IEA: Data center investment will exceed oil supply spending this year
Global data center investments will surpass new oil supply expenditures this year, marking a significant economic shift according to a new International Energy Agency (IEA) report.
The world is projected to spend $580 billion on data centers this year, exceeding the $540 billion allocated for new oil supplies. The IEA stated this comparison provides “a telling marker of the changing nature of modern, highly digitalized economies.”
Electricity consumption by AI data centers is anticipated to increase fivefold by 2030, effectively doubling the current total energy usage of all data centers. Conventional data centers will also experience increased energy consumption, though less dramatically.
The IEA projects half of this demand growth will occur in the U.S., with Europe and China accounting for most of the remaining increase.
Most new data centers are under development in cities with populations exceeding one million. Approximately half of these planned facilities will be at least 200 megawatts, with many situated near existing data center clusters.
The IEA notes that this rapid build-out, particularly in urban and clustered areas, presents challenges. “Grid congestion and connection queues are increasing in many regions, and connection queues for new data centers are often already long,” the agency reported.
Grid connection waits can extend up to a decade in certain markets, such as northern Virginia. Dublin, Ireland, has halted new interconnection requests entirely until 2028. Supply chain constraints represent another critical issue, with components such as cables, critical minerals, gas turbines, and transformers delaying grid upgrades.
Companies like Amperesand and Heron Power are developing solid-state transformers. These aim to upgrade the current century-old grid technology by integrating renewables more effectively, responding rapidly to instabilities, and handling various conversions. Initial deployments are still one to two years away, with production ramp-up requiring additional time.
The IEA expects renewables to fulfill the majority of new data center power requirements by 2035. This projection holds regardless of whether countries maintain current policies or pursue more aggressive emission reduction strategies. Solar power, with its recently reduced costs, has become a preferred option for developers.
Over the next decade, approximately 400 terawatt-hours (TWh) of electricity for data centers will come from renewables. Natural gas is expected to provide around 220 TWh. Should small modular nuclear power plants meet their projected capabilities, the IEA anticipates they could contribute 190 TWh to data centers.
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