions resulting from crypto mining.

Fortunately, the IEA has also predicted the accelerated growth of renewable energy around the world, overtaking coal to generate more than a third of the world’s electricity by 2025. It still doesn’t solve all the challenges new data centers bring. It is probably just as important to improve energy efficiency – say, by adopting high-efficiency cooling systems – as too much growth in electricity demand can outpace the rise in renewables.