Global electricity demand is growing rapidly, the International Energy Agency (IEA) warned in its annual World Energy Outlook report.

Over the next decade, a Japan's worth of electricity consumption is expected to be added to global grids every single year, impacting emissions reduction efforts. Demand in 2035 is expected to be six percent higher than forecast last year.

As for data centers, the IEA said that data center electricity consumption is expected to grow rapidly due to AI and digitalization, but added that it will remain a small part of overall global electricity growth.

"With established technology companies and AI startups making major investments, a sharp rise in electricity consumption by data centers looks inevitable, but the relatively early stage of this new phase of growth and sparse data availability mean that any projections are bound to be tentative," the report states.

Dramatic improvements in efficiency have long ameliorated data center power growth, as workloads moved from older, distributed enterprise sites to larger, more advanced cloud facilities.

But with the lower-hanging fruit of efficiency plucked, and the potential surge in high-power AI workloads, the sector is expected to see its electricity demands grow more than ever.

"Data center electricity consumption was estimated in 2022 to be in the range of 240 to 340TWh, around one percent to 1.3 percent of total electricity consumption (excluding data networks and crypto mining)," the IEA said.

"A substantial increase in electricity consumption from data centers appears inevitable. However, several factors make projections challenging," it added, listing supply chain challenges, efficiency improvements, policy decisions, and longer-term AI demand uncertainties.

However, "plausible" forecasts at the upper or lower end of data center demand do not change IEA's overall view that the sector will not overwhelm global electricity growth, the agency said.

"In the base case, data centers account for less than 10 percent of total electricity demand growth at the global level, which is roughly on a par with demand growth for desalination, and less than a third of the demand growth for both EVs and space cooling in the buildings sector.

"Therefore, growth of electricity demand for data centers is projected to be rapid, but the level looks set to remain relatively small in the context of overall global demand growth."

The agency also pointed to the industry's aggressive investment in renewable energy sources. "Between 2023 and 2030, total data center demand growth is projected to be just below 50 percent of the annual global increase in low-emissions sources of electricity over the last five years, so meeting this demand growth sustainably is feasible," the report said.

However, "constraints on generation and grid capacity may be more severe at the local level" as data centers are very spatially constrained. Data centers cluster for proximity to each other, cable landing stations, talent, and local tax incentives.

This has led to locations like Virginia and Ireland struggling to have enough power, while Singapore and Amsterdam have both enacted temporary moratoria to slow the sector's growth. This is expected to become more of a challenge as 1GW data centers become a reality.

The IEA notes that data centers' spatial concentration in the US is worse than any other major sector, including warehouses, power plants, and factories.

"To ensure that the outlook for data center demand growth is better understood and that actual growth is met sustainably, policymakers, the energy industry, and the technology sector need to work more closely together to enhance data sharing, strengthen regulatory dialog, improve efficiencies, scale up low-emissions electricity supply and mitigate local bottlenecks," the IEA said.