Dive Brief:
- Data center operators, hyperscalers, electricity providers, local regulators, municipalities and real estate firms must collaborate on how best to balance environmental, business and societal goals, according to a Deloitte report released Tuesday.
- That collaboration should involve determining potential strategic colocation needs — where a data center company rents computing and server resources to one or more companies — as well as needs for cooling, recycling, and heat and wastewater managment, according to the report.
- Small and midsized organizations that may find it challenging to harness generative AI data center capacity should work with specialized data center operators and cloud service providers to meet their needs, Deloitte says. In turn, data centers can actively track usage and availability for potential opportunities and demand pockets to help deliver near-term colocation services, per the report.
Dive Insight:
As data center energy consumption rapidly accelerates to meet power-intensive generative AI demand, many companies are looking to use a combination of energy-efficient data center technologies and more carbon-free energy sources to reduce environmental impact, the report says. Although data centers are expected to make up only about 2% of global electricity consumption, or 536 terawatt hours, in 2025, annual energy use could roughly double to 1,065 TWh by 2030, Deloitte’s analysis suggests.
In the U.S., data centers are anticipated to represent 6%, or about 260 TWh, of total electricity consumption in 2026, Deloitte says, citing estimates from the International Energy Agency. The nation’s data center market has doubled in size in four years, with vacancy rates hitting a record low of 3% in the first half of 2024, according to a report by JLL released in August.
The surge in demand for data center capacity comes “against the backdrop of a multi-decade power industry transformation,” as electric companies build, upgrade, and decarbonize electric grid infrastructure, and digitalize systems and assets,” Deloitte says. Utilities are also working to fortify assets against increasingly severe weather and protect networks from rising cybersecurity threats, according to the report.
As demand for high-power computing capability intensifies, a significant price gap between new data centers and legacy facilities has also emerged, with existing data centers lacking the infrastructure to support the demanding workloads required, according to a CBRE report released in August.
Liquid cooling, despite its potential to support more data-intensive server racks, potentially eliminating the need for chillers, is still at a nascent stage and yet to be widely adopted or integrated into AI data centers globally, Deloitte notes, citing a March 2024 article on the website of engineering and consulting firm Ramboll.
The urgency and geographic concentration of data center demand, along with the need for round-the-clock, carbon-free energy, exacerbate challenges for technology companies and electricity providers, compounded by new demand from electrification, manufacturing and other sources, Deloitte says.
To expedite the jump to carbon-free energy sources for data centers, major tech industry players like Amazon and Google continue to be aggressive in boosting their use of renewable energy-sourced electricity and establishing power purchase agreements. The technology sector “consistently dominates” U.S. corporate renewable procurement and accounted for more than 68% of the nearly 200 deals of associated capacity tracked between February 2023 and February 2024, Deloitte’s report notes, citing its analysis of information gathered from multiple reports from S&P Global Market Intelligence, published during March and August.
The 24/7 carbon-free electricity that many tech companies seek can be hard to come by, however, “especially in the short term,” with many electricity providers announcing plans to build carbon-emitting natural gas-fired power plants, Deloitte says. “This could potentially make it more challenging to meet utility, state, and even national decarbonization targets,” the report notes.
Deloitte suggests that stakeholders form strategic partnerships to serve local and cluster-level AI data center needs.
The technology industry should also work closely with electricity providers to determine how to fund and scale new energy technologies, “which is a vital step to bring more clean energy to the grid,” the report states.
Deloitte also suggests optimizing generative AI uses and shifting processing to edge devices, which can help save network and server bandwidth, while supporting applications where response times are critical or where sensitive data is involved.
