Speaking at the Bosch Connected World conference in February, Elon Musk said rising demand for power-hungry AI chips could soon lead to an electricity shortage. “”The simultaneous growth of electric cars and AI, both of which need electricity, both of which need voltage transformers – I think, is creating a tremendous demand for electrical equipment and for electrical power generation.” said Musk

While the enthusiasm for AI’s potential benefits is clear, it is crucial to address the often overlooked immediate and significant environmental impacts of AI technologies, particularly in terms of energy and water consumption.

At the start of this year, OpenAI’s CEO Sam Altman acknowledged that AI’s energy consumption is far greater than initially anticipated. On average, a ChatGPT query requires nearly 10 times as much electricity to process as a Google search, according to a recent Goldman Sachs report.

Data Centres: The Backbone of AI Operations

Data centres, the backbone of AI operations, are incredibly energy intensive. They support business applications from email to CRM, Netflix to AI and everything In between. They provide the backup, data replication and security for most digital processes. They are the sky in which the digital cloud sits.

The International Energy Agency (IEA) predicts that energy usage by data centres will double within the next two years, reaching levels comparable to the entire energy consumption of Japan- population 125 million. This surge is primarily driven by the computational demands of AI models, which require vast amounts of electricity for both training and operational processes.

Additionally, data centres consume substantial amounts of water, primarily for cooling purposes. These centres are often situated in regions already grappling with water scarcity, exacerbating local water shortages. The necessity for cooling to maintain optimal operating temperatures for servers adds to the environmental burden, creating a paradox where technologies designed to solve problems, like climate change, are contributing to resource depletion and environmental stress.

The latest figures from the Central Statistics Office (CSO) highlight the significant impact of data centres on Ireland’s electricity consumption. According to the CSO, data centres now account for over 20% of the nation’s total electricity use, surpassing the combined electricity consumption of all urban households and doubling that of rural households.

Ireland currently hosts 82 operational data centres, with 14 more under construction and planning approval granted for an additional 40. This trajectory predicts a 65% growth in the sector in the coming years, raising alarms about energy security and the country’s ability to meet its climate commitments. The scale of this growth poses a severe threat to the national grid and environmental targets, necessitating immediate action.

EirGrid, Ireland’s energy grid, placed a moratorium on the development of new datacentres in Dublin until 2028. But applications for centres outside the capital are still being granted. Other European countries, such as the Netherlands, are halting their development of datacentres. Singapore imposed a three-year moratorium from 2019 to 2022, and is now seeking applications within new parameters to ensure sustainability.

A recent article from Goldman Sachs Research “AI is poised to drive 160% increase in data centre power demand” highlights several key points about the future of Europe’s power demand and infrastructure investments:

• Europe’s power demand is expected to grow significantly, potentially increasing by 40% to 50%. This rise will be driven by various factors, including increased digitalization, electrification of transport, and industrial processes.
• Currently, around 15% of the world’s data centres are in Europe. By 2030, their power requirements will equal the current combined consumption of Portugal, Greece, and the Netherlands. This indicates a substantial increase in energy consumption by data centres, reflecting the growth of the digital economy and cloud services.
• Europe has the oldest power grid globally, necessitating significant upgrades to accommodate the rising power demand and integration of renewable energy sources.

Goldman expect approximately €800 billion ($861 billion) will be needed over the next decade to upgrade and expand transmission and distribution networks to ensure the reliability and resilience of the power grid. And an additional nearly €850 billion will be required for investments in renewable energy sources, including solar, onshore wind, and offshore wind.

These figures underscore the significant financial and infrastructural efforts needed to support Europe’s energy transition and meet future power demands. Investing in both grid modernization and renewable energy will be crucial to achieving these goals while ensuring energy security and sustainability.

Goldmans view is supported by the International Energy Agency who expect global energy investment is set to exceed USD 3 trillion for the first time in 2024, with USD 2 trillion going to clean energy technologies and infrastructure. Investment in clean energy has accelerated since 2020, and spending on renewable power, grids and storage is now higher than total spending on oil, gas, and coal.