Home / Analysis / Technology / AI and Cryptocurrency Demand Strains Global Power Grids- Calls For Urgent Energy Solutions
5 min read

AI and Cryptocurrency Demand Strains Global Power Grids- Calls For Urgent Energy Solutions

Last Updated April 20, 2024 11:12 AM
Giuseppe Ciccomascolo
Last Updated April 20, 2024 11:12 AM
Key Takeaways
  • The rise of artificial intelligence (AI) and cryptocurrencies is placing a strain on the world’s power grids.
  • AI models require a lot of energy to run and this is expected to increase significantly in the future.
  • The energy consumption of Bitcoin mining is significant and projected to increase by 40% by 2026.
  • A possible solution may come from innovation and cooperation.

The impact of artificial intelligence (AI) and cryptocurrencies extends beyond financial markets, as it’s also disrupting the power sector. These industries heavily rely on data centers – vast warehouses housing powerful computers running non-stop complex operations.

The immense electricity demand from these centers is straining the grid to its capacity. This challenge presents opportunities for advancements in energy-efficient technologies and renewable energy integration to support the evolving needs of these sectors without compromising the stability of the power grid.

AI Energy Consumption

AI models operate on servers equipped with multiple GPUs (or TPUs for Google), most of which are provided by Nvidia. Each AI server consumes a continuous two kilowatts, as Shaolei Ren, a researcher at the University of California Riverside, noted .

The scale of infrastructure required for large AI models like ChatGPT is staggering. SemiAnalysis, a semiconductor analysis firm, projected  that implementing ChatGPT in every Google search would necessitate over 500,000 of Nvidia’s A100 HGX servers. This translates to a daily electricity consumption of 80 gigawatt hours (GWh) and an annual consumption of 29.2 terawatt hours (TWh).

Nvidia dominates the AI server market with a commanding 95% share. In the previous year, Nvidia shipped 100,000 units, collectively consuming an average of 7.3 TWh of electricity annually. Projections  from the International Electrotechnical Commission (IEC) indicate that by 2026, the AI industry‘s demand is expected to skyrocket, potentially reaching ten times its 2023 levels.

Estimated electricity demand
Estimated electricity demand from traditional data centres, dedicated AI data centres, and cryptocurrencies. l Source: IEA


The trajectory suggests that the energy consumption of AI will escalate significantly. Generative AI, in particular, will drive a surge in data center electricity consumption, potentially tripling from 2.5% to 7.5% of total usage by 2030 in the US, according to estimates  by the Boston Consulting Group.

Bitcoin Mining Has Always Been A Problem

In 2022, cryptocurrencies devoured approximately 110 TWh of electricity, equivalent to 0.4% of global annual electricity demand. The IEC predicted  a staggering 40% surge in cryptocurrency electricity consumption by 2026, reaching around 160 TWh.

In the US alone, crypto mining accounted for 0.6%-2.3% of the nation’s electricity demand last year, as reported by the Energy Information Administration. Astonishingly, miners consumed the same amount of electricity as the entire country of Australia in 2023, with projections indicating substantial future growth, according to ClearView’s analysis.

Bitcoin mining’s voracious energy appetite stems from its consensus mechanism and competitive dynamics. The proof of work (PoW) mechanism, integral to Bitcoin’s operation, rewards miners for solving complex mathematical puzzles with computer processing power, inherently demanding  vast energy resources.

Global electricity demand
Global electricity demand from data centres, AI, and cryptocurrencies. l Source: IEA

Andrew O’Neill, Managing Director & Co-Chair of S&P Global’s Digital Assets  Research Lab, emphasized the impact of halving block rewards on miners’ profitability. He told CCN:

“The block reward remains a significant part of miners’ revenue, therefore halving the reward impacts profitability. Some operations will become non-profitable and will shut down as result, particularly those with higher energy costs, and the most profitable BTC miners with lower energy costs will remain. How miners optimize their energy costs and manage their liquidity to cover fiat-denominated debt and operational costs will differentiate their credit risk.”

“Profitability challenges may continue the trend of consolidation within the BTC mining industry. As lowering energy costs becomes increasingly important, we expect that miners will continue to explore partnerships to provide load-balancing to energy grids, improving the economics of renewable energy projects in particular,” he added.

Possible Solutions

Addressing the energy consumption of AI data centers and cryptocurrency mining presents complex challenges but also potential solutions. MIT’s Lincoln Laboratory Supercomputing Center highlighted  the reliance of AI data centers on fossil fuels, prompting tech giants like Microsoft to explore nuclear energy from small modular reactors as a solution. However, some view  this approach as extreme, cautioning against blindly integrating AI into products without considering its necessity.

Cryptocurrency’s electricity demand is projected to surge by 40% by 2026, driving efforts to mitigate its environmental impact. But here Ethereum offers a solution. Its transition to a more energy-efficient validation method offers a success story, contrasting with Bitcoin’s resistance to change and its significant carbon footprint. Ethereum, for instance, employs an alternative consensus mechanism known as proof of stake (PoS). Here, block creators are selected based on their cryptocurrency holdings, minimizing the need for intensive computational power. Ethereum’s annual energy consumption clocks in around 7.08 GWh, a fraction compared to Bitcoin.

In the UAE, crypto mining facilities play a unique role in balancing the electricity grid, leveraging excess energy during low-demand periods. Saqr Mashhor Ereiqat, Co-Founder of Crypto Oasis, suggested  that Bitcoin mining could serve as a temporary solution for storing surplus electricity, although concerns persist about its consensus mechanism’s sustainability.

As the tech industry seeks solutions, the imperative remains to transition data centers away from fossil fuels, emphasizing the need for innovation and collaboration in pursuit of sustainable practices.

Was this Article helpful? Yes No