**Data Centers Overtake Oil in Global Investment as AI Drives Soaring Energy Demand**
A new report from the International Energy Agency (IEA) highlights a significant shift in the global economy, as investment in data centers is set to surpass spending on new oil supplies for the first time. In 2024, global spending on data centers will reach $580 billion, outpacing the $540 billion allocated to oil supply development. This milestone underscores the growing centrality of digital infrastructure in modern economies, reflecting a transition from traditional energy resources to the digital engines that power everything from cloud computing to artificial intelligence (AI).
**The Data Center Boom: Demand and Energy Use**
Data centers, which house the servers and networking equipment that underpin the internet and digital services, have become critical to economic activity worldwide. The IEA’s report emphasizes that electricity consumption by data centers, especially those dedicated to AI applications, is expected to increase dramatically. By 2030, the energy used by AI-focused data centers alone could increase fivefold compared to current levels, effectively doubling the total electricity consumption of all data centers today.
While conventional data centers will also see increased energy use, the growth is not expected to be as steep as that driven by AI workloads. The surge in demand is largely tied to the rapid adoption of machine learning, generative AI, and other computationally intensive technologies that require vast amounts of processing power.
**Geographic Concentration and Urban Challenges**
Half of the projected growth in data center electricity demand will occur in the United States, according to the IEA. Europe and China are also expected to see significant expansion. Most new facilities are being constructed in or near large urban centers with populations over one million, reflecting the need for low-latency connections and proximity to major markets.
Interestingly, many of the data centers currently in development are substantial in size, with at least half exceeding 200 megawatts of capacity. Moreover, these facilities tend to cluster together, often being built adjacent to existing data centers, forming dense hubs of digital infrastructure.
This rapid expansion presents significant challenges for electric grids, particularly in urban areas. Grid congestion and long connection queues are becoming commonplace, as utilities struggle to keep up with the influx of new, high-demand customers. In some hotspots, such as northern Virginia—a global leader in data center density—waiting times for grid connections can stretch up to a decade. In Dublin, Ireland, the utility has gone so far as to halt new interconnection requests until 2028, citing grid limitations.
**Supply Chain and Technological Bottlenecks**
Beyond grid congestion, the supply chain for critical infrastructure components is also under strain. Essential items like cables, critical minerals, gas turbines, and transformers are experiencing delays, impeding necessary grid upgrades and the timely deployment of new data centers.
To address some of these issues, companies such as Amperesand and Heron Power are developing advanced solid-state transformers. These modern devices promise to improve upon the century-old transformer