IMF Warns Surge in AI-Driven Electricity Demand Could Strain Global Economy and Environment

The International Monetary Fund (IMF) has issued a warning about the rapidly growing electricity demand driven by the expansion of Artificial Intelligence (AI) technologies. As AI models and cloud computing become more integral to global industries, the IMF has highlighted potential challenges related to energy infrastructure, prices, and environmental impact. AI’s potential to boost productivity and economic growth is closely tied to the surge in energy consumption, particularly from the data centers powering AI operations.

In 2023, AI data centers consumed about 500 terawatt-hours (TWh) of electricity, more than double the average consumption seen between 2015 and 2019. The IMF projects this demand could rise to 1,500 TWh by 2030, comparable to the current electricity consumption of India. The United States, home to the largest concentration of data centers, is expected to see a significant increase in energy usage, with estimates suggesting electricity consumption in US server farms could exceed 600 TWh by 2030.

While increased electricity demand could encourage more production and only marginally raise prices, the IMF warns that sluggish responses from energy suppliers could lead to steep cost increases. These higher energy costs could potentially hinder the growth of AI-related industries, reduce global economic growth, and negatively impact consumers and businesses. Reliable and affordable energy supply will be crucial for maintaining momentum in the AI sector and preventing delays in investment.

Environmental concerns also loom large, with the IMF projecting that AI-related electricity demand could generate an additional 1.7 gigatons of global greenhouse gas emissions between 2025 and 2030, which is equivalent to Italy’s five-year energy-related emissions. As AI usage expands, balancing the economic benefits with the environmental cost becomes a key challenge for policymakers worldwide.

To address these issues, the IMF calls for proactive policy measures to ensure that energy supply can meet future demand. Governments and private sector players are urged to collaborate on scaling up electricity generation, utilizing diversified energy sources, including renewables, to avoid price shocks and mitigate the environmental impact of the AI-driven energy surge.

Source: Nairametrics