Regional Variations in Energy Demand
The impact varies significantly across Western regions. In the United States, Goldman Sachs estimates that US data centre power capacity to rise 24% from 33 GW in 2024 to 41 GW in 2025, before tripling to 120 GW by 2030 and rising further to 176 GW by 2035. This represents a fundamental shift in the American energy landscape, where data centres will become one of the largest categories of electricity consumers.
European projections suggest a somewhat more measured but still substantial increase. In Europe, AI needs should account for 4 to 5% of total electricity demand by then (up from 2-3% in 2024), indicating that while the absolute numbers may be lower than in the United States, the proportional impact on European grids remains significant.
Current Energy Mix and Limitations
The existing energy infrastructure in Western nations presents both challenges and opportunities for meeting this surging demand. In the United States, fossil fuels including natural gas and coal made up just under 60% of electricity supply in the US. Nuclear accounted for about 20%, and a mix of renewables accounted for most of the remaining 20% in 2024. This energy mix highlights a critical tension: gaps in power supply, combined with the rush to build data centres to power AI, often force utilities to rely on the most readily available power sources, which frequently include fossil fuels. This reality conflicts with the environmental commitments many Western nations have made regarding carbon emissions and renewable energy transitions.
The Nuclear Renaissance
Nuclear power has emerged as a leading contender to address AI’s energy demands while maintaining low carbon emissions. The nuclear option has
gained significant traction among major technology companies, with Microsoft, Constellation, AWS, Talen, and Meta with major data centre nuclear energy announcements in the Second Half of 2024. Google’s approach exemplifies the industry’s nuclear strategy. In October 2024, Google signed a deal with Kairos Power, a next-generation nuclear company that recently received construction approval for two demonstration reactors from the US Nuclear Regulatory Commission (NRC). The company is developing small, molten-salt-cooled reactors designed specifically to meet the consistent, high-volume power demands of data centres.
However, the nuclear solution faces significant limitations in the Western context. No SMRs currently operate in the United States or Europe. While Russia has deployed a floating SMR and China has a single demonstration SMR, no such reactors exist in the Western world, and their performance and economic viability remain unproven. Goldman Sachs analysts acknowledge these constraints, noting that nuclear power will be a key part of a suite of new energy infrastructure built to meet surging data-centre power demand driven by artificial intelligence. But nuclear can’t meet all of the increased data-centre power needs.