The Looming Power Crunch: Solutions for Data Center Expansion in an Energy-Constrained World
As global IT demand reaches unprecedented levels, dire predictions suggest that electric grids may fail to keep pace and hamper data center industry growth. But at Schneider Electric, we believe there are multiple paths to allow continued growth.
Global electricity demand is on a relentless rise, fueled by economic growth, the electrification of transportation and heating, ventilation and air-conditioning (HVAC) systems, and the explosive growth of data centers and IT infrastructure. In fact, data centers' total electricity consumption could more than double from an estimated 460 terawatt-hours in 2022 to over 1,000 TWh in 2026 – a demand equivalent to the entire country of Japan. This surge has led to concerns about a potential "power crunch," with some analysts viewing electric utilities as a growth segment for the first time in years.
Estimated data center electricity consumption increase from 2022 to 2026
The data center industry often finds itself in the spotlight, facing blame for this escalating energy demand. The rise of voracious AI models, cryptocurrency mining, and the increasing digitization of our lives undeniably contribute to an insatiable need for electricity. This perception is understandable given the staggering growth forecasts for IT and data centers.
However, attributing the "looming power crunch" solely to data centers overlooks the complexities of the situation. The modernization and expansion of electrical transmission and distribution capacity is a time-consuming process, often entangled in bureaucratic hurdles. Furthermore, the transition to clean energy, while crucial for long-term sustainability, introduces intermittent, low-inertia renewables to the grid, potentially causing supply constraints. This creates a challenging environment where both energy providers and consumers, including data centers, are navigating unprecedented shifts.
So, will the world truly run out of power? While some regions are experiencing strained or exhausted utility grid capacity due to a convergence of factors, the answer is likely no.
Experts believe this challenge will largely be short to mid-term, with new grid capacity investments and modernization programs expected to reach completion. In the meantime, data center companies are proactively adjusting their energy procurement strategies, exploring alternative prime and backup power sources such as natural gas turbines, HVO-fueled generators, wind/solar, fuel cells, and battery energy storage systems.
The path forward involves a multi-faceted approach, including:
Rethinking site selection strategies
Prioritizing power and water availability alongside latency and labor considerations.
Early collaboration between data centers and utility companies
Aligning goals and expectations to improve the efficiency and success of new builds.
Investing in grid modernization and expansion
Supporting utility companies' efforts to increase capacity and streamline permitting processes.
Exploring alternative power architectures
Considering on-site generation and energy storage solutions for faster and more sustainable data center deployments.
The narrative of an impending power crisis crippling data center growth presents an incomplete picture. While challenges exist, viable solutions are emerging through innovation and collaboration.
To gain a deeper understanding of these solutions and the strategies being employed to navigate this evolving landscape, we invite you to download our report, “The Looming Power Crunch: Solutions for Data Center Expansion in an Energy-Constrained World”, by the Schneider Electric Data Center Research and Strategy Group.
Discover how data centers and utility companies are working together to ensure a sustainable and powered future for the digital world.
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The looming power crunch: Solutions for data center expansion in an energy-constrained world
The looming power crunch
- By Patrick Donovan
- 07 May 2025
- 4 min read
As global IT demand reaches unprecedented levels, dire predictions suggest that electric grids may fail to keep pace and hamper data center industry growth. But at Schneider Electric, we believe there are multiple paths to allow continued growth.
Global electricity demand is on a relentless rise, fueled by economic growth, the electrification of transportation and heating, ventilation and air-conditioning (HVAC) systems, and the explosive growth of data centers and IT infrastructure. In fact, data centers' total electricity consumption could more than double from an estimated 460 terawatt-hours in 2022 to over 1,000 TWh in 2026 – a demand equivalent to the entire country of Japan. This surge has led to concerns about a potential "power crunch," with some analysts viewing electric utilities as a growth segment for the first time in years.
Estimated data center electricity consumption increase from 2022 to 2026
The data center industry often finds itself in the spotlight, facing blame for this escalating energy demand. The rise of voracious AI models, cryptocurrency mining, and the increasing digitization of our lives undeniably contribute to an insatiable need for electricity. This perception is understandable given the staggering growth forecasts for IT and data centers.
However, attributing the "looming power crunch" solely to data centers overlooks the complexities of the situation. The modernization and expansion of electrical transmission and distribution capacity is a time-consuming process, often entangled in bureaucratic hurdles. Furthermore, the transition to clean energy, while crucial for long-term sustainability, introduces intermittent, low-inertia renewables to the grid, potentially causing supply constraints. This creates a challenging environment where both energy providers and consumers, including data centers, are navigating unprecedented shifts.
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So, will the world truly run out of power? While some regions are experiencing strained or exhausted utility grid capacity due to a convergence of factors, the answer is likely no.
Experts believe this challenge will largely be short to mid-term, as new grid capacity investments and modernization programs expected to reach completion. In the meantime, data center companies are proactively adjusting their energy procurement strategies, exploring alternative prime and backup power sources such as natural gas turbines, HVO-fueled generators, wind/solar, fuel cells, and battery energy storage systems.
The path forward involves a multi-faceted approach, including:
Rethinking site selection strategies
Prioritizing power and water availability alongside latency and labor considerations.
Early collaboration between data centers and utility companies
Aligning goals and expectations to improve the efficiency and success of new builds.
Investing in grid modernization and expansion
Supporting utility companies' efforts to increase capacity and streamline permitting processes.
Exploring alternative power architectures
Considering on-site generation and energy storage solutions for faster and more sustainable data center deployments.
The narrative of an impending power crisis crippling data center growth presents an incomplete picture. While challenges exist, viable solutions are emerging through innovation and collaboration.
To gain a deeper understanding of these solutions and the strategies being employed to navigate this evolving landscape, we invite you to download our report, “The Looming Power Crunch: Solutions for Data Center Expansion in an Energy-Constrained World”, by the Schneider Electric Data Center Research and Strategy Group.
Discover how data centers and utility companies are working together to ensure a sustainable and powered future for the digital world.
Latest in AI & Technology
A cybersecurity blueprint: Securing critical infrastructure through zones of influence
Bridging data and AI for success: Why it matters for businesses
Transforming data center services: AI-driven condition-based maintenance
The looming power crunch: Solutions for data center expansion in an energy-constrained world
