In a new report, the agency reveals that electricity demand from data centres soared by 17% in 2025, and that of AI-focused data centres climbed even faster – well outpacing total growth in global electricity demand of 3%.
Indeed, the capital expenditure of just five large technology companies surged to more than $400bn (£296bn) in 2025 – driven by data centre investments – and is set to increase by a further 75% this year.
However, the report explains how AI deployment is increasingly coming up against a range of physical bottlenecks, such as supply constraints, which is limiting the rate at which data centres can expand in the near term.
In response, the tech sector is adopting new approaches. It accounted for around 40% of all corporate power purchase agreements for renewables signed in 2025, and is also now a major driver behind the nuclear and advanced geothermal industries.
As a result, the IEA said that “the momentum behind AI could accelerate the commercialisation of new energy technologies”.
“While AI is still an energy taker, it is also becoming an energy maker – driving forward innovative solutions like next-generation nuclear reactors, flexible data centres and long-duration energy storage,” commented IEA executive director Fatih Birol.
“To help countries that seize on this opportunity to modernise their energy systems, and to tackle bottlenecks and other concerns associated with AI’s rapid growth, collaboration between policymakers and the energy and tech sectors remains crucial.”
The report also reveals that power consumption per AI task is “declining rapidly”, with efficiency improving at a rate “unprecedented in energy history”, arguing that the technology may be critical for global industrial innovation and competitiveness.
It outlines how proven applications of AI could help firms in energy-intensive industries reduce their energy costs by 3-10%.
However, the energy sector as a whole is not yet taking full advantage of AI’s potential, according to the report, with lack of sufficient digital skills and data availability emerging as key barriers to adoption.
To enable greater dialogue between policymakers, Birol said: “I am pleased to announce that we will soon launch a new platform for government and industry to regularly discuss energy and AI issues.
“In addition to providing the latest data, the IEA will continue to facilitate the collaboration needed to maximise AI’s energy benefits and overcome key challenges.”
Image credit: Shutterstock
Chris Seekings is the Deputy Editor of ISEP’s Transform magazine, which is published biomonthly for ISEP members. Chris’s role involves writing sustainability-related news, features and interviews, as well as helping to plan and manage the magazine’s other day-to-day activities.
