Demand for electricity is expected to increase by 75% by mid-century. And a growing share of that demand will come from data centers.
According to BloombergNEF’s latest New Energy Outlook report, out today, data centers are expected to jump to 4.5% of final power demand by 2035, and then nearly double to 8.7% by 2050. That’s less than the demand from electric vehicles (11.2% by 2050) but more than the combined load of air conditioning and heat pumps (7.1%).
The report maps how the energy transition would likely proceed “in a world where investment decisions are driven primarily by the need to meet rising energy demand with a cost-competitive mix of technologies — not by climate concerns.”
While the report’s estimates are “somewhat uncertain and subject to revision,” the researchers noted that the general trajectory of data center energy demand — today estimated to total 362 additional gigawatts by 2035 — is expected to be a boon for renewables.
Together, renewables and storage are expected to make up 56% of that needed capacity, versus 44% from fossil fuels. However, fossil fuels are expected to make up a far greater share of power generation: 64% of incremental generation to meet data center demand.
“This last finding appears to run at odds with industry wisdom today that places solar and wind at the front of the queue when constructing new power capacity to meet data-center demand, in part due to a backlog in the availability of gas turbines,” BNEF notes. This is precisely what NextEra CEO John Ketchum spelled out in the developer’s first quarter earnings call; he both announced a gas turbine partnership with GE Vernova, but also noted that renewables are far faster and easier to build.
However, BNEF noted that the data center-fueled growth in renewables is coinciding with “the possibility that added data-center demand could help extend the life of existing coal and gas plants.” Most of the incremental coal and one third of the gas capacity that is expected to power data centers going forward is from existing plants that delay or avoid retirement.
This extension of gas and coal generation, the report added, will slow emissions declines.
This “Economic Transition Scenario” would lead emissions to fall by just 22% by mid-century, which is far below what is needed for net zero. The scenario aligns with global warming of 2.6 degrees Celsius by 2100, which would spell disaster for many vulnerable communities as well as ecological systems.
Many of the report’s findings — including that significant gas generation will endure until 2050 — contrast with those of BNEF’s net zero scenario, published in May 2024. That report found that gas use will need to drop dramatically, down to roughly half, in order to reach net zero by mid-century; it also found that battery storage will need to jump by 50 times by then.
The US in the age of AI
In a separate report on the outlook for data centers in the U.S., also out today, BNEF researchers noted that artificial intelligence is “reshaping the near-term outlook for U.S. power markets.” And the companies that develop, own, and operate those data centers “will have an outsized impact on the future of electricity in the U.S.”
In the U.S. alone, data center power demand is expected to more than double by 2035, from 34.7 GW in 2024 to 78.2 GW by 2035. In that time, data center utilization will also increase.
The more complex the AI model, the more computing power and energy needed to train it. However, the report notes that AI training innovation “offers a check on rising demand.” For instance, in January hedge fund High-Flyer Capital Management, released its DeepSeek reasoning model that demonstrated some measures of performance on par with U.S. rivals like OpenAI — with significantly less power demand.
Overall, BNEF has a relatively conservative outlook of near-term data center energy demand; less than a third of Goldman Sachs’ particularly bullish May 2024 estimate. That’s because the constraints on infrastructure development mean that it takes roughly seven years to develop a data center in the U.S. — and grid interconnection delays can extend that timeline further in certain data center hotspots like Virginia.
“BNEF’s relatively conservative outlook does not reflect skepticism about AI’s potential as a market force but acknowledges the deployment challenges of scaling energy infrastructure,” the researchers note.
