The Rising Demand for Electricity
AI and the Surge in Global Electricity Demand: A Closer Look
Global electricity demand is rising rapidly, and while artificial intelligence (AI) is contributing to the surge, it’s not the sole factor. A new report from the International Energy Agency (IEA) highlights that a mix of drivers—including climate change, manufacturing shifts, and electrification trends—are fueling this trend, with different regions experiencing unique impacts.
In the United States, electricity consumption increased by 3% in 2024. Much of this growth is attributed to the rapid expansion of data centers, which are needed to support the increasing demands of AI technologies. These data hubs are energy-intensive, requiring massive power for computing and cooling. However, they are just part of a broader story.
Advanced manufacturing is also contributing significantly to the rise in electricity use. Federal programs enacted during the Biden Administration, like the Inflation Reduction Act, have helped boost the country’s advanced manufacturing footprint. That has resulted in a wave of new facilities being built on previously undeveloped land or in revitalized vacant industrial spaces. Unlike factories of the past—which might have used onsite fossil-fuel-based energy—modern manufacturing plants tend to rely more heavily on grid electricity.
Climate change is playing a growing role as well. As record-breaking heatwaves become more common, demand for air conditioning and cooling systems is soaring, especially in developing nations with growing middle-class populations. Additionally, a global trend toward electrification—such as electric heat pumps replacing gas furnaces—is pushing electricity demand even higher.
Emerging economies are leading the way in energy demand growth. In 2024, China's electricity demand grew by approximately 6.8%, surpassing the nation's 5% GDP growth for that year. Other developing countries saw similar or greater increases. Meanwhile, the European Union posted a smaller 1.5% increase, reflecting greater energy efficiency and a decline in industrial output.
Despite these sharp rises in demand, the global energy mix is shifting in a positive direction. According to the IEA, 80% of all new electricity generation added globally last year came from renewable energy or nuclear power. This marks a crucial step in decoupling economic and energy growth from greenhouse gas emissions.
In sum, AI may be the face of rising energy demand, but it's just one of many forces transforming how and where electricity is consumed. The solution to managing this growth lies in continued innovation, infrastructure investment, and a sustained transition to clean energy sources.