The energy sector is grappling with a seismic shift in demand, driven by the insatiable appetite of data centers, particularly those powering artificial intelligence (AI) infrastructure. What was once a steady, predictable load has morphed into a volatile, high-stakes game, leaving energy suppliers scrambling to adapt.
The International Energy Agency’s projection that global data center electricity demand will more than double by 2030, and quadruple for AI-optimized facilities, underscores the urgency of this challenge. “Electricity demand from data centers worldwide is set to more than double by 2030 and quadruple for facilities optimized for AI,” the agency states. This surge is not uniform, with hotspots like Virginia, particularly in PJM’s service area, and Atlanta experiencing explosive growth. PJM, for instance, is forecasted to see demand double by 2040, with 85% of this new load tied to data centers, according to the Institute for Energy Economics and Financial Analysis. Atlanta, meanwhile, has recently topped northern Virginia in data center net absorption, with 705.8 MW of positive net absorption last year, per CBRE.
The traditional models of load forecasting and risk management are ill-equipped to handle this new reality. Data centers don’t follow the predictable patterns of other commercial customers. Their consumption profiles depend on factors like server utilization rates, cooling efficiency improvements, workload migration patterns, and technology refresh cycles—variables most energy professionals have never had to consider.
“Data centers change all of this. They don’t follow weather patterns, standard business cycles, or seasonal variations,” says Daniel Cross, Ph.D., director of Data Science and Reporting at POWWR. “Their consumption profiles depend on factors most energy professionals have never considered.”
This unpredictability poses significant financial risks. A data center might operate at low capacity for months, then suddenly ramp up to 80% when a major cloud customer migrates workloads. Suppliers basing contracts on initial figures can find themselves scrambling to adjust if actual demand surges beyond expectations.
Moreover, data centers offer little flexibility. They can’t shift operations to off-peak hours like other large energy consumers, making them poor candidates for traditional demand response programs. This rigidity, combined with their massive power consumption, is forcing energy suppliers to rethink their strategies.
To successfully serve data center customers, suppliers must abandon traditional risk management approaches in favor of strategies designed for uncertainty. Real-time interval demand recorders (IDR) and advanced metering systems (AMS) can help refine projections and make smarter hedging decisions. Block hedging and scenario-based hedging that accounts for rapid scaling events are also becoming essential tools.
Contract structures are also evolving. Pure fixed-price contracts expose suppliers to unlimited upside risk if facilities scale faster than expected. Pure index contracts may appeal to cost-conscious data center operators but offer no protection against demand volatility. Hybrid structures that share risk between supplier and customer while maintaining competitive pricing are often the most successful.
However, the most critical factor might be the relationships suppliers build with data center operators. Transparent communication about expansion plans, capacity additions, and expected usage patterns can help suppliers anticipate demand shifts and structure contracts accordingly.
Despite the challenges, the data center boom represents a significant growth opportunity for the energy supply industry. These facilities require enormous amounts of electricity and often have long-term contracts, providing suppliers with the scale and duration needed to justify major investments in generation and risk management capabilities.
The data center boom is already reshaping energy markets, and this growth is not slowing down anytime soon as AI-driven applications demand more and more computational power. For energy suppliers, this transformation creates both challenges and opportunities. Those who develop sophisticated forecasting models, implement effective risk management strategies, and build collaborative relationships with data center operators will discover significant opportunities to strengthen profitability while maintaining stable market positions.