The United States is witnessing an unprecedented surge in data center power demand, which is expected to double from 2022 levels to 35 GW by 2030. Projected to reach up to 7.5 percent of the country’s total electricity consumption, this level of demand is equivalent to the electricity consumption of nearly a third of (40 million) American homes. This dramatic growth, marked by a record-breaking 4.3 GW of new transactions in 2023 alone, is fueled by the expanding needs of cloud computing, cryptocurrency mining, and artificial intelligence (AI) workloads, including large language models that require substantial power for operation. The impact of this growth is driving mounting concerns over grid reliability and decarbonization as these workloads push up against existing grid capacities.

Many utilities are turning to gas as a solution to address load growth, reporting to add 16.9 GW of new gas generation between 2023 and 2027. However, they have other options. Data center load growth could exceed $100 billion in annual investment directed toward the energy system; this can influence the types of generation, siting decisions, and cost allocations that will be used to meet it. Data centers can help reshape the energy landscape and set a precedent for larger loads to come from electric vehicles (EVs), onshoring industry, manufacturing, and building electrification. Proactive system-level approaches to address grid reliability and promote carbon-free electricity and storage are critical for overcoming default energy solutions that would add natural gas plants, deploy diesel backup generators, or postpone fossil fuel assets retirements.

Exhibit 1: Proposed New Gas Plant Capacity 2023–2027

To support grid reliability and decarbonization effectively, data center companies can implement four strategic solutions: maximizing energy efficiency, enhancing demand flexibility, getting more out of existing grid infrastructure, and negotiating for additional carbon-free energy and storage. These approaches are critical pathways toward a more sustainable and resilient energy future for data centers that support system-level progress on decarbonization, not just company-level goals and reporting.

Maximize Energy Efficiency

Data center cooling can consume about 40 percent of the facility’s energy use. The industry has seen significant advancements in cooling technology, transitioning from traditional air-conditioning systems to more efficient solutions like in-row cooling or refrigerant-based heat dissipation. Despite these improvements, the challenge of cooling is intensifying, with typical power requirements per rack in current data centers expected to jump from 10–14 kW  to 40–60 kW for AI-ready racks that accommodate resource-intensive GPUs. An example of a forward-thinking approach to addressing these heightened demands is Equinix’s adoption of AI to dynamically adjust its cooling in response to real-time weather conditions. Through this change, the company achieved a 9 percent increase in energy efficiency.

Enhance Demand Flexibility

Enhancing demand flexibility is a critical front in the battle to achieve a reliable, low-emissions grid. Data centers could intelligently shift data processing workloads to times or geographies where the grid is less congested or renewable energy sources are more plentiful. In this way, data centers can play a key role in reducing pressure on peak loads and utilizing excess carbon-free electricity that may otherwise have been curtailed. Alphabet’s spinoff, Verrus, for example, is designing data centers with sustainability as a focal point. By employing software to manage workloads and utilizing grid-scale battery storage, Verrus has announced plans for data centers to dynamically reduce their electricity load during peak grid stress periods. This strategic approach can not only lessen the burden on the grid but also aligns data center operations more closely with the availability of carbon-free electricity.

It is important to recognize that demand flexibility incentives vary among data centers. Cryptocurrency mining operations, for instance, often suspend activities when electricity prices exceed operational profitability, sometimes deriving substantial revenue from demand response programs. In contrast, data centers engaged in AI computations may see little economic incentive to reduce demand based solely on price signals, making their participation less about cost savings and more a strategic decision influenced by broader corporate sustainability goals.

This distinction underscores the importance of policy and regulatory mechanisms to encourage demand flexibility participation across the spectrum of data center activities. Where such programs do not exist, data center companies can negotiate with their utilities to design these programs so they support system-level reliability and help avoid using coal and gas generation.

Use Existing Infrastructure Better

Interconnection queues and supply chains to add new generation and transmission infrastructure remain steadfast bottlenecks to expanding load. Datacenter companies will need to use existing infrastructure more efficiently if they wish to continue expanding in low-capacity markets. Grid-enhancing technologies (GETs), which include dynamic line ratings, advanced power flow controls, and topology optimization, offer more cost-effective and rapid alternatives to traditional transmission upgrades. Datacenter companies could encourage their utilities and transmission owners to deploy GETs to help them connect to the grid more rapidly and with lower transmission and distribution upgrade costs and enhance their ability to meet climate goals through increased integration of renewable energy sources.

In parallel, the Energy Infrastructure Reinvestment program, part of the broader Inflation Reduction Act (IRA), presents an innovative opportunity for data center companies to add new load, clean generation, or storage at existing coal and gas generation sites by leveraging the same interconnection infrastructure.  This “clean repowering” could potentially accelerate the integration of renewables relative to going through the interconnection queue. Data center companies should also consider the emissions impacts of where they choose to site new or expand existing facilities – grids and even individual nodes can vary by how much emissions they would generate. Discussing site selection in the context of tariff negotiations and broader utility planning processes between corporations, developers, and utilities may help support the decarbonization of data center operations.

Negotiate Access to Renewables and Storage with Utilities

Negotiating to add renewable energy and integrate storage with utilities is another pivotal strategy for data center companies looking to be leaders in the energy transition. Data center companies could forge novel tariff agreements with utilities or inform utility resource plans to achieve these outcomes for new and expanding facilities. In fact, Meta’s partnership with the Tennessee Valley Authority (TVA) to establish a green tariff for new solar energy across TVA’s service area is an example of how corporate demand can drive additional renewable energy sources.  And Amazon’s innovative energy procurement strategy has led to the repurposing of a 120-year-old Maryland coal mine site into a solar farm. This brownfield conversion project illustrates the transformative potential of aligning corporate renewable strategies with local grid needs.

The data center industry, propelled by AI, is at a critical juncture. Data center load growth is likely a practice round for a bigger wave of loads from EVs, onshoring industry, and building and manufacturing electrification. The significant capital that data center companies are directing to the energy system could be used to support scaling traditional renewable energy sources like wind and solar, as well as GETs and nascent technologies such as virtual power plants, clean firm generation, and long-duration storage.

The IRA introduced new ways to finance and site these projects and make them accessible to a broader range of electricity customers. However, if data center companies — as well as other large load customers — only focus on accelerating their own interconnection, and not the broader system-level needs and opportunities, the energy industry could continue on a business-as-usual path, adding more natural gas, installing diesel generators, or delaying fossil retirements, jeopardizing both corporate and state sustainability goals.

RMI’s ZEROgrid initiative brings together leading corporations from multiple industries to identify system-level actions that will accelerate grid reliability and decarbonization.  We encourage data center operators, their customers, developers, utilities, and regulators to participate in driving ambitious, forward-thinking actions that will set an example that other industries can follow for how to grow energy demand while also supporting a reliable, equitable transition.