Key Takeaways
- AI’s rapid growth is driving an unprecedented surge in global data center demand, requiring trillions in new infrastructure investment.
- Meeting this demand poses major challenges for energy, sustainability, and resource allocation worldwide.
- Governments, industry leaders, and chipmakers must collaborate on sustainable solutions to power AI while minimizing emissions.
The emergence of AI has led to an immense increase in data center capacity needs. The capacity demand is such that the world would halt if we did not find a global consensus and effective means to power up data centers.
Projections from analysts, governments and major data center developers all point to a rapid expansion of the current global data center capacity over the next several years.
How much would this cost, and how would it be used? Let’s break it down.
The Modern-Day Data Center
Current estimates call for $9-15 million per megawatt to develop a modern data center. This cost includes land acquisition, building design, building construction, structured cabling, power and cooling systems, and securing the facility.
The actual number will vary depending on actual materials costs, local labor costs, local regulatory compliance, and unforeseen delays.
Using this range, we see that a new 10MW facility would cost between $90 and $150 million. Scaling up to 100MW – something that usually requires multiple buildings – brings the price tag to almost $1 to $1.5 billion.
The gigawatt-and-beyond facilities now being discussed by many developers bring the cost to almost $10 to $15 billion and beyond.
A global construction boom from 55GW to 300GW thus caps out at around $2-2.5 trillion.
These latter amounts are similar to the entire economy of Brazil, Canada, or Italy. They would constitute about 2% of the world’s GDP.
Clearly, it would take several years to achieve construction at this level and put hundreds of massive new data centers into operation.
Is there enough opportunity out there to justify such a heavy lift?
The AI Challenge Continues To Grow
AI proponents will tell you “yes.” The large models being used to develop today’s generative AI (or GenAI) platforms require computing resources costing in the hundreds of millions, even billions, of dollars.
As these platforms continuously move into the mainstream of consumer search and corporate/government research, we can expect the demands they make to grow exponentially.
Additionally, the next generation of “agentic AI” featuring more proactive AI platforms that act as agents for automated tasks and custom requests can be expected to make further substantial demands.
A third area is government and scientific research. Here AI is put to use to work on complex modeling and simulation problems found in climatology, other earth sciences, epidemiology, medical diagnostics, military research, and cryptography across all consumer, business, and government functions.
A fourth area is, of course, cryptocurrency development.
Although Bitcoin’s energy-intensive proof-of-work architecture is giving way to less intensive proof-of-stake protocols in blockchain and stablecoin development, the near-future demands of the blockchain/cryptocurrency world should not be underestimated.
Demands on Electricity Grids
But the challenge of simply building enough new data centers to meet all of these needs does not end with the data centers themselves. Enough power must be available for them, and as much of that power as possible must be sustainable.
In 2024, the International Energy Agency (IEA) estimated that around 1.5% of the world’s electricity served data centers.
It’s likely this is now higher at around 1.7-1.9%. The IEA estimates that only about half of that demand is met by renewables. In developing countries, data centers account for more than 20% of electricity demand growth to 2030.
There are valid concerns about this level of energy use and the impact of it on efforts to curb global greenhouse gas emissions.
It’s critical to note that this energy usage is very unbalanced and skewed. The United States, for example, has 44% of the world’s data servers, with a very large concentration within a single range of Northern Virginia in the Washington, D.C. area.
Energy constraints have already emerged as an issue there, likewise in Chicago, Dallas, Phoenix, and California’s Silicon Valley. Texas recently legislated new policies to cut back data center power consumption during peak periods.
There are also concerns about having enough water to cool large data centers, particularly in Arizona in the US, and arid regions elsewhere in the world.
So what can we do?
Major Chip Producers
For their part, major chip producers including NVIDIA and TSMC are working daily to make their chips more efficient – to use less electrical power even as they deliver more computing power.
Most of the world’s major data center operators long ago committed to Net Zero energy usage strategies, and though they often have to restate their goals and processes, it is rare to see a large new data center being planned today without a commitment to using sustainable energy.
The world seems to be moving in the direction of developing more nuclear energy, which although not a renewable resource, is a sustainable source that emits steam as its byproduct.
A declaration at the United Nations COP28 meeting in Baku, Azerbaijan, during December 2023 was signed by more than 20 nations (including the United States), with a mission to triple the amount of nuclear energy by 2050.
Viewing all of these efforts and more, the International Data Center Authority (IDCA) provides a metric that shows a correlation between data centers and related digital infrastructure and economic efficiency.
Rather than simply looking at a nation’s total emissions or its per capita (per-person) emissions, IDCA examines emission levels compared to the productivity of a nation’s economy.
This number, expressed as the number of tons of CO2 produced by each $1 billion of nominal GDP, finds a world average of about 350 tons of CO2 produced per $1 billion of GDP.
But in the United States, this number drops to 177, about half of the world average. Germany comes in at about 150, as does Brazil, France and the U.K. at 100, and Scandinavian nations under 100.
China and India, however, produce around 700 tons of CO2 for each $1 billion of their economy. Much of the developing world is also at a level less efficient than the world average.
The kicker is that AI, when put to proper use in making searches more efficient, in automating systems from transportation and logistics to manufacturing and customer service, and to creating a new class of high-end skilled service employment, should force a downward trend in emissions levels by developing more efficient economies.
There is a path toward developing the massive infrastructure required to support AI’s demands, but it will require concerted efforts by governments to take the lead in sustainability, regulatory consistency and AI-driven economic efficiency.
These are highly complex, difficult issues unsuitable for slogans or truncated thinking.
However, several nations are already proving that a well-functioning 21st-century economy will place data centers in a key role as we all work toward reducing emissions and reaching Net Zero.
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The views, thoughts, and opinions expressed in the article belong solely to the author, and not necessarily to CCN, its management, employees, or affiliates. This content is for informational purposes only and should not be considered professional advice.
About the Author
Mehdi Paryavi is the Chairman and CEO of the International Data Center Authority (IDCA), the world's leading Digital Economy think tank and prime consortium of policymakers, investors, and developers in AI, data centers, and cloud.
