The growing interest in generative artificial intelligence (AI) has triggered a race to develop the technology, driving demand for high-density data centers and significantly increasing predicted electricity consumption. Research from the US Energy Information Administration and Goldman Sachs indicates domestic and global record-high energy demand is quickly approaching.
THE FORECAST
US power consumption is expected to reach record levels in 2025 and 2026, driven by rising demand from data centers supporting AI and cryptocurrency, along with increased electricity usage in homes and businesses for heating and transportation. According to the US Energy Information Administration, power demand will reach 4,179 billion kWh in 2025 and 4,239 billion kWh in 2026, surpassing the 2024 record of 4,082 billion kWh.
This surge in demand is part of a broader global trend, with Goldman Sachs forecasting that global power demand from data centers will increase 50% by 2027, potentially rising as much as 165% by the end of the decade compared to 2023. As a result, analysts project that by 2027, power demand will reach 84 gigawatts (GW), with AI-driven workloads accounting for 27% of the market, cloud services at 50%, and traditional workloads at 23%.
This increased forecast comes in tandem with a shifting reliance on generation resources. Studies indicate that reliance on natural gas will decrease from 43% in 2024 to 39% by 2026, while coal's share will drop slightly from 16% in 2024 to 15% in 2025. Meanwhile, renewable energy generation is expected to grow from 23% in 2024 to 27% by 2026. Nuclear power’s share is anticipated to remain stable at 19%.
IMPACT ON THE GRID AND GENERATION
The rapid growth of data centers will place additional strain on the electric grid, requiring substantial investment. Goldman Sachs estimates that approximately $720 billion will need to be spent on grid upgrades through 2030. Goldman Sachs’ senior equity research analyst warns that “[t]hese transmission projects can take several years to permit and build, creating a potential bottleneck for data center expansion if regions do not proactively address these challenges.”
KEY VARIABLES
While the increase in global energy demand is certain, the exact figures remain subject to several variable factors, including:
- AI modernization may not progress as quickly as anticipated.
- The expansion of the power grid may constrain data center supply.
- Developments in China, particularly with the AI model DeepSeek, have raised uncertainties regarding AI training, infrastructure, and scalability.
As we move toward an energy-intensive future driven by AI and data centers, the need for strategic investments in infrastructure will become crucial in mitigating the risks of potential shortages.