AI data center growth stymied by power constraints

While data center developers are looking forward to a prolonged period of expansion, they're still being held back by a shortage of available power.

In a mid-year update to its annual Data Center Power Report, Bloom Energy has found that developers are citing higher electricity prices, increased water consumption, and strain on grid reliability as the concerns most likely to influence projects.

Community scrutiny has only ramped up over the past six months, and, as of May, in the US, at least 18 state bills and 86 local moratoriums have been proposed. More than six-in-ten developers say they are planning to source their own power if the grid is unavailable, and nearly a third of these onsite-powered sites are expected to incorporate carbon capture by 2030, reflecting growing pressure to address emissions concerns while expanding power capacity.

"Access to power remains the biggest constraint to data center growth, but it is not the only issue. Community concerns are increasingly shaping which projects move forward," said Natalie Sunderland, chief marketing officer at Bloom Energy.

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Developers are looking forward to adding significant capacity between now and the end of the decade, as AI adoption accelerates. Inference is now driving sustained demand for new data center capacity, and now accounts for more than 50% of AI compute, reflecting the transition from model building to real-world applications.

However, there's a gap in readiness that risks slowing AI innovation. Chip developers expect high-density architectures and rack-level DC designs to be adopted in 2028, a full year ahead of data center developers' plans.

"Our findings suggest that solutions that reduce strain on local infrastructure while helping developers bring new capacity online faster – such as clean onsite power – will play an important role," said Sunderland.

"We believe the winners in the next phase of AI buildout will be those that can grow in a way that works for both operators and the communities that host them."

The research follows repeated warnings that the power requirements of AI data centers are growing too fast for national grids to keep up. In a recent report, Wood Mackenzie concluded that with grid transmission build-outs five to ten years away, projects, markets, and consumers are all at risk. Colocated generation and flexible interconnection models aren't actually fixing the problem, said the firm, as these projects face huge technical, regulatory, and economic hurdles.

The problem's only set to get worse, according to real-estate services firm Savills, with only 850MW of power capacity delivered across EMEA since the start of this year, down by 11% on the same period last year.

Gartner has also warned that 40% of data centers could face constraints in power availability by 2027: consumption is expected to grow 160%, with the power required to run AI-optimized servers reaching 500TWh, more than two-and-a-half times as much as in 2023.