What Does Renewable Energy Have To Do With AI?
Artificial intelligence might feel like a software revolution, but behind the scenes it is a power story. The growth of AI is colliding with one unavoidable constraint: electricity. Every model trained, every query executed and every data centre built requires real world power supply. Without a rapid scale up of renewable energy, this demand becomes impossible to meet. According to the World Economic Forum, a single AI powered query consumes around ten times the energy of a standard online search, while global electricity demand from data centres could exceed one thousand terawatt hours by 2030, almost one quarter of current United States consumption. (1)
AI And The Surge In Electricity Demand
In a report prepared by Nous, an energy and decarbonisation consulting firm, they say that global data centres could consume as much power as the entire nation of Japan by 2026, with US based energy management solutions provider, Gartner, projecting a five hundred terawatt hours of data centre demand by 2027, more than double 2023 levels (2).
These pressures are visible in Australia too. In a recent article that appeared in the Australian Financial Review (AFR), the enormous pipeline of hyperscaler developments and the increasingly strained relationship between data centres and the regulated power system (3). In that AFR analysis, there was a quote from Morgan Stanley’s Stephen Byrd who warned that the United States alone could face a forty four gigawatt power shortfall by 2028 and that operators spend most of their time thinking about grid bottlenecks, rather than the technology itself .
Why The Future of Renewables And AI Are Intertwined
AI driven demand places pressure on both price and reliability. Data centres operate continuously and cannot tolerate outages. We all know of the Iberian Peninsula blackout. While no official reason for the blackout has been given, there is a good reason to believe that the actual cause is linked to substation failures, rather than renewable intermittency. AI can definitely help here.
AI is not just a source of energy pressure. It is also part of the solution. The World Economic Forum notes that AI could reduce global emissions by five to ten per cent through optimisation, smart grids and predictive maintenance, improvements equivalent to removing two hundred thousand petrol powered cars from the road each year in one example cited by ADNOC’s 2023 energy efficiency results . Further, the Boston Consulting Group (BCG) in their analysis state how AI can generate real financial value for renewable energy companies by reducing downtime, improving forecasting, optimising site selection and enhancing energy trading. With companies able to lift productivity by between fifteen and twenty five per cent through AI enabled operations, renewables become more competitive and more responsive to the needs of large load users such as data centres. (4)
Further, battery costs have fallen more than eighty five per cent since 2010, improving the ability of storage to smooth output and support high density users such as AI facilities. This matters because the alternatives are not viable. Coal is inflexible and slow to respond, and cannot compete without subsidies. Our federal government has said that gas remains necessary for short term reliability. But globally, over the long-term, growth depends on cheap, scalable and zero emissions generation. AI firms know this. Major operators like Google, Microsoft and Meta have all committed to using renewable power exclusively, and we know that companies are locating data centres in renewable rich regions is now a key strategy for grid stability and cost control .
While headlines in the US would suggest otherwise, the reality paints a different picture.
Despite the political opposition in the United States, the demand for renewable energy is surging because AI is forcing the issue. Utilities are retiring ageing coal and gas plants while renewables and battery storage according to Forbes, eighty one per cent of new generation capacity additions in the US last year were for renewable energy projects (5). This is driven in large part by the explosive growth of AI powered data centres and their need for cheap, clean and reliable energy supply . Even in regions where policy settings remain contested, operators are turning to large scale solar, wind and storage because they are now the most commercially viable way to meet the enormous and rapidly rising electricity load created by AI infrastructure.
Australia’s Strategic Opportunity
Australia is exceptionally well placed to lead in green data centres because of its renewable resources, geographic stability and credibility within Five Eyes markets. We note that Australia could become an AI superpower if it can supply abundant renewable energy and that data centres could form a major export industry if token production and training facilities are powered cheaply and cleanly . No new coal fired power is being built in Australia and new gas turbines require years to approve. With no large scale renewable or storage project reaching financial close in the September quarter, the bottleneck in our opinion is not a lack of demand, but supply readiness.
The Bottom Line
AI cannot scale without renewable energy. The energy demands of data centres are rising so quickly that without a major expansion of solar, wind and storage, the global rollout of AI will slow, costs will rise and Australia will lose strategic ground to regions with cheaper power. Fortunately, the relationship works both ways. AI can enhance renewable energy systems, improve efficiency and stabilise grids. With coordinated policy, investment and project acceleration, Australia can become a leading hub for green data centres and AI model training. The opportunity is significant, but so is the risk of delay. Renewable energy is no longer an environmental preference. It is essential infrastructure for the AI economy.
References
Al-Zu’bi, I. World Economic Forum. Energy and AI: The Power Couple That Could Usher in a Net Zero World. January 29 2025 https://www.weforum.org/stories/2025/01/energy-ai-net-zero/
Diviny D, Strawhorn T, Daif M Nous Group. Power Hungry: What Role Can Renewables Play in the AI Revolution. 22 April 2025 https://nousgroup.com/insights/power-hungry-ai-revolution
Chanticleer, AFR The three dark clouds hanging over the data centre boom 26 November 2025 https://www.afr.com/chanticleer/the-3-dark-clouds-hanging-over-the-data-centre-boom-20251120-p5nh57
Tout T, Thi Tam H, Klose F, Levin A, Lee V, Oh A. The Boston Consulting Group A new AL playbook for renewable energy 25 June 2025 https://www.bcg.com/publications/2025/ai-in-energy-new-strategic-playbook
Siverstein K. Forbes Magazine Green Energy’s Role In A World Where AI Data Centers Are Power Hungry 01 June 2025 https://www.forbes.com/sites/kensilverstein/2025/06/01/green-energys-role-in-a-world-where-ai-data-centers-are-power-hungry/
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