The digital transformation of the global economy is unfolding at a pace never seen before. From connected homes and smart factories to cloud platforms and online services, data has become the backbone of modern life and business. Every search query, video stream, financial transaction and automated process adds to a rapidly expanding digital universe that must be stored, processed and accessed instantly.

This shift has triggered an unprecedented surge in data centre workloads worldwide. The rapid spread of smart devices across homes, offices, industries and infrastructure, combined with cloud computing, big data analytics and always‑on digital services, has fundamentally changed how information flows through the global economy. Adding further momentum is the rise of artificial intelligence, particularly generative AI and data driven machine learning, which require immense computing power to function at scale.

As digital systems increasingly power decision making, automation and infrastructure management, global data volumes are expected to rise sharply. Data generation is projected to grow from 64 zettabytes in 2020 to 335 zettabytes by 2030. This growth is forcing existing data centres to expand while driving demand for new facilities operating at gigawatt scale. With hyperscale facilities becoming the dominant model, global data centre floor space is expected to exceed 300 million square feet, placing unprecedented pressure on energy systems worldwide.

AI and the Energy Challenge Behind the Digital Boom
As data centres expand to meet rising demand for speed, scale and reliability, energy consumption has emerged as one of the most pressing challenges of the digital economy. Modern data centres, especially those supporting AI driven workloads, depend on high performance hardware such as graphics processing units. These processors consume significantly more electricity than traditional computing systems.

Real time AI applications, including autonomous systems and large scale data analytics, require continuous, high intensity computing. This increases both direct power demand and the need for advanced cooling systems to manage heat generated by dense server environments. As a result, electricity consumption at data centres is rising sharply, often outpacing the expansion of local grid infrastructure and power generation capacity.

In many regions, the growth of data centres is moving faster than upgrades to transmission networks and new power plants. This mismatch creates strain on local power systems and raises concerns around reliability, energy security and long term sustainability. As AI continues to reshape industries, the need for stable, scalable and resilient energy solutions for data centres has become urgent.

Global Electricity Demand from Data Centres
While the data centre sector is evolving rapidly, several global studies offer insight into the scale of its growing energy footprint. According to the International Energy Agency Electricity Report 2024, data centres powered by AI consumed approximately 460 terawatt hours of electricity in 2022, representing around 2 percent of total global electricity demand. The same report projects total data centre electricity consumption to rise to between 620 and 1050 terawatt hours by 2026, depending on growth scenarios.

Other estimates reinforce this trend. The Gas Exporting Countries Forum October 2024 report projects electricity demand from data centres to grow from 414 terawatt hours in 2023 to between 770 and 1560 terawatt hours by 2030. Deloitte’s Technology, Media and Telecommunications report published in November 2024 estimates AI driven data centre power consumption at 536 terawatt hours in 2025, potentially doubling to 1065 terawatt hours by 2030.

These projections highlight the scale of the challenge. What was once a relatively modest contributor to global electricity demand is becoming a major consumer of power within a single decade.

Where the Energy Goes Inside a Data Centre
Understanding how data centres use electricity is critical to managing their impact. Approximately 40 percent of electricity consumption is driven by computational requirements, including servers and processors handling data storage and processing. Another 40 percent is consumed by cooling systems that maintain safe operating temperatures for high density equipment.

The remaining 20 percent supports associated infrastructure such as internal power networks, data transmission and communication systems, power conditioning equipment, storage systems and lighting. This balanced split between computing and cooling highlights why energy efficiency improvements must address both hardware performance and facility design.

In terms of scale, smaller data centres typically consume between 5 and 10 megawatts of power. Large hyperscale facilities, which are increasingly common, consume 100 megawatts or more. The annual electricity consumption of a single hyperscale data centre is comparable to the electricity demand of approximately 350,000 to 400,000 electric vehicles.

A Global Footprint with Regional Concentration
Today, there are more than 8000 data centres operating globally. About 33 percent are located in the United States, reflecting the country’s strong digital infrastructure and technology ecosystem. The European Union accounts for approximately 16 percent, while China hosts around 10 percent. India currently represents about 3 percent of the global data centre count, but this share is expected to grow as digital adoption accelerates.

This geographic concentration means that the impact on energy systems is uneven. Regions with high data centre density face greater pressure on power grids, while emerging markets must plan carefully to support future growth without compromising energy security or sustainability goals.

Managing the Energy Impact of Data Centre Growth
The rapid rise in electricity demand from data centres has significant implications for climate commitments and energy transition goals. Without intervention, increased demand could lead to greater reliance on fossil fuel based power generation, contributing to higher carbon dioxide emissions and climate change.

Renewable energy offers a clear pathway to address this challenge. Wind and solar power can support large scale data centre operations while reducing greenhouse gas emissions. Other low carbon sources such as nuclear energy, hydropower and battery based energy storage also play an important role in providing stable and reliable power.

Data centre operators can either develop dedicated renewable energy assets or procure clean power through long term contracts with renewable energy providers. These approaches not only reduce environmental impact but also improve energy cost predictability over time.

Efficiency as a Strategic Priority
While clean power is essential, energy efficiency remains equally important. Advances in semiconductor technology are enabling more efficient processors that deliver higher performance with lower energy consumption. Improvements in cooling systems, including advanced air and liquid cooling methods, can significantly reduce electricity use.

Additional measures such as waste heat recovery, energy efficient building design and optimised power distribution systems help offset rising demand. Together, these strategies improve overall system efficiency and reduce the environmental footprint of data centre operations.

The Role of Regulation and Policy
Governments and regulators are increasingly recognising the importance of transparency and accountability in data centre energy use. The European Commission has introduced revised regulations that require data centres to report energy consumption and emissions. This promotes better monitoring and informed decision making across the sector.

In the United States, the Energy Act 2020 enables the federal government to measure and monitor energy and water consumption in data centres. The Act mandates the publication of energy and water usage data, creating benchmarks and encouraging the adoption of best practices.

Several countries are also introducing requirements for renewable energy use and efficiency standards, reinforcing the role of policy in shaping sustainable digital infrastructure.

Conclusion
Data centres are becoming a critical pillar of the global digital economy, supporting everything from healthcare and manufacturing to finance and autonomous systems. The rapid adoption of AI driven technologies is accelerating this growth, bringing with it significant increases in electricity demand.

Meeting this challenge requires a balanced approach that combines renewable energy, efficient technologies and supportive regulation. By rethinking energy optimisation, infrastructure planning and system design, the industry can support continued digital innovation while aligning with long term sustainability goals.

Tata Consulting Engineers, with its focus on innovative design solutions for complex challenges, is actively leveraging AI driven technologies across engineering applications. With experience in data centre projects, TCE offers comprehensive design solutions that help clients navigate the intersection of digital growth, energy efficiency and sustainable infrastructure.