AI Data Centers and Electricity Demand: Taming the energy guzzlers

Willem Thorbecke

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: Artificial intelligence (AI) use and its energy requirements are skyrocketing. This paper finds that the market capitalizations of Amazon, Google, Meta, and Microsoft have increased by more than $500 billion above predicted values since ChatGPT was launched in 2022. Nevertheless they negotiate aggressively to lower energy costs and transfer electricity expenses to other ratepayers. Their appetite for energy is also met by burning fossil fuels including coal. This paper considers how to incentivize Big Tech companies to internalize the externalities associated with data center electricity use. It also recommends innovations that can reduce AI energy demand. These include using AI itself to save energy at data centers and in the production of batteries, steel, glass, hydrogen, ammonia, and copper.

Pages: 30 pages
Date: 2026-02
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Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:26013

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