Digitization, rapid advancements in AI technologies, and slower gains in power usage efficiency have significantly escalated the demand for data centers, with major implications for global power market dynamics. In Europe, demand for data centers is expected to grow to approximately 35 gigawatts (GW) by 2030, up from 10 GW today. To meet this new IT load demand, more than $250 to $300 billion of investment will be needed in data center infrastructure, excluding power generation capacity.
The exponential growth in data center demand comes with a corresponding surge in power demand. At the current rate of adoption, Europe’s data center power consumption is expected to almost triple from about 62 terawatt-hours (TWh) today to more than 150 TWh by the end of the decade. This increase will be one of the primary near-term growth drivers for power demand in Europe, with data centers accounting for about 5 percent of total European power consumption in the next six years (from approximately 2 percent today). Based on the net-zero commitments announced by many major data center players, this demand is expected to be largely for green power.
Currently, the entire European power ecosystem faces significant challenges in accommodating this growing demand. These include limited sources of reliable power, sustainability concerns, insufficient upstream infrastructure for power access, land availability issues, shortages of power equipment used in data centers, and a lack of skilled electrical tradespeople for building facilities and infrastructure. In large, established markets such as Dublin and Frankfurt, the time required to supply power to new data centers can exceed three to five years, with lead times for electrical equipment alone often surpassing three years.
Meeting data center demand will be important if Europe is to unleash AI’s full economic potential. It could also come with the broader benefit of helping to unlock the critical investment needed in European power infrastructure to support the ongoing energy transition.
In this article, we address this rapidly evolving space, looking at the prospective growth of AI and the corresponding demand for data centers; the challenges in scaling data centers; and how investors and incumbents could get ahead in the race for power (see sidebar “The evolving energy transition: McKinsey’s latest analysis”).
Data centers can create significant economic value
Globally, data center power demand is skyrocketing to meet the need for greater computing power and the connectivity demands of digitization, cloud migration, and emerging technologies such as AI. In particular, AI is driving power demand because it has significantly higher power density requirements that come with the new generation of graphic processing unit (GPU) chipsets.
According to McKinsey research, about $10 trillion of economic value could be created across the global economy by AI and analytics. However, realizing even a quarter of this potential by the end of the decade would require an additional 50 to 75 GW of data center infrastructure worldwide.
While the growth in data center build-out will be strongest in the United States , Europe has ample opportunity to grow its market and further stimulate its technology ecosystem. The total IT load demand for data centers in the region is expected to grow from 10 GW in 2023 to approximately 35 GW in 2030 (Exhibit 1).
Meeting this demand will require an extensive increase in electricity supply; a notable shift for Europe, where aggregate power demand has remained relatively stagnant since 2007.
While there has been much discussion about potential increased power demand growth from domestic manufacturing, electric vehicles (EVs), heat pumps, and electrolyzers, the demand from data centers is immediate and substantial. Data center load could account for 15 to 25 percent of all new net European demand added through 2030 (see sidebar “What makes data center load unique?”). Between 2023 and 2030, electricity demand for data centers in Europe is projected to increase by approximately 85 TWh, with a CAGR of about 13 percent (Exhibit 2).
At present, data center growth in Europe is fueled by hyperscalers and colocation leases (see sidebar “Data center archetypes”), with hyperscalers alone driving up to 70 percent of the anticipated demand by 2028 (Exhibit 3).
Challenges across the European power value chain
The expected data center-related surge in power consumption will likely be accompanied by a shift to renewable and low-carbon energy sources as the global energy transition gathers pace and new policies emerge. The European Commission has already adopted regulation to allow it to assess the sustainability of data centers within the European Union. The recast Energy Efficiency Directive requires data center operators to report on KPIs to the European database, starting in 2024.
Data center operators need to consider three key factors when building out new capacity:
- Energy intermittency: Meeting higher requirements for access to fast power with zero risk of interruption (that is, reducing time to grid and ensuring backup solutions)
- CO2-free energy: Securing green energy in the market, including through power purchase agreements (PPAs)
- On-site generation: Adopting independent generation capacity at data center sites
Energy intermittency
According to data center experts, hyperscalers have an average capacity utilization of 80 to 95 percent. While data centers operate quite steadily, their high uptime requirements necessitate a stable connection to power. However, they may lack control mechanisms to ensure consistent power, largely due to demand growth by 2030. Given that a 10 percent fluctuation in power demand across a set of five 1 GW data centers is equivalent to the power output of a full gas power plant, this high uptime requirement is likely to stress the grid and increase the need for flexibility.
In locations where the power system is unable to accommodate them all, data centers may need to manage their own power balancing. A combination of (underutilized) combined-cycle gas turbines and battery storage paired with on-site backup generators could provide this balancing capacity. In Europe, green firming solutions—such as hydro, thermal capacity with carbon capture, utilization, and storage (CCUS), and nuclear (though this is less common and country- or bidding-zone specific)—could also help to balance the system.
Transmission capacity affects various aspects of data center performance, including speed, scalability, reliability, and energy efficiency. McKinsey research shows that, for data center operators, time to market is the most critical consideration when deploying new capacity. However, connection time for new facilities has increased significantly due to a combination of factors, including renewables being connected to the system, growing electrification across the economy (from EVs, heat pumps, and electrolyzers), and grid investments lagging behind those in generation. In addition, the long lead times of transmission planning—compared to the shorter time frame required to plan and build data centers—creates a potential shortfall in transmission capacity.
The time required to get new power connections for data center sites in major hubs such as Frankfurt has been on the rise. There are even locations, such as Amsterdam and Dublin, that have placed moratoriums on new data center builds in recent years, primarily because of a lack of power infrastructure to support them.
CO2-free energy
The data center industry faces a big challenge to decarbonize its footprint and reach net-zero targets on a 2030–40 timeline. Both hyperscalers and colocators are partnering with energy players to secure low-carbon electricity supply during hours when power from their own renewable energy sources is low. So far, PPAs have emerged as the leading strategy for hyperscalers to fulfill their renewable energy commitments. Technology companies remain a large contributor of PPA growth; last year, Amazon acquired more PPAs globally than any other company.
Hyperscalers are relying on renewable energy certificates (RECs) to offset their real-world emissions. While some focus on matching their energy consumption with RECs from the grids where they operate, others are increasingly purchasing certificates tied to power generated at different times and locations. Researchers point out that this carbon matching has a minimal impact on long-term emissions in power systems and rarely incentivizes the development of new projects or the generation of clean energy in areas that wouldn’t otherwise see such initiatives.
Energy-related emissions can also be partially reduced through strategic site selection. This includes choosing locations where the grid mix has a high proportion of carbon-free energy and where temperatures are inherently lower, reducing the need for cooling-related power consumption (Exhibit 4).
Currently, many new data centers are designed for AI training, which has less stringent latency requirements than traditional data center activity. Over time, some of these may shift to AI inferencing, which demands much higher speeds than AI training or traditional use; those in remote locations with poor latency may not be suitable for this.
In the absence of fully CO2-free energy, there is a growing interest in carbon removal solutions, particularly among hyperscalers. Companies such as AWS are actively purchasing substantial carbon removal credits to offset their emissions. For example, AWS has committed to buying CO2 removals of 250,000 metric tons over a decade.
On-site generation
In most global markets, the major bottleneck slowing power access is a limited ability to connect to the transmission grid, rather than an inability to generate the power itself. Latent capacity in the generation fleet largely comes from fossil fuel plants that currently operate below maximum levels.
In locations with access to power on the bulk transmission grid, there are further constraints on the supply of power equipment, such as transformers, on-site backup generators, and power distribution units, with historically high lead times of up to nearly two years in some cases (Exhibit 5).
As power grids near their capacity limits and lead times for new grid connections increase, data center operators will be called on to innovate. Energy for powering data centers must meet the different growth demand and load profiles of data centers. Additional sources may be needed to ensure 24/7 power, alongside renewables and the bulk grid supply. Many operators are already exploring alternative strategies for on-site generation, including small modular reactors, hydrogen fuel cells, and natural gas.
In the last two decades, no technology has driven the need for accelerated power infrastructure development in Europe more than AI, and particularly generative AI (gen AI). What’s more, this demand is mostly for clean energy.
Investment in green energy solutions for the sector is gaining momentum, but significant untapped potential remains, given exponential data center growth. Unlike traditional data center acquisitions, such as real estate or technology, green energy investments present different risk/return profiles, likely attracting investors with specific objectives. As data centers play an increasingly crucial role in the European economy, exploring the entire energy value chain is essential to identify and capitalize on these emerging opportunities.
Low-carbon power is an increasingly important area of investment. Companies across the data center sector are using many different instruments and approaches to manage their carbon accounting, including unbundled and time-matched RECs, PPAs, carbon matching, offsets, CO2 removals, and accreditation activities—but many stakeholders have been left to define their own motivations, ambitions, and directions for the future.
As Europe confronts an increasingly strained power grid, the future of data centers—critical to the continent’s digital infrastructure and competitiveness—depends on strategic choices about location and energy management. In a landscape where reliable and swift power access is no longer guaranteed, companies that rely on or build data centers must confront this new reality head-on. The trade-offs between power availability and data transmission infrastructure are no longer theoretical; they demand urgent action.
To balance the increased penetration of intermittent renewables, Europe will require more dispatchable energy sources. It may also need to overbuild the peak capacity of renewable installations to meet the unexpectedly high demand from data centers for green energy.
For transmission system operators, the imperative is clear: accelerate and increase investments in energy infrastructure to ensure stability and reliability. The influx of investment could serve as a catalyst for developing purpose-built infrastructure that is well-connected to European industry, transport, and households, as outlined in the EU Grid Action Plan. In other words, addressing the energy needs of data centers could help to bridge the investment gap that has historically lagged advancements in power generation.
Moreover, strengthening the link between generation and distribution grids is crucial to support expanded generation capacity and ensure efficient power delivery. By addressing these challenges proactively and investing in the necessary infrastructure and technologies, Europe could create a more resilient and sustainable energy future.
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