An IDC report highlights a significant trend in the data centre industry: the increasing energy consumption driven by artificial intelligence (AI) workloads is set to escalate data centre spending. As the digital economy continues to expand, data centres are becoming pivotal for growth, yet they face mounting operational costs due to rising electricity prices and intensive energy demands.
Electricity represents the largest ongoing expense for data centre operators, accounting for 46% of total costs in enterprise data centres and a staggering 60% in service provider facilities. The IDC report projects that the demand for AI workloads will catalyse a substantial rise in data centre capacity, energy consumption, and associated carbon emissions. Specifically, AI data centre capacity is expected to grow at a compound annual growth rate (CAGR) of 40.5% through 2027, with energy consumption from AI workloads alone forecasted to increase at a CAGR of 44.7%, reaching 146.2 Terawatt hours (TWh).
IDC anticipates that global data centre electricity consumption will more than double between 2023 and 2028, with a five-year CAGR of 19.5%, ultimately reaching 857 TWh. This surge occurs amidst a backdrop of escalating electricity prices, influenced by supply-demand dynamics, environmental regulations, and geopolitical events. IDC asserts that these trends are likely to persist, making data centre operations significantly more expensive.
To illustrate the financial implications, IDC conducted a scenario analysis for a data centre operating at 1 MW of IT load in 2023, revealing that expected growth in electricity costs could exceed a CAGR of 15%, with many scenarios projecting growth over 20%. Notably, an improvement of just 10% in energy efficiency could lead to considerable savings for operators.
Sean Graham, research director at IDC, emphasises the importance of efficiency and sustainability in data centre operations: “There are any number of options to increase data centre efficiency, ranging from technological solutions like improved chip efficiency and liquid cooling to rethinking data centre design and power distribution methods.” He further argues that investing in renewable energy sources is essential for data centre providers to meet customer sustainability goals while enhancing overall efficiency.
Renewable energy options like solar and wind not only provide environmental benefits but also offer the lowest levelized cost of electricity (LCOE). By situating data centres near these energy sources, operators can reduce costs and energy losses, thereby improving both sustainability and resiliency.
In summary, as data centres prepare for a future dominated by AI, the focus on energy efficiency and renewable energy investment will be vital for managing rising operational costs while supporting sustainability objectives.
