Cloud computing’s demand for electricity strains a grid that is already predicted to feature power shortages and routine rolling blackouts in the coming years.
As federal net-zero policies attempt to shift transportation, heating, and other essentials onto the electric grid, one of the hottest growth sectors of America’s economy is poised to increase electricity demand exponentially, further straining an energy infrastructure that is being pushed into the red.
Data centers, the so-called “brains of the internet,” are industrial warehouses packed with rows upon rows of servers. They process, communicate, and store the data behind everything from bank records, online retailers, and social media platforms to Netflix shows and your personal iPhone videos.
“Data centers are essential to cloud computing and its ability to give users remote access to data,” a 2023 Federal Reserve report states, quoting a Science article that calls them the “information backbone of an increasingly digitalized world.”
Many analysts laud data centers as one of the fastest-growing sectors of the real estate market, but the industry may soon find itself hitting a wall as local communities put up increasing resistance to the industry’s seemingly insatiable appetite for power and water.
“While other commercial real estate sectors are experiencing a decline in construction pipelines, data center development has reached an all-time high,” according to a January report by Newmark, a commercial real estate advisory.
“However, growth is increasingly constrained by land and power availability, supply chain challenges and construction delays, not to mention increasing resistance from some local jurisdictions.”
The report said the rapid growth of artificial intelligence (AI) and other technologies is fueling the demand.
The industry is led by cloud computing behemoths like Amazon Web Services (AWS), Microsoft Azure, Google Cloud, and Meta. It also includes digital landlords, called co-location companies, which rent storage space out to third parties. These include Equinix, Digital Realty, and CyrusOne.
