The global data center industry remains optimistic about growth fueled by artificial intelligence (AI), despite rising concerns over power supply challenges. According to a recent DLA Piper survey, 70% of data center operators and investors foresee increased investment in the sector over the next two years.
This optimism is closely tied to the expanding demand for data centers driven by AI technologies such as machine learning and natural language processing.
The industry faces significant hurdles, however, with power supply reliability emerging as a critical issue. Nearly all survey respondents expressed concerns about the availability and dependability of power sources for the growing number of data center facilities worldwide. Alarmingly, 50% identified power supply as the primary barrier to investment decisions. The strain on utility providers is especially pronounced in the United States, where requests for power to support data center developments far exceed current capacity and are unlikely to be fully addressed until the 2030s.
To manage these limitations, utility companies have imposed stringent conditions on data center developers. These include upfront non-refundable fees and requirements for developers to finance necessary infrastructure, such as substations. This situation has forced investors to take a more cautious approach, with 70% of respondents indicating heightened due diligence and scrutiny in project planning due to sustainability and resource concerns.
Reducing Data Center Environmental Impact
The financial prospects for the data center industry remain strong. TMT Finance projects the market will reach $300 billion in 2024, with an average annual growth rate of nearly 10% pushing its valuation to $483.15 billion by 2029. However, sustainability pressures are mounting. The European Union has enacted strict regulations, such as the Energy Efficiency Directive and European Climate Law, requiring data center operators to disclose emissions and implement strategies to reduce their environmental impact.
“Data center capacity is critical for the AI revolution and the broader global economy,” said Anthony Day, a partner at DLA Piper. “The industry must align on a clear framework that fosters collaboration among investors, policymakers, and power providers to ensure future demands can be met sustainably.”
The competition for grid access intensifies as data centers vie with renewable energy projects and electric vehicle (EV) charging stations for resources. “The energy transition has led to an unprecedented surge in grid demand,” said Alanna Hasek, a partner at DLA Piper. “U.S. utility providers, under government pressure to prioritize renewable energy and EV infrastructure, are increasingly requiring data center developers to finance their grid connections. This trend is likely to extend to other regions.”
While challenges persist, the data center industry is adapting to meet growing demands. Addressing power supply bottlenecks and aligning with sustainability goals would be key to ensuring the sector’s ability to support AI advancements and the evolving digital economy.
DLA Piper is a global law firm providing comprehensive legal services to organizations worldwide. With offices in over 40 countries across the Americas, Europe, the Middle East, Africa, and Asia-Pacific, it offers expertise in areas such as corporate law, litigation, regulatory matters, intellectual property, and real estate. DLA Piper serves a diverse range of sectors, including technology, finance, healthcare, and energy.
