EU Strategy for Rising Electricity Demands from Data Centers

The advent of generative AI, driven by tools like ChatGPT, has revolutionized industries but also presents substantial challenges, particularly in electricity demand. As the EU strives for Net Zero emissions, the rising energy needs of AI and data centers necessitate a reassessment of existing policies. A comprehensive strategy—improving energy efficiency standards for data centers, expanding renewable energy sources, managing electricity demand, and introducing stringent regulatory measures—is essential to sustainably meet the rising energy demands posed by generative AI and data centers.

Electrical Demand of Data Centers: Environmental and Economic Consequences

Data centers are vast complexes that house computer hardware, providing the computational power and storage essential for running applications, processing data, and supporting cloud services. Nearly every online action, from a Google search to a Zoom call, is processed by a data center, consuming small amounts of electricity each time. While the cost per interaction is minimal, the aggregate electricity consumption becomes substantial due to billions of daily interactions.

In 2022, data centers in the EU consumed an estimated 45–65 TWh of electricity, accounting for 1.8–2.6% of the region’s total electricity consumption. This already significant figure predates the widespread adoption of generative AI, which requires approximately ten times more electricity per query than a typical Google search. Analysts predict that, by 2030, data centers could consume at least 3.2% of the EU’s electricity, with some estimates suggesting an even higher figure due to the exponential growth in generative AI usage. Despite varying projections, it is widely acknowledged that these complexes will command an increasingly substantial portion of the EU’s energy consumption in the coming years.

Generative AI and data centers pose significant environmental and economic challenges. Rising electricity demand presents a challenge to the EU’s aging power grid, potentially requiring a choice between boosting investment, increasing reliance on fossil fuels, or managing possible power shortages. Without sufficient renewable energy and storage capacity, this growth could disrupt internet services and elevate electricity prices. European Transmission and Distribution Operators (ERT) estimate an €800 billion investment in grid infrastructure is needed by 2030, costs likely to be passed on to consumers unless mitigated by policy intervention. Despite these challenges, generative AI’s potential benefits necessitate adaptive regulatory approaches that balance innovation with sustainability.

Existing and Future Policies

Understanding new challenges is the first crucial step toward addressing them. The EU has already initiated efforts revising the Energy Efficiency Directive and subsequently by adopting a  delegated regulation aimed at establishing an EU-wide scheme to rate the sustainability of data centers. This framework requires data center operators to report key energy performance indicators (KPIs) by 15 September 2024, and then annually by 15 May starting in 2025. Specifically, the EU mandates reporting on energy and water usage, as data centers heavily rely on water for cooling servers. This initiative aims to enhance transparency about the current state of data centers, ultimately creating a sustainability rating system that could inform future regulatory policies.

To support this mission, the Joint Research Centre (JRC) created the European Code of Conduct for Data Centres (EU DC CoC). This voluntary initiative provides over 500 data center members with guidance on cost-effectively reducing energy consumption while maintaining operational efficiency. Despite positive strides in improving data center efficiency, these facilities still need to halve their emissions by 2030 to meet the Net-Zero Emissions Scenario targets set for 2050. With the goal of “making these infrastructures climate neutral and energy efficient by 2030” as stated in the Digitalising the energy system – EU action plan, the EU may need to consider implementing more aggressive policies.

As part of its action plan, the EU Commission is promoting the reuse of waste heat from these complexes to heat homes and businesses. This initiative will be integrated into the revised Energy Efficiency and Renewable Energy Directives and included in the National Energy and Climate Plans of Member States to ensure data centers contribute positively to their communities. Furthermore, the Commission plans to fund research and innovation in systems capable of storing waste heat produced by these complexes during the summer for use in winter. To support these efforts, the EU has conducted studies to optimize the overall integration of data centers into energy and water systems. This comprehensive approach aims to enhance the sustainability and community benefits of data centers.

The existing framework, while a positive step, requires further reinforcement to achieve the EU’s ambitious environmental goals. Building on its existing commitment to transparency, the EU is likely to take a multi-pronged approach to address the growing energy demands of data centers. The recently launched EU-wide data center sustainability rating scheme could be expanded into a system with stricter mandatory reporting requirements and minimum energy performance standards. For example, mandating minimum Power Usage Effectiveness (PUE) ratings for new data centers and offering incentives for retrofitting existing facilities with energy-saving technologies would drive substantial improvements. With EU data centers having an average Power Usage Effectiveness (PUE) level of 1.6, enforcing the ideal level of 1.0 would be a measurable and effective way to reduce electricity consumption by data centers. Already, there is precedent for this act with the German Energy Efficiency Act requiring a PUE of 1.2 for new data centers by 2026. Overall, this move would align with the EU’s focus on clear and measurable environmental benchmarks.

With an inclination to market-based solutions, the EU is discussing the implementation of renewable energy mandates for data centers. These mandates would require data centers to source a significant portion (estimates range from 30% to 50%) of their energy from renewable sources. Proponents argue that such mandates would act as a powerful catalyst, driving further investment in renewable energy infrastructure.

Even with the recent rightward shift in Parliament, the Energy Directives and Net Zero Goal will remain topics of discussion. However, these policies may evolve to reflect the new priorities and strategies of the current parliamentary composition.