AI sector on course to use as much power as Spain by 2027, new report warns

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The fast-paced growth of the generative artificial intelligence (AI) sector has put it on course to start consuming the same amount of electricity each year by 2027 as was used by the entirety of Spain in 2022, new modeling by Morgan Stanley shows. 

The rapid expansion of the Generative AI industry is set to see its power usage grow at rates of 70% each year, from under 15 terawatt hours (TWh) in 2023 to heights of 224 TWh by 2027 – in sums close to the 230 TWh used by all of Spain throughout 2022. 

Morgan Stanley’s
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optimistic report, however, argues the AI sector is set to have a net positive impact on the global climate as it argues the industry’s widespread use of clean energy will see Generative AI help mitigate more carbon emissions than it generates.

AI’s potential to help the world boost grid efficiency and develop new emissions reducing technologies – including carbon capture, utilization and sequestration (CCUS) machines – will outweigh the uptick in emissions driven by the AI industry’s power usage, the paper says. 

Energy experts have previously raised concerns about plans to rely on speculative technologies – including carbon capture and storage (CCS) and CCUS – as a means of tackling global warming due to the fact they are unproven in the real world. 

The sector’s surging demand for power will, meanwhile, require a large-scale buildout of new clean energy generation capacity, Morgan Stanley’s report says, as it argues renewable power companies and data center infrastructure companies will be boosted by AI’s growth. 

Morgan Stanley’s report follows concerns from experts and investors that the growth of the AI sector will drive an uptick in fossil fuel usage that would lead to an increase in the carbon emissions that contribute to global warming. 

Experts have previously warned the AI industry’s increased power demand will likely lead to an uptick in fossil fuel use even if the sector is powered by clean energy sources directly, as the net increase in power demand would see other sectors forced to use hydrocarbons instead.

The situation is set to be made worse by soaring demand for clean energy from rival sectors – including from the green steel industry and for powering an ever growing fleet of electric vehicles (EVs) – that could see demand outstrip supply. 

In March 2023, Morten Brandtzæg, the CEO of Finland and Norway’s state-owned arms company Nammo, said the company’s ability to supply munitions to Ukraine is currently being limited due to power constraints, as a data center for TikTok is using up all spare power. 

“We are concerned because we see our future growth challenged by the storage of cat videos,” Brandtzæg said in an interview with the Financial Times.

Earlier this month at Davos, OpenAI CEO Sam Altman told Reuters the AI sector is set to consume  much more power than people are currently expecting and that breakthroughs in nuclear fusion technology will be required to meet demand. 

Morgan Stanley’s report notes that data center clusters could heighten competition for supplies of clean energy and outstrip current pipelines for the buildout of renewable resources. 

In Ireland, plans to build a Liquefied Natural Gas (LNG) terminal to meet increasing power demand which is partly driven by the country’s fast-growing data center sector have met major opposition from campaigners who argue the plans are undermining the country’s climate goals.

Morgan Stanley’s report says net zero targets currently held by data center companies and major technology firms will force them to build out new clean energy capacity, including small-scale nuclear fission reactors. 

In December 2023, Microsoft posted a job opening for an energy expert with experience in the nuclear industry to help the company develop plans to use small modular reactors (SMRs) to power its data centers. 



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