For the past 40 years, the relationship between data centers and the power grid has focused on protecting the data center from disruptions to grid power. However, recent advancements have placed a spotlight on challenges to energy availability, leading industry experts to rethink how data centers and the grid can partner to more effectively meet the energy needs of both.

With the implementation of innovative technologies and approaches, such as peak shaving and load shaping, operators can continue to build new data centers to support increased computing demand while enhancing grid reliability with lower capital expenditure and costs. Local generation, nuclear power, battery energy storage systems (BESS), direct current distribution and energy reuse are examples of solutions data center and grid operators can employ to help reduce carbon footprints while continuing to deliver critical innovation.

The International Energy Agency (IEA) projects that the global electricity demand of data centers will more than double by 2026, from 460 terawatt-hours (TWh) to up to 1000 TWh. In the United States alone, data center load growth tripled over the past decade and is projected to double or triple by 2028, according to a recent report from the U.S. Department of Energy.

This increase is driven largely by advanced artificial intelligence systems, which require significantly more energy than traditional data processing tasks. A single AI query consumes approximately 2.9 watt-hours (Wh) – 10 times more energy than a standard Google search. Even with DeepSeek’s recent announcement that power reduction may be achievable with its platform, utilization still shows a need for energy-hungry AI-powered software-as-a-service (SaaS) applications.

Increased demand and utilization will unlock new use cases that were previously inconceivable. The Las Vegas Sphere, for example – an immersive entertainment venue centered on a structure covered in LCD screens and featuring AI-powered “spokesbots” – was unthinkable until technological advancements made it possible. Technologies now emerging are different from much that has come before. Both foundational AI models and possible ‘DeepSeek-type’ application growth will accelerate already increasing electricity demand, this acceleration compounded by the electrification of transport and buildings. More energy generation is needed, and the energy industry has an opportunity to support growth intelligently by shifting between nuclear, traditional energy sources and clean power in a way that enables electrification yet also achieves carbon reduction goals.

And while it is easy to focus on the energy demands of data centers alone, the real challenges will be ensuring that overall demand does not create an unsustainable strain on the grid and that clean energy is made available at an affordable cost to everyone, including local communities.

While some regions have made impressive strides in their use of renewable resources, many have been hampered by grid congestion and approval delays. These challenges vary by geography but present a universal hurdle in the transition to a sustainable energy future. Even ambitious policies, such as the European Union’s revised Energy Directive – which sets a minimum target of 42.5% renewable energy by 2030 – fall short of addressing the surging energy demands of the digital age.

This disconnect is especially evident in the data center space which – as data center power consumption threatens to exceed the grid’s ability to supply and manage sufficient sustainable power – has responded by adopting innovative, sustainable solutions to help meet growing power needs. Yet grid stabilization has become a concern, especially in regions where grid infrastructure is outdated. In some areas, such as Loudoun County, Virginia, the strain from years of data center expansion has led to moratoriums on new developments, forcing operators to consider relocating to regions with more available power.

Geographic shifts help alleviate grid congestion but highlight a broader challenge: the digital economy’s dependence on modernized grids with a stable supply of renewable energy. The current pace of data center expansion is struggling to match growing demand from digital services and expanding applications like AI. If it fails to keep up, this in turn threatens to stifle the digital economy.

The energy requirements of data centers are central to the disconnect between policy aspirations and energy infrastructure because the areas that experienced fast data center growth have historically become the first to face permit restrictions due to congestion. Confronted with this challenging landscape, it is important to consider how the role of the data center might expand from passive energy consumption to active grid participation, thus making data centers ‘prosumers’ that both produce and consume energy.

By integrating on-site low- or zero-carbon energy generation and innovative energy management technologies, data centers can support utilities and power providers while simultaneously helping deliver sufficient renewable energy.

Government intervention at the federal and state levels remains vital in addressing the demands of the energy transition, as policy can drive the rapid adoption of renewable energy and boost the pace of grid modernization.

Political, regulatory and economic barriers undoubtedly present challenges to meeting rapidly rising energy requirements. The key to overcoming these challenges will be partnerships and collaboration between governments, industry leaders and energy providers. A concerted effort to shorten the time to develop sustainable power – as well as harness the technical and investment capabilities of large data center operators to boost the penetration of low-carbon generation in stable grids – will be essential to ensuring that the digital revolution is both sustainable and resilient.