AI set to face its day of reckoning as it confronts biggest threat yet — China and other countries want to slash exponential rise in data center power consumption

Governments worldwide are tightening regulations on the construction of data centers due to concerns over their enormous energy consumption and the impact on national climate goals and power grids.

According to the Financial Times, countries including China, Singapore and Ireland have imposed restrictions on new data centers in recent years to comply with stricter environmental regulations.

Elsewhere, Germany and Loudoun County in Virginia, USA, have introduced measures such as limiting permits for data centers in residential areas or requiring them to contribute renewable energy to the grid and reuse the waste heat they generate.

Increased demands of AI

The most significant threat to new projects is in Ireland, a hub for server farms built by cloud computing giants due to its low tax rate and easy access to high-capacity subsea cables for global internet traffic. The country’s energy and water regulator’s decision in 2021 to limit new data connections to the electricity grid resulted in data center operators Vantage, EdgeConneX, and Equinix having permits for new projects in Dublin rejected last year.

The US hosts a third of the world’s 8,000 data centers and their energy consumption is growing significantly, due in no small part to the increased demands of AI. Tech companies like Microsoft, Alphabet, and Amazon are under increasing pressure to play a more active role in generating renewable energy and working on energy efficiency measures to keep their data centers running.

While the tech behemoths are all investing in wind and solar energy, Microsoft has begun looking into the nuclear option to fuel some of its data centers.

Analysts at Barclays warn that governments have yet to consider the effects of increasing internet use on their power grids, predicting similar restrictions will be implemented globally in the coming years.

This could pile pressure on the $220 billion data center and cloud industry, which is expected to rise to $418 billion by the end of the decade as global data demands surge.