The world is witnessing an unprecedented surge in energy demand driven by the rapid spread of artificial intelligence technologies, putting immense pressure on power sources and grid infrastructure worldwide.
With expectations for continued growth in this sector, public and private investors are racing to accelerate the large-scale development of new data centers. According to data from the International Energy Agency (IEA), global investment in data centers reached half a trillion dollars in 2024 — nearly doubling in just two years.
However, this rapid pace of construction has created a new problem: data center buildouts are outstripping the capacity of electrical grids to expand, leading to critical delays in bringing new facilities online.
The Power Grid Struggles to Keep Up
The IEA’s *Energy and AI* report, published earlier this year, notes that one in every five data center projects worldwide is at risk of delay due to intense pressure on power grids.
The report stated: “The interconnection queues for new projects — both generation and load, including data centers — are long and complex,” adding that building new transmission lines can take four to eight years in advanced economies, while wait times for essential grid components such as transformers and cables have doubled over the past three years.
In the United States, power grids were already aging and overburdened even before the AI-driven boom. With the surge in demand from data center construction, the scale of required upgrades has become enormous.
The US Department of Energy estimates that the country will need about 47,300 gigawatt-miles of new transmission lines by 2035 — a 57% increase in current grid capacity. To meet this target, the current construction pace would need to double.
Data Centers Clustered in Already Stressed Regions
Compounding the problem is the fact that many new data center projects are being built in areas already home to existing facilities — regions where electrical grids are already strained.
In the US, for example, half of all data centers currently under construction are expansions of existing clusters. To ease grid pressure, improve efficiency, and avoid local bottlenecks, it would be far more effective to build new facilities in regions with surplus electrical capacity.
Distributed Energy: A Promising Solution to Ease the Strain
This is where the concept of distributed energy resources (DERs) comes into play.
DERs include small-scale power generation systems such as rooftop solar panels and battery storage units. Unlike traditional grids that transport power over long distances from generation plants to end users, distributed energy systems generate and consume electricity locally.
Building more of these decentralized energy hubs and integrating them with public utilities could serve as a crucial short-term solution to accelerate the deployment of new data centers. They could also help balance loads on local grids during peak hours by providing supplemental energy when needed.
According to a report by *Utility Dive*: “If implemented correctly, this solution could quickly increase computing capacity using existing distribution equipment, transmission lines, and power plants,” adding that it could also reduce energy bills for residents and local businesses.
Balancing Technology and Consumers
Reducing energy costs is critical at a time when energy poverty is rising in both the United States and globally.
In the current model, consumers bear much of the financial burden of integrating AI infrastructure on a large scale — even if they do not benefit from it directly.
However, adopting distributed energy systems could change this equation, as it may encourage technology companies to pay more in exchange for faster and more direct grid connections.
As *Utility Dive* notes: “The more that’s paid, the greater the incentive for owners of distributed resources, and the faster new capacity can be integrated into grids — meaning more money in consumers’ pockets.”
Acceleration in Distributed Energy Development
The development of distributed energy systems is already growing rapidly, as both tech giants and grid operators increasingly recognize their value.
According to research firm Wood Mackenzie, hundreds of gigawatts of distributed energy resources are expected to be added to power grids by 2027 — roughly matching the projected additions from centralized power plants over the same period.
