This is an extract from a recent report “Grids for data centres: ambitious grid planning can win Europe’s AI race” by EMBER.
Data centre deployment requires grid availability
AI advancements are driving a surge in demand for new data centres as existing facilities are in short supply or no longer fit-for-purpose, being unable to meet the massive need for computation power. However, data centre deployment is coming up against difficulties, and grids have emerged as the primary barrier in traditional data centre hubs. High congestion in these locations means grids are unable to accommodate new facilities: Ireland, an investment hotspot for data centres, was forced to impose a de facto moratorium on new data centres in Dublin until 2028. Similar challenges have also emerged in other key markets like Frankfurt and Amsterdam.
Data centres pose unique challenges to electricity grids compared to other types of energy users. They represent large, localised loads which typically operate continuously and can ramp up their operations faster than most large energy users. Data centres are getting bigger as well. For instance, the Italian TSO Terna reports that data centre capacity applications exceed 140 MW on average. This means data centres have a major impact on the grid, being a large load that can come online in a single location, fast. As network capacity becomes less available, and congestion and connection times ramp up, industry players are turning to new markets. Better grid availability means new data centres can get online faster and outpace their competitors.
Data centres bring economic growth and competitiveness
Data centres generate value for the economy: The European data centre market was valued at $47 billion in 2024 and is projected to reach $97 billion by 2030. The International Monetary Fund estimates that between 2025 and 2030, an AI boom can increase the average annual growth rate of global GDP by 0.5 percentage point, but this is dependent on the timely deployment of data centre infrastructure. In the Netherlands, the data centre and cloud industry is already responsible for 20% of all foreign direct investment (FDI) – making it the largest sector when it comes to FDI. In Germany, data centres are estimated to have contributed €10.4 billion to GDP in 2024, both directly and indirectly. This amount is expected to more than double to €23 billion by 2029. Similarly positive data comes from Norway, where data centres are estimated to have added €240 million to the economy in 2023 – more per unit of consumption than the traditional power-intensive industries such as the production of chemicals.
Competitiveness and data centres go hand in hand: Beyond direct investment and job creation, the data centre industry brings a range of additional economic benefits. As a key technology enabler, it is a major pull factor for IT companies and fosters digital ecosystems, enabling Europe to capitalise on emerging opportunities in AI and quantum technologies. Building new data centres requires industrial automation solutions, an area where European firms hold a competitive edge with over half of the global market share. Indeed, four European industrial groups that provide components for data centres added more than €150 billion to their market caps since November 2022, on the back of AI’s soaring demand for data centres. For one company, Siemens AG, this meant its market value grew by more than 60%. Data centres also have a significant role to play in the EU’s wider energy security and competitiveness agenda and its drive for digital sovereignty.
Europe is facing a surge in power demand from data centres
Data centres are already having an impact on Europe’s electricity demand, particularly in key markets. European data centres consumed an estimated 96 TWh of electricity in 2024, equal to 3% of the region’s total electricity demand. Among the top data centre markets, this ranged from 2% of national electricity demand in France, through 4% in Germany and the UK, to 7% in the Netherlands and 19% in Ireland. Their localised impact is even more significant. In 2023, data centres consumed 33% to 42% of all electricity in Amsterdam, London and Frankfurt – and almost 80% in Dublin.
Data centre power demand in Europe is expected to grow to 168 TWh in 2030 and 236 TWh in 2035, representing an increase of almost 150% in just ten years. Some markets are expecting enormous, rapid growth. In Sweden, Norway and Denmark, data centre electricity demand is expected to triple already by 2030. This trend is projected to continue and spread to other countries in the following five years, with Austria, Greece, Finland, Hungary, Italy, Portugal and Slovakia projected to see data centre consumption increase by three to five times by 2035 compared to 2024.
Recent research confirms that data centres will be a major contributor to increasing power demand. In Europe, ICIS estimates that their share of electricity demand will grow from 3% to 4.5% in 2030 and 5.7% in 2035. Data centre demand growth between now and 2030 (72 TWh) is projected to be larger than that of electric vehicles (67 TWh) and comparable with electrified industry (80 TWh). At the global level, the IEA’s outlook also sees data centres as a strong contributor to power demand, adding more in absolute terms than heavy industry or building heating by 2030.
Grids will decide where AI investments go in Europe
The European data centre market has long been dominated by a handful of metropolitan hubs known as the FLAP-D markets: Frankfurt, London, Amsterdam, Paris and Dublin. Their historical appeal was driven primarily by proximity to major demand centres which meant fast data transmission. Forecasts of growth, however, show the historical dominance of the FLAP-D markets beginning to erode. Growth is being forced to slow due to adverse impacts on the grid and congestion is causing data centre developers to move away from established hubs. Currently, approximately 62% of Europe’s data centre capacity is located in the FLAP-D markets, but this is expected to drop to 55% by 2030, and 51% by 2035. Of these five core markets, only France, where grid remains relatively unconstrained, is expected to maintain continued data centre investment. In Ireland, the Netherlands and Frankfurt, grid operators have had to implement radical measures, effectively banning new data centres until at least 2030. This suggests that grid infrastructure has become a critical factor influencing investment decisions, often outweighing other factors such as cost of land, economic incentives and attractive regulatory frameworks.
The Nordics top the list for data centre expansion. They have some of the lowest levels of grid congestion in Europe and offer the added benefits of low electricity prices and carbon intensity, inexpensive land and reduced cooling needs thanks to colder climates. The good state of the grid stems from intentional and deliberate planning choices. For instance, Norway’s TSO Statnett is planning for a tripling of data centres’ electricity demand by 2030 compared to 2022, and up to 15 TWh of data centre power consumption in 2050. The Danish TSO Energinet was looking to position Denmark as a future data centres hub as early as 2017, building high voltage substations in preparation to connect data centres to the transmission grid. As a result, Denmark has been a top destination for data centre developments, with a huge capacity growth of 26% annually for the past five years. The trend is starting to slow as the grid becomes increasingly saturated in key zones, but is still expected to maintain an impressive 12% annual growth over the next five years.
Belgium is also expected to see strong growth in the next five to ten years, with data centre demand increasing by 72% between 2024–2030 and a further 42% between 2030–2035. Data centre trends have been consistently monitored by the TSO and incorporated into its grid development planning, enabling forward-looking network expansion that paves the way for such investments. Belgium’s grid preparedness has been a major pull factor for developers, to the extent that its system operators, Elia (TSO) and Fluvius (DSO), recently raised concerns over the sharp increase in grid connection applications submitted for new data centres in Flanders. In response, the grid operators are working in consultation with the Flemish government to optimise the location of new data centres to alleviate grid congestion concerns. The surge in applications for very high capacities appears to be related to grid conditions in the Netherlands and Germany which are causing project developers to turn to Belgium where grid availability remains more accommodating for now. Major industry players will not wait for the necessary infrastructure to be built – they will just move to where it is readily available. Well planned grids have become a key trigger for economic activity and investments, while unprepared grids have become a barrier.
Smarter grid strategies can unlock digital investments
With AI bringing many opportunities, countries are competing to attract digital infrastructure investments. Those taking decisive action to prepare their grids for AI investments will be the ones best positioned to capture the economic and security benefits they bring. Deploying new data centres often requires substantial available grid capacity at a single location – an increasingly scarce resource. However, strategic choices by developers and grid operators can help overcome these constraints, speeding up the deployment of new facilities, while also reducing the required infrastructure expansion to accommodate the growing sector.
Time to market is crucial for competitiveness, especially in the fast moving tech industry. Wait time for grid connection is therefore an important criterion for site selection of new data centres. But long connection queues are becoming increasingly common across Europe, as system operators struggle to allocate capacity to new users, deterring data centre developers. Building transmission infrastructure – which takes a long time – is not the only solution. Alternative forms of grid connections could secure a faster process while also bringing benefits for the grid. Such options are described in the following sections.
The average time to build a new data centre in Europe is approximately four years but varies widely across countries, particularly impacted by availability of grid capacity. Countries with long grid connection queues are losing out on potential growth in their data centre markets – which is being reaped by others whose grids are better prepared to accommodate such demands. Currently, countries with half the connection time of key markets are set to attract around 20% more data centre growth by 2030.
IEA and McKinsey data suggests that, on average, data centres in Europe only used 44% of their annual nominal power rating in 2024. The Irish TSO EirGrid reports that the average load currently drawn by data centre customers is approximately 34% of their contracted capacity. This is similar to reported figures for Norway where, out of the 500 MW connected to the grid, only 150 MW of that capacity was utilised in 2023 – a utilisation rate of just 30%. Low utilisation of connection capacity makes data centres ideal candidates for a phased connection approach. Data centres could apply for an immediate connection capacity corresponding to around 50% of their needs, with the remaining 50% being delivered over an extended period of time.
This provides both the developer and the grid operator with a clear path to scale, a welcome development in sectors both exposed to significant uncertainties. Another relevant option for new data centres is a non-firm or flexible grid connection – where users agree, in advance, with system operators that their consumption may be interrupted under certain conditions such as extreme weather events. This allows new customers to connect to a constrained grid much faster and may bring additional benefits such as lower network tariffs. This setup is distinct from demand response, which is typically a market-based mechanism rather than a condition specified in a grid connection agreement.
Data centre flexibility unlocks grid capacity
The idea of flexibility for data centres is gaining traction, stemming primarily from a need to overcome growing grid constraints. Data centres are typically assumed to be firm loads, but real life data shows that even for colocation facilities, electricity consumption can drop or increase up to 30% between days, depending on the IT job performed. Some seasonal variation is present due to cooling needs as well. In the case of AI data centres, the electricity demand depends on model training and varies with the usage of the model by individuals and businesses.
The IEA estimates that if European data centres offered just 30 hours of flexibility annually, the grid capacity available for them could more than double. This would not mean that a data centre would be occasionally completely disconnected from the grid – the IEA model assumes that in “80% of the hours of grid stress, more than half of the usual grid electricity supply to the data centre would still be available. In 50% of these hours, around four-fifths of the grid capacity would be available”. The side effects of the flexibility scheme could be offset further by the use of on-site backup generation and battery storage.
Conclusion
Trends in data centre investment in Europe make it clear that grid capacity has become a prized resource and a pull factor for major investors. If Europe is to have a place in the global AI race, grid planners need to step up their game. The rapid development of AI can provide a much needed boost for European economies. But it will not happen unless the energy infrastructure is prepared to accommodate the necessary data centre expansion. Forward-looking and anticipatory grid planning is a key solution, but there are also short-term measures such as data centre flexibility and alternative connection contracts that can tackle grid congestion and unlock millions in investments. Multiple tactics need to be deployed in parallel to give Europe a chance of hitting its data centre deployment target and avoid further downgrading of forecasts. Countries that become leaders in innovative grid planning will likely emerge as Europe’s new data centre hubs.
Access the report here
