There really is currently this moment for electricity.
Welcome to Radio Davos, the podcast from the World Economic Forum that looks at the biggest challenges and how we might solve them. This week, the global demand for electricity is rising fast, with wars in Ukraine and the Gulf squeezing fossil fuels.
And that then led to a pivot in the focus on electrification as an alternative to using fossil fuels in the energy system. And now the opportunity to use clean energy for electrification is also more available than it was any time before.
Add to that the rising demand from artificial intelligence.
AI data centres globally grew by 50% in their energy consumption in just over a year.
By 2030, they expect demand from data centres to double. That will still be just around 3% of total electricity consumption, but the pace and scale of it is quite remarkable.
We look at the pressure on electricity systems and speak to the head of a startup who says there is a solution to the data centre challenge.
Think of the grid as a big, massive super highway. It's got eight lanes, right? And most of the year, it's quite empty. You could add a ninth lane to that highway. It'll take you 10 years, and it's very expensive, and everybody pays for it. Or that data centre can just reduce its consumption during that peak moment, so you can use your eight-lane super highway, which is available almost all of the year.
Follow Radio Davos wherever you get podcasts, or visit wef.ch/podcasts. I'm Robin Pomeroy at the World Economic Forum, and asking how we can meet surging demand for electricity...
You've avoided building that expensive ninth lane.
This is Radio Davos. Welcome to Radio Davos, where we're talking about energy, specifically the massive increase in demand for electricity and how we might meet that demand. Later in the episode, we'll hear from a tech startup that says it has a solution to the challenge posed by the rise of AI data centres. But first, to set out the scale of the issue and to talk about the whole range of issues, I'm joined by my colleague Divya Reddy, Manager of Energy Initiatives at the World Economic Forum. Hi Divya, how are you?
Good, thanks. How are you, Robin?
Very well. Thank you. What do you do at the World Economic Forum?
I'm the manager specifically on the Future of Power Systems initiative, and we bring together stakeholders from across the electricity value chain to really decide what are the key priorities facing the electricity industry and arrive at some joint solutions for addressing them.
Electricity, the demand for electricity, whenever we do a Radio Davos about energy, at the moment we can talk about oil and gas, we can talk about all kinds of things, but this massive increase in demand for electricity, when did that really start and what's driving it?
So it's been over the last 10 years, and it's a combination of factors, but it really is currently this moment for electricity. And part of the more recent driver for this is the number of energy crises that we've faced. First, it was the Russia-Ukraine situation that resulted in gas supply shortages. And then more recently, the Straits of Hormuz being closed off, again, resulting in oil and gas shortages. And that then led to a pivot in the focus on electrification as an alternative to using fossil fuels in the energy system. And now the opportunity to use clean energy for electrification is also more available than it was any time before.
So it's partly that transition to electrification for things like cars and in industry as well.
Exactly. So it's across the board. So the three sort of end uses would be transportation, it would be industry, and it would be buildings as well.
Also though, add to that, in the last what, three years, the rise of artificial intelligence as a thing we're all using now, which probably we didn't realise three years ago, the massive energy demand that would create. Tell us something about that.
Yeah, exactly. So in addition to just general electrification of end uses, there is this massive new entry of data centres, specifically AI data centres, that is coming into the system. Now, it's still a relatively small part of the overall electricity picture. And it probably will remain so, but it's the pace and scale of the change that's really having a dramatic impact over the last few years. So just to put some numbers on this, the IEA estimates that last year alone, there was a 17% increase in data centre electricity demand. And that's compared to just 3% for overall electricity demand growth. And by 2030, they expect demand from data centres to double. That will still be just around 3% of total electricity consumption, but the pace and scale of it is quite remarkable. And AI data centres in particular draw around 10% more electricity than even standard data centres. And they also have a very kind of volatile and more unpredictable demand profile than traditional loads do. So it's sort of a combination of factors. It's the pace and scale of growth. It's also the nature of the demand, and it's also location, because what happens is that when data centres come into the electricity system, they typically connect on what we call firm connections, which means that they basically are guaranteed service at any time. And so that requires that this network needs to accommodate them at all times, and that it can exacerbate peaks in supply and exacerbate tightness that then leads to higher costs that then need to be paid by all consumers. So there's also a locational issue if they're entering into the system at congested areas.
Later in this episode, we're going to hear an interview I did recently with the head of a startup company who says he has a solution, at least in part, to some of this, and it does go to that thing you're saying about peak demand, which is a problem with electricity in general, right? Maybe we can talk a little bit about that. We'll get back to data centres in a minute, but in general, you know, we've got wind and solar energy, which over the last, what, 10 years, a bit more maybe, have suddenly become this very cheap way of generating electricity. But what they don't have is that kind of constant, you can't, if the sun's not shining and the wind's not blowing, you can just switch it on and you need that baseline power. That's a real challenge, isn't it, for this massive increase in demand.
Yeah, exactly. So essentially, the way that electricity systems have traditionally operated and been planned for is that you have these steady sources of demand and steady sources of supply. And it's sort of been this traditional model of balancing the electricity system at all times. With the advent of more variable sources of generation like wind and solar, you have more volatility in the supply profile. And now with the advent of things like data centres, you also have this more volatile demand coming into the picture. Now there are a lot of tools that can address these. So there are now increasingly options for flexibility solutions that can help address these volatile supply and demand profiles, but they need to actually be enabled to participate in the system the way that they are able to.
And where's the low-hanging fruit? What are the things we can do quickly to improve our electricity systems?
So given the pace and scale of what the electricity system needs and that it does need to grow, we also do need to enable the building of new infrastructure. But more immediately, there is a lot of infrastructure currently that is underutilised. And so the low-hanging fruit really is to enable the optimisation of existing infrastructure and assets that we already have. And there are a lot of tools, particularly flexibility tools, but there are also digital tools, there are AI tools that can support this. So those are the kinds of solutions that really are the low-hanging fruit.
Where can people get more information? You publish useful reports. Where can people go? What resources have you got?
So we currently have a tool on our website, which is called the Innovation Playbook for Future Power Systems. And it includes, it's a sort of database of over a hundred solutions backed by case studies. And it really is aggregating solutions that are already in the market that then can be deployed and scaled to address these challenges of modern power systems. And it covers both technology type of solutions, but also things like financial models, business solutions, policy and regulatory settings that are all part of what we call solutions. We also have an upcoming white paper that will be released in early November, and that is really looking at three focus areas that are kind of most pressing for today's power systems. The first is optimising existing infrastructure. The second is how to quickly enable and finance new infrastructure. And the third is how to connect large loads such as data centres.
Let's get back to data centres then. Just remind us again what the problem is here and of the work you're doing on that, and then we'll introduce this interview.
Yeah, so the problem, again, is that the pace and scale of demand is greater than the electricity system in many locations can accommodate. And so it's creating this tension. It's requiring network expansions. It's increasing costs. There are some solutions that can help alleviate this challenge. One is from the demand side that data centres are actually able to operate more flexibly. So they can compute at different periods, they can shift jobs to different hours, they can cut their computing in certain peak moments, and they can also redirect processing to a different location. And all these have significant benefits to the system. They can free up more network capacity. They can lower costs or unlock savings because it avoids peak charges. It avoids new infrastructure builds and it sort of optimises the existing grid more efficiently. And they can also connect new sources of demand faster. Currently we hear a lot about connection queues where large demand is just not able to connect to the existing grids. So it alleviates all these types of problems. And then on the supply side, they can also offer their own onsite storage as well as onsite generation that also limits the amount of electricity they draw from the grid.
So that brings us to this interview that I did at an event that I believe you were involved in here at the World Economic Forum. His name is Varun Sivaram. What was he doing in Geneva?
The World Economic Forum hosted an energy forum at our headquarters in Geneva in September. Varun Sivaram served as one of the co-chairs for this event. And what it did is it brought together stakeholders from across the energy spectrum to discuss challenges with current energy systems, to discuss joint solutions, and to kind of facilitate partnerships across the energy space that can take forward these types of solutions.
