Acknowledgements 3

Executive summary 9

Introduction 15

Factors influencing electricity demand by data centres

1 In light of recent market trends, has the IEA adjusted its data centre demand outlook? 17

1.1 Big numbers, complex signals: Interpreting the message from financial markets 18

1.2 Public policy support 20

1.3 Physical bottlenecks 21

1.4 Key takeaways 23

2 To what extent can efficiency improvements moderate AI electricity growth? 28

2.1 Software improvements 28

2.2 Hardware improvements 30

2.3 Key takeaways 31

3 Are new data centres moving to locations beyond existing clusters? 34

3.1 Global data centre clustering patterns 34

3.2 Data centre clustering in the United States 36

3.3 Key takeaways 39

Powering data centres

4 How is AI changing data centre design, and what does it mean for the mix of energy technologies in them? 40

4.1 Key takeaways 44

5 How are data centre operators procuring the electricity they need? 46

5.1 Procurement strategies 46

5.2 New natural gas capacity will help meet surging electricity demand 49

5.3 Key takeaways 49

6 Why are some data centre developers considering onsite generation? 51

6.1 Key considerations for onsite generation 52

6.2 Operational challenges of supplying electricity to data centres 55

6.3 Key takeaways 57

7 What are financial markets telling us about the impact of AI on the energy sector? 59

7.1 Which energy market segments have benefited from the AI boom? 59

7.2 How does increased exposure to market sentiment towards AI create opportunities or risks for the energy sector? 61

7.3 How are companies responding to increased AI demand growth? 63

7.4 Key takeaways 65

8 Are data centres raising electricity prices? 67

8.1 Surging data centre growth in some regions presents a unique challenge 67

8.2 Understanding what drives system costs 72

8.3 Policy and technology levers offer scope to mitigate price impacts 74

8.4 Key takeaways 77

Impact of AI on energy

9 How can AI enhance energy security and sustainability in energy, and what are the barriers to wider adoption? 78

9.1 The role of AI in enhancing energy security and sustainability 78

9.2 Barriers to scaling up AI use in the energy sector 82

9.3 Key takeaways 85

10 What does the rise of physical AI and robotics mean for innovation and competitiveness in the energy sector? 86

10.1 How is physical AI evolving? 86

10.2 Can physical AI drive competitiveness by improving process automation? 87

10.3 Will robots be the next technology to transform the industrial and energy sectors? 91

10.4 Key takeaways 93

11 If AI drives a boom in productivity and GDP, what would it mean for energy demand? 95

11.1 AI’s impact on productivity: From micro-level gains to macro effects 95

11.2 What could be the impact of higher productivity from AI on energy demand? 97

11.3 Key takeaways 101

Annexes

Annex A. Data tables 105

Annex B. Definitions 111

Annex C. References 125