Data Centers, Emerging Economies, and the Need for Cheap, Firm Energy

Data centers–the physical infrastructure enabling AI technologies–underscore the challenge of shifting to clean energy grids while also meeting rapidly growing energy demands. Variable renewables alone, such as wind and solar and storage, will not meet demand. The power requirements of data centers reinforce the need for innovative solutions. As nations work to balance digital expansion with decarbonization, the rate of innovation in energy infrastructure, including battery storage, will determine how well clean energy targets can be met.

Most projections anticipate significant growth in electricity consumption by data centers, though estimates vary widely. For instance, the International Data Corporation (IDC) predicts global data center electricity consumption will double by 2028, reaching 857 TWh. Conversely, Goldman Sachs expects a more modest rise to 164 TWh in 2028. The International Energy Agency’s (IEA) World Energy Outlook estimates data centers will account for 223 TWh of global electricity demand growth by 2030—roughly 5% of the total projected increase. Cooling requirements and direct server usage account for the majority of electricity consumption and emissions.

The sector’s short-term growth is already impacting power grids. The United States is constrained by interconnection capacity – the physical and operational links between power generation sources and the main electrical grid. Microsoft and Google have announced partnerships with nuclear power companies to power their data centers, underscoring the importance of steady and reliable generation to support growing infrastructure. Hybrid, decentralized energy systems, along with advancements in technology efficiency, offer promising solutions for meeting the growing power demands. A recent U.S. study highlights the scalability of off-grid solar-storage-gas microgrids for data centers, arguing that a 90% renewable energy mix can offer a scalable, low-cost power supply. Additionally, Deepseek’s lower computing and energy-consumption rates compared to its competitors raises the potential for future AI models to reduce energy impacts while enhancing capabilities.

While these developments attract attention in America and Europe, the expansion of data centers in non-Western and developing countries presents an equally compelling story. Southeast Asia, Taiwan, and India represent part of the next wave of economies that must overcome power constraints to sustain rising digital demand. Countries like South Africa, Kenya, and Nigeria, must develop stable and reliable power grids to meet the growing energy demands of expanding data centers. To this end, clean energy deployment will necessarily include firm, cheap power that can match fast-growing energy demand.

The Next Wave: India and Taiwan

India is emerging as a major player in data center expansion. Most data centers are concentrated in Mumbai and Chennai due to those cities’ status as onshore hubs for submarine cable networks. India is experiencing a significant expansion in its data center industry, driven by increasing digitalization, cloud adoption, and supportive government policies. The country’s data center capacity is projected to more than double, from approximately 950 MW in 2024 to nearly 1,800 MW by 2026.

India is attracting substantial investments from both domestic and international companies. For instance, Microsoft has announced a $3 billion investment over the next two years to enhance its cloud and AI infrastructure in India, including the establishment of new data centers. Similarly, Yotta Data Services is seeking to raise $500 million to expand its data center portfolio within the country.

The Indian data center market is also witnessing significant activity from global players. Princeton Digital Group plans to invest $1 billion to increase its capacity to 230 MW across major hubs like Mumbai and Chennai. Additionally, companies such as Sify are initiating projects in cities including Chennai, Mumbai, Noida, and Bengaluru, aiming to add 350 MW to their current data center capacity.

Taiwan is actively expanding its data center infrastructure to bolster its position as a technological hub in Asia. Data center investment in Taiwan is expected to increase from $1.42 billion in 2022 to $3.21 billion by 2028, reflecting a compound annual growth rate of 14.57%. In 2024, the Taiwanese government announced plans to invest approximately US$3 billion (NT$97.75 billion) over the next three years to enhance its artificial intelligence capabilities, focusing on AI data centers and related infrastructure. A significant share of China’s internet traffic is routed through Taiwan. The close geographical proximity allows China to maintain tight control of its internet traffic with stringent censorship policies, while taking advantage of preexisting submarine cable infrastructure. Demand for internet services was likely the driver of the first submarine communications cable between mainland China and Taiwan—the Taiwan Strait Express-1 (TSE-1). Major international companies are also contributing to this growth. Apple has plans to develop a data center in Taiwan, potentially benefiting local manufacturers.

AI giant Nvidia is setting up its Asian headquarters in Taipei, with plans to develop customized chips and advanced chip packaging technology. The company is recruiting at least 2,500 employees in Taiwan as the country becomes a key player in its supply chain. In collaboration with Foxconn, Nvidia is constructing Taiwan’s fastest AI supercomputer in Kaohsiung. The first phase is expected to be operational by mid-2025, with full deployment targeted for 2026. This supercomputer will support Foxconn’s initiatives in digital twins, robotic automation, and smart urban infrastructure.

Future Waves: Digital Expansion and Energy Consumption in Africa

Despite the fact that 600 million people are not connected to the electrical grid in Africa, demand for digital services is rising. Mobile data consumption across the continent is expected to increase by 40% annually until 2025—almost double the global average. South Africa, Nigeria, and Kenya are key players in Africa’s data infrastructure expansion. South Africa hosts 100 data centers and is constructing a new 40-MW facility in Johannesburg.

Nigeria, Kenya, and South Africa are already making significant investments in internet infrastructure and cloud service capacity. The Nigerian government is expanding its fiber-optic network in order to increase internet access and drive economic growth. Kenya is doing the same with federal investments in submarine and fiber-optic network expansion. South Africa hosts most of Africa’s data infrastructure, with 100 data centers, and will likely continue leading the continent’s data growth. South Africa recently started construction on a new 40-MW data center in Johannesburg.

Many African nations are yet to build out their grid, making it difficult to expand the supply of cheap and reliable electricity. The South African state-owned utility, Eskom, faces a raft of problems, leading to regular outages. Nigeria and Kenya experience similar power disruptions, though both nations are investing in fiber-optic networks to boost internet connectivity. Expanding national grids will be critical to meet digital demand. However, much of the international community’s current focus remains on small off-grid solar solutions for residential and commercial electricity. While valuable, these solutions cannot replace the need for robust centralized power systems.

Energy Planning for a Digital Future

Addressing energy constraints in Asia and Africa ultimately hinges on expanding the supply of cheap and reliable power. India and Taiwan must build additional capacity to accommodate surging digital demand. Firm energy sources—such as hydropower, geothermal, and nuclear energy—are critical options for policymakers and developers to consider if striving to meet such power demand growth cleanly. India’s data centerelectricity consumption is projected to rise to 6% of the nation's total power demand by 2030. India’s current data center power capacity stands around 375 MW, this may increase to as much as 17 GW by 2030. India’s extensive hydropower potential and growing nuclear capacity could bolster existing resources. India relies heavily on coal and oil, but the government is requiring three new data centers to use clean energy. A new data center policy emphasizes the need for clean power.

Challenging the paradigm that data centers require baseload power generation to supply their steady, flat electricity demands, the U.S. study on off-grid solar-storage-gas microgrids for data centers offers valuable future insights for developing countries aiming to rapidly expand their energy infrastructure. These systems may provide a more timely solution, particularly for nations grappling with a centralized power grid constrained by unreliable energy supply, ageing infrastructure, and limited resources. New, hybrid energy systems may present opportunities for developing countries to exploit, illustrating the value of looking beyond solely 100%-solar-and-wind options.

Flexible clean energy solutions will be essential as countries face increasing challenges in expanding power supplies to keep up with data center growth. For instance, Taiwan, constrained by its island geography, is struggling to supply power to its data centers and to expand its power infrastructure to support additional data centers. The rapid expansion of AI data centers has led to concerns about power supply stability. As power demands grow, operators are exploring carbon-free energy initiatives and advancing liquid cooling technologies to enhance energy efficiency and reduce consumption. Taiwan is integrating renewable energy sources into its data center operations. The government’s ambitious 20-30-50 plan, to generate 20% of its electricity from renewables, 30% from coal, and 50% from natural gas by 2025, sets clear goals for increasing the use of renewable energy sources in data center operations. Taiwan may also reconsider its nuclear phaseout to ease energy shortages.

For African nations, the challenge is first to build stable, reliable grids before addressing data center energy demand. Funding for grid modernization is crucial, as is balancing short-term off-grid solutions with long-term, large-scale infrastructure for industrial and digital use. Kenya’s 950 MW of installed geothermal capacity (and significant reserves) and South Africa’s ongoing nuclear expansion highlight potential pathways. Nigeria’s planned 4-GW nuclear project and Kenya’s nuclear projectsunderscore growing interest in firm power sources.

Data centers are expanding as countries seek greater dividends from digital technologies. As digital economies grow, the challenge lies not just in meeting demand but doing so with resilient and sustainable energy solutions. The future of clean energy in developing nations will rely on a mix of firm power sources, renewables and storage backed with gas, flexible financing, and strategic investments to ensure a stable and efficient energy transition beyond traditional solar-and-wind-only approaches.

It is not likely that data centers will increase global emissions very much, at least for now. But their rapid growth highlights the need for resilient, diversified energy solutions. Efforts to shift away from fossil fuels will need to be balanced with portfolios of energy sources that provide continuous, reliable energy for the modern digital economy.